Newfoundland National Convention, 11 December 1947, Debates on Confederation with Canada

1000 NATIONAL CONVENTION December 1947

December 11, 1947

Report of the Ottawa Delegation Proposed Arrangements for the Entry of Newfoundland into Confederation Committee of the Whole

Mr. Reddy Mr. Chairman...
Mr. Chairman Mr. Reddy, Mr. Bailey was occupying the floor, if you don't mind deferring it.
Mr. Bailey Mr. Chairman, as regards to this discussion we were in yesterday evening when the question probably went outside of the scope of the clause discussed, I assure you that I did not intentionally do it; I was just trying to make it clear for the Convention and the people to understand.
Mr. Chairman Iam sure we all appreciate that, Captain Bailey.
Mr. Bailey I would like you to turn to page 4 of the Grey Book, where I intended to follow on when I left off yesterday evening when brought to order - Transitional Grants:
In order to facilitate the adjustment of Newfoundland to the status of a province and the development by Newfoundland of revenue-producing services, Canada will pay to Newfoundland each year during the first twelve years of union a diminishing Transitional Grant payable as follows...
Now each and every one of us will note that after the first three years there has to be found a certain portion from taxation different from what we have got today. I want it made clear just what we have to expect, I believe in the quotation which was, I think, made in this House by some member, that the wrong way to tax a people is for one body to collect the taxes and another body to spend it. So I believe that When we get closer to the crux of the matter and find out what we are being taxed for, I believe we will have a better form of government. I think this clause we have before us points that out very strongly.
I find, and I am worried about it, that there has been no effort made for any adjustment in what we have before us. We know what we are going to get, it has been pointed out very strongly, everything that is coming to us; but nobody has taken the trouble so far to point out what we are going to pay and how it is going to be paid. I tried yesterday in my humble and probably illiterate manner to bring to your attention the difference in the direct taxation that must come upon us if and when we come into confederation. We must adjust ourselves, and l not only see that 12 years to the day we will have to find this amount that is brought before us, but also another $1.5 million. I cannot see for the life of me how this country can have the very least in services under $5 million taxation. Now that's the point I would like to make clear today. and I don't see, looking at it from every angle. after the federal and provincial governments take their cuts. where the cut is going to come from for municipal purposes and for our schools. You will find out that the 578,062 people of Nova Scotia are collecting $9,941,058 for their schools. I say we have got twice the territory to service, because we can't go on leaving the Labrador in the place it is into; I am sure it is the greatest disgrace in the world, the way that Newfoundland has left the people of Labrador. If there is one body of people in our country that has raised themselves by the bootstraps, against odds that you can hardly understand, it's the people of Labrador. I believe that they should have the same as everybody else. There isn't any doubt that there's an immense amount of wealth in the country, and our people in Labrador should not be left like the natives.
I tried yesterday to explain in my simple way how these people are raising this money. I can't quote the districts in the Province ofNova Scotia, that's the municipal statistics, the clause here would be too deep to go into. I think we have got about 33 pounds of data on this Convention Act, and I slogged through most of it, and I believe if we were to make an impartial survey of Nova Scotia we would have to have 30-odd pounds of that... I am not satisfied that this country is going to get all it needs for $75 per capita, It can't be done, and if we had $120 per capita, including December 1947 NATIONAL CONVENTION 1001 our federal taxes, we will have to find another $5 million to give the service to the country that the people require.
When we look around we know what we have to have. Take just Public Health and Welfare. We will go through the villages of Newfoundland. It is not because it can't be done, or should not be done, but because the people don't understand. You want a staff of people going through this country just to educate people. If you don't, it will cost money just to prevent ill-health in many cases. There are hundreds and thousands more items that I could think about if I had the time, but I don't want to keep this Convention too long, I just want to emphasise the fact that those taxes have to be raised, and yesterday I brought it down to two localities; I did no harm in what I was trying to do, I wanted to show the responsibility that would fall on the people of the different villages and settlements and towns throughout this country if we have got to put those services in. I believe they should be put in if we have responsible government or Commission of Government. I am sure it should be done if we have Commission government. And then we will have our people saying, "I don't know how much taxes I am paying". Nobody knows. Canadians know, yes the Canadians know. Why does the Canadian and Nova Scotia man know? Because the Nova Scotia man collects the taxes, and not only collects the taxes, but he employs an army — six councillors here and six there and 12 somewhere else to see if those taxes are used right.
That's all I am going to say on this, and I believe there are others wanting to get the floor. I want to emphasise this fact to our people that we cannot go on, and we are not going to go on getting a handout from the federal government of Canada to run this country. Now that's all we talked of so far — handouts. When that time comes we will have a royal commission and what will we find? Perhaps $100,000 or $200,000, perhaps $500,000 being collected for municipal services outside St. John's. What is the royal commission going to say? "Why you are not taxing your people at all — look what our people are paying. You have got to bring it up." And that is the question before us today. Now whether our people are going to have that royal commission down is none of my business, they have got the vote and let them use it, but for everyone's sake let us realise that they are going to come in and they don't promise anything else. This Grey Book doesn't promise us anything else, and common sense doesn't promise us. That is all I am going to say on this question today.
Mr. Reddy Mr. Chairman, during the past several days l've asked myself often if I were dreaming. Everyone of us hears some strange and funny things as we go through life, but a story as fantastic as any I've listened to has been delivered in this house during recent days by the member from Bonavista Centre, Mr. Smallwood, with a straight and solemn face, and up to this moment I am not sure whether or not the member for Bonavista has been playing one of his practicaljokes and poking fun at us all the time.
Mr. Smallwood Mr. Chairman, a point of of order. Mr, Reddy is imputing motives to me, and he is out of order in doing so, and every time he does I am going to rise to a point of order.
Mr. Chairman Just a moment now, gentlemen, please. Your point of order is predicated upon the assumption that Mr. Reddy is imputing motives to you, Mr. Smallwood.
Mr. Smallwood Yes, sir.
Mr. Chairman No, I hold that that is just what he has cleverly avoided doing, by virtue of that expression, he says, "I don't know whether or not Mr. Smallwood is playing one of his practical jokes upon us."
Mr. Smallwood That itself is a definite imputation. It is casting doubt upon my bonafideness. It is casting doubt upon my honesty and sincerity. He definitely casts doubt. He does not know whether I am doing such and such or not. If that's not an implication. if that's not casting doubt upon my integrity as a member of this Convention, and as one piloting this report, if that's not casting doubt, I don't know what is.
Mr. Chairman No, I am afraid 1 can't sustain you on that point. In effect he says he can't plumb the psychological depths of your mind to know exactly what you are doing. I can't see that he has imputed bad faith or anything else, because he says he does not know. He says. "I don't know whether or not Mr. Smallwood is playing a practical joke."
Mr. Smallwood But isn't be bound to assume that I am a man of integrity?
Mr. Hollett I rise to a point of order.
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Mr. Smallwood I am on my point of order. There is one still before the Chair. Am I not entitled, as a member of this Convention, to have it assumed, unless it can be proved to be otherwise, that I am a man of integrity and sincerity? And here is a man who says he does not know whether I am a man of integrity or not.
Mr. Chairman No, he does not say that.
Mr. Smallwood He has doubt about it. He does not know.
Mr. Chairman He does not know whether you are playing a practical joke or not.
Mr. Smallwood In other words he does not know whether l am honest or not, whether I have introduced this sincerely and honestly, or whether I am just playing a joke. If that's not imputing...
Mr. Chairman I am sony, Mr. Smallwood, I have to hold that the statement made by Mr. Reddy is not capable, in my judgement, of the interpretation you have placed upon it.
Mr. Reddy OK, Mr. Chairman?
Mr. Chairman Yes.
Mr. Reddy I know we are living in a mad world, and I have thought recently that we here have ringside seats, and are participants in propagating some of this madness.
Mr. Chairman, about three or four weeks ago the Economic Committee delivered through Major Cashin its Economic Report. As a supplement to this report, the Committee made a serious, and I believe sincere attempt, to give an estimate of our probable revenue for the next three years, which period they called the foreseeable future. They were careful to say that they were guessing, but that this guess was based on present day facts, as they saw them; and as they were all intelligent men, they made what they said was an estimate of what our economic condition might be for the next three years.
When Major Cashin sat down the member for Bonavista Centre rose to his feet, and launched forth on perhaps the most devasting, violent and bitter speech I have listened to since I came here 15 months ago. Mr. Smallwood ridiculed the idea of this Economic Committee attempting to give the people a problematical budget for three years ahead. Mr. Smallwood used his bitterest sarcasm to discredit the Economic Report in general, and the three—year budget in particular.... Mr. Smallwood said, in effect, that for the Economic Committee to estimate our revenue three years in advance was nonsense and worse. When he had delivered his solar plexus punch I felt that, irrespective of the merits or demerits of the case, that Mr. Smallwood was sincerely convinced that the future could not be seen, and our probable revenue could not be essayed, and we could not count our chickens before they were hatched; and that this was the honest and sincere conviction of the member for Bonavista Centre. So much for that; but as they say, "time marches on".
For the past three or four days I have been sitting, listening to the same member from Bonavista Centre stand up and deliver his estimate of our revenue and expenditure if we became a province of Canada, not for a foreseeable future of a paltry three years, or four years, or five years, or six years or seven years. No, nothing less than a period of eight years in the future is worthy of the attention of Mr. Smallwood, and equipped with his own particular spyglass, and all by himself, he projects himself and all of us eight years ahead, up to 1956. He then divides the eight years into two four-year periods, and proceeds with serene self-confidence to read our economic future for the next eight years — and in three days composes a budget covering from now till 1956, and brings it to this House and delivers it for our appreciation. And I have no doubt if the gentleman from Bonavista Centre had been requested to prepare a budget taking us further into the stratosphere, he would have done so with equal facility.
Now Mr. Chairman, I may not have the best of understanding, but as I see it the member for Bonavista Centre has said in effect to Major Cashin and his associates of the Economic Committee. "How dare you attempt to look into the future. That is not your province — that is just another of my provinces. and it is only I who am permitted to see the shape of things to come. It is all right for me to estimate eight years ahead, but it is nonsensical for you, Major Cashin, to attempt any such thing!" Mr. Chairman, may I be pardoned if I ask in all seriousness if there be some direct ray oflight giving the member for Bonavista Centre prophetic vision, and leaving the other members of this House in darkness? If so, I wish to raise a point of order, so that this ray of light be made available to the other members also. Mr. Chairman, the humble members of the December 1947 NATIONAL CONVENTION 1003 Economic Committee said that they were sticking their collective necks out when they attempted to guess the economic future of Newfoundland — three years ahead. if so, what can be said for the gentleman who so bravely tells the people of Newfoundland that by following his programmes their economic welfare is assured, not for just a day, not for just three years, not, not for just eight years, but always.
Mr. Smallwood Mr. Chairman, I want to reply to Mr. Reddy, but there is lots of time if Mr. Hollett wants to reply to the witty speech which Mr. Reddy has just delivered, and whose author I congratulate very sincerely upon his wit and humour. The point, the one point in the speech sir, which I think demands a reply is this: that I quarrelled with Major Cashin, the chairman of the Finance Committee, and with the members of the Finance Committee, for having brought in a budget looking three years ahead, and that I then am so inconsistent as to bring in one for eight years ahead. Now that's the point of that speech. Sir, there is no point in it. There is not a good point. What the Economic Committee did was bring in a firm budget for three years. I have not done any such thing. What they said was that each year for three years the Government of New foundland under responsible government would collect...
Mr. Cashin Mr. Chairman, I rise to a point of order.
Mr. Chairman State your point.
Mr. Cashin We stated no such thing, that a government of Newfoundland under responsible government — I don't think the words "responsible government" appear in the Economic Report.
Mr. Chairman I must sustain you on that.
Mr. Smallwood All right, the Government of Newfoundland, whether responsible, or Commission or what. I don't think the Economic Report could have meant the government of the Province of Newfoundland. I think they meant the Government of Newfoundland for each of the three years foreseeable in the future would collect roughly $30 million.
I have said that if we become a province there are certain fixed assets that we know we will get. There is no guesswork about it. We know the provincial government will get $6,820,000 a year in subsidies. We know we will get $35 million a year for the first three years, $22 million in eight years. We know we can, or will get $666,000 paid back to the provincial government for Gander; we know we will get $1.8 million or whatever it is paid back to the government for the two Railway boats — that's $2 million. Now I have merely added up the income for the first eight years that we know we will get. I have added that up, and it comes to $80 million. Sir, that is not guesswork, just ordinary addition and multiplication of known facts: $80 million will come to the provincial government of Newfoundland, leaving $40 million to collect in taxes, that is $5 million a year. Now sir, for any man in this Convention or out of it to get up and say that in the coming eight years the government of the Province of Newfoundland could collect, on an average, $5 million a year revenue, $40 million in eight years, through taxation, is surely, surely, not to be put in the same class as forecasting $30 million by taxation, $30 million for the next three years. Surely there is all the difference in the world. I estimate that the Government of Newfoundland, if we become a province. would need to spend in the first eight years $120 million; $80 million of that would come in from sources that we know about, that are in the Grey Book. That leaves $40 million to get by taxation in eight years, an average of $5 million a year. You don't have to be a prophet or a financier to be quite firmly convinced that we as a province can collect in taxes $5 million a year. So that the speech which Mr. Reddy has just read out is really quite without point. it is comparing two things that are not actually comparable.
Mr. Hollett First I would like to make a remark or two with regard to the statement made by Mr. Smallwood yesterday relative to the interest on the 1950-52 loans. You will rememberthat the day before yesterday I pointed out to Mr. Smallwood that I thought he had erred in some way, and that he and his budget makers had failed to provide for $123,000 in his accounts. that is to say $80,000 and some hundreds from 1947-50, and some $40,000-odd from 1947-52. Mr. Smallwood replied to me that he would answer me yesterday, after consulting with the Finance Department. Now I feel quite sure that Mr. Smallwood did not have to consult the Finance Department. I am also certain that he did not consult them at all...
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Mr. Smallwood You are wrong then.
Mr. Hollett And if he did, he did not get any satisfaction
Mr. Smallwood I did.
Mr. Hollett Well, in that case there must be something wrong with the Finance Department, because they have made a ruling that they will not answer any questions from this Convention unless it comes through the proper channels. I wonder therefore why Mr. Smallwood has the privilege of going to the Finance Department and getting the information. He can go to his little friend who helped him make up the budget,[1] and he probably did. Anyway I discover that he and his budgetmakers were $123,000 short in 1947- 48, 1949-50, and $40,000-odd short for 1951-52, That was the first thing that should have gone into that budget. That was left out, and as I go through it I find there were many other things left out, many other things not accurate there; but having found that first error I studied it very carefully, because i was indeed surprised.
Now Mr. Chairman, first I have a reply to one of the first things stated in this House, one given in connection with the statement made by Premier Duplessis, wherein he stated that formal notice had been given to the Commission of Government that he was not satisfied, and did not intend to remain satisfied with the judgement of the Privy Council, 1927, relative to the Labrador. I am just in receipt of a reply to that question which was tabled here from the government.
December 5, 1947.
Dear Sir:  
In reply to question asked by Mr. M.M. Hollett, M.A., as to whether the Premier of Quebec had served formal notice upon the Government of Newfoundland that the Province of Quebec does not consider that the judgement of the Privy Council in 1927 relative to the boundary between Quebec Labrador and Newfoundland Labrador is the final settlement of this issue, I am directed to inform you that no such formal notice has been received by the Commission of Government.
Yours faithfully, W.J. Carew Secretary.
So up to December 5, 1947, Mr. Duplessis had not made good his statement.
Then I have another reply to a question which I made on the December 2. and this one is so important that I will read you the notice of question first:
I give notice that I will on tomorrow ask His Excellency the Governor of Newfoundland to seek clarification from the Government of the United Kingdom for the benefit of this Convention on the following point:
That is to say, that whereas under the Lease Bases Agreement 1941 it was stipulated that upon the resumption by Newfoundland of the constitutional status held by it prior to the 16 February, 1934. the contracting parties to said Agreement would be the Government of the United States ofAmerica and the Government of Newfoundland.
Now therefore, what would be the position should Newfoundland enter into confederation with Canada?
Would the contracting parties under said Agreement be the Government of the United States of America and the provincial government of Newfoundland, or otherwise, and if otherwise, to inform this Convention as to the real position which will exist.
And to that question this is the reply signed by Mr. Carew, Secretary of the Commission of Government. I take it that the Commission had made inquiry from the Commonwealth Relations Office, otherwise they would not have replied to it.
Dear Sir:
With regard to the question submitted by Mr. Hollett on December 2, the reply is as follows:
It is assumed that the question is based on the text of notes exchanged between Mr. Churchill and Mr. Winant at the time of the signature of the Leased Bases Agreement of 1941 (Cmd. 6259). It was then agreed between the United Kingdom and United States governments that "upon resumption by Newfoundland of the constitutional status held by it prior to February 16, 1934, the words "the Government of the United Kingdom wherever they occur in relation to a provision applicable to Newfoundland in December 1947 NATIONAL CONVENTION 1005 the said Agreement shall be taken to mean, so far as Newfoundland is concerned, the Government of Newfoundland and the Agreement shall then be construed accordingly".
The wording of this note did not cover the position which would arise in the event of Newfoundland entering into the Canadian confederation, but in that event the present function of the United Kingdom government in relation to Newfoundland under the terms of the Agreement would devolve upon the Government of Canada.
From that I read that upon confederation the contracting parties to that base agreement will be the governments of the United States and the Dominion of Canada. In other words Newfoundland is out of the picture. Entering confederation you give up all claim to the bases. Remember they are only leased grants for 99 years, and while some of us may not be here, some of our offspring may be, and these lease agreements, whereby part of Newfoundland was given away by Great Britain for a few destroyers, upon confederation we pass over the whole leased territory, the lease goes over and the agreement is between the USA and Canada. That looks very much to me like the alienation of the public domain of this little country of ours.
I asked that question because I see the seriousness of it. I see Canada taking over these bases and being a party to the agreement with the United States, and under the defence pact which Canada today has with the United States it is simple for Canada to man these bases, put her own men in here for a while, a skeleton crew if you like, and deprive 3,500 Newfoundlanders of jobs which they are now working at, and for which I understand they are getting very good pay.
Mr. Chairman I don't know whether I am as clear on that as you are, that the Government of Newfoundland shall be taken to mean the Government of Canada in the event of our going into confederation; by virtue of the fact that under section 92, sub-clause 13, of the BNA Act, the civil rights of the province will fall upon the province, so whether they mean the provincial government, in the event of entering confederation, or the federal government of Canada, does not appear to me to be quite clear. But if they mean the federal government of Canada I would be interested in knowing how they arrived at that conclusion.
Mr. Hollett In my opinion it would be highly unconstitutional, but we have been the subject of so much unconstitutionalism (if that is the word, sir) since 1933, that I never expect to see constitutionalism applied here again. I will read that again: "But in that event the present function of the United Kingdom government..." What is their function now? They are party to the agreement with the United States of America, "But in that event the present function of the United Kingdom government in relation to Newfoundland under the terms of the Agreement would devolve upon the Government of Canada." That's plain enough. I want you gentlemen to think that over. Mr. Chairman "Upon the Government of Canada." As a matter of interest. Mr, Hollett, I would like to know the manner in which that conclusion has been arrived at. It would be very interesting.
Mr. Hollett Yes, I think it is about time our people did know and ask about it.
Mr. Higgins It is a very serious position if that is so.
Mr. Chairman All I can say is that I don't know how you get around it in the event of our becoming a province, because civilian property rights within the province of course come within the domain of the provincial government. How then can the Canadian government, as such, abrogate to itself the rights which are reserved to provincial governments under section 92? l am not trying to obstruct you, but it is a very far-reaching conclusion, and I would like to know how it is reached.
Mr. Butt I just want to suggest to you that it may be a question of defence, you know, which is purely federal government.
Mr. Chairman That's true,
Mr. Hollett I put it to you that this is not a question of defence. I am talking about the base agreement. it is a question of Newfoundland territory.
Mr. Chairman The point is this... that while the reversion under the lease would ordinarily come to the province under section 92, we would understand that defence, being a matter concerning the bases and the Government of Canada, would naturally come within the purview of section 91, 1006 NATIONAL CONVENTION December 1947 therefore in matters of defence the bases might, as defence, come within the jurisdiction of the federal government. Still the point made by Mr. Hollett is this: how can they abrogate to themselves the rights which would pass to the province, the right to the reversions under the lease, which would be transferred to the province under section 92?
Mr. Butt The logic of it is that it would revert to the federal government.
Mr. Chairman As defence, but as a matter of civil and property rights, no. Mr. Hollett, if I may interrupt you at this, I would like to declare a brief recess.
[Short recess]
Mr. Hollett ....Now Mr. Chairman, in looking at this whole matter of this information which has been brought back to us from Canada by the delegation which went from this Convention to find out if there were any equitable basis for union between Newfoundland and Canada, and in studying these books which have been brought back, and all this information, I feel that it would be wise if we pause for a little while in our deliberation and take a look at Canada, relative particularly to these agreements which the Canadian government is endeavouring to make, and which they have made with some of the provinces.
As we know, these tax agreements have not been signed by Ontario, Quebec and Nova Scotia as yet, and I want, before I go on to that, to give the delegates a sort of refresher on this business of confederation. To that end I want us to remember that in 1864 British North America was just a number of inconsiderable colonies dispersed along a narrow belt of territory from the Atlantic to the Pacific. In the centre was the Province of Canada, stretching 1,000 miles from Gaspé to the Detroit River, linked together commercially by the St Lawrence River system and the Grand Trunk Railway built in 1850, and consisting of a million French Canadians and a million and a half English, Irish and Scotch settlers, whose chief industries were agriculture, lumbering, shipbuilding, fishing and considerable manufacturing.
Britain had adopted a free trade policy, and the Reciprocity Treaty with the United States was not to be renewed. The St. Lawrence was frozen up for six months of the year, and the northern United States were not too friendly at that time. On the Atlantic seaboard there were the colonies of Nova Scotia, New Brunswick and Prince Edward Island, as well as Newfoundland, with a total population of 800,000 in 1864. Nova Scotia was still prosperous, her prosperity based on the era of wooden ships and the high prices following the American Civil War. It was a colony of fishermen, sailors and traders. Nova Scotia had enjoyed representative government for 100 years, and had a culture all her own. She had fish, lumber, agriculture and coal, and traded with New England, the West Indies, Europe, and indeed the whole world all seasons of the year. New Brunswick, the home of United Empire Loyalists, had much the same natural resources as Nova Scotia. Prince Edward Island had agriculture, fishing and shipbuilding. All three were prosperous on account of the demand for their products by the United States and the high prices then existing. Then in the centre was the Red River District (now Manitoba), with 10,000 souls, mostly half-breeds. In the west were two separate colonies, one on Vancouver Island, and British Columbia on the mainland. They united in 1866 to form one colony, but not more than 10,000 people lived there. Such was British North America in 1864, or just before the idea of confederation was mooted. Between all these colonies there were no commercial dealings whatsoever.
There were various causes for the desire of confederation: there were conflicting interests, personal ambitions of some statesmen, and there was the question of commercial greed between the various colonies; most of all there was fear of the American empire. Confederation as finally consummated was only a compromise, for it was the hope and wish of Sir John A. Macdonald and most of the Fathers of Confederation that a real legislative union could be brought about, and not merely a loosely bound number of autonomous provinces. "I have always contended", said Macdonald in one of the debates, "that if we could agree to have one government and one parliament, it would be the best, the cheapest, the most vigorous and the strongest system of government we could adopt." Lower Canada (Quebec), New Brunswick and Nova Scotia, however, were against such an idea for various reasons, and so Macdonald, Sir Charles Tupper and others who December 1947 NATIONAL CONVENTION 1007 favoured the idea of one government for the whole of Canada, had to be satisfied with what we know as confederation or no union at all. However, confederation as consummated in 1867 left no doubt as to where the sovereignty of Canada lay, and as Sir Wilfred Laurier stated, "Every reasonable precaution seems to have been taken against leaving behind us any reversionary legacies of sovereign state rights as they have in the United States to stir up strife and discord among our children."
The relationships between the provincial legislatures and the Dominion government were defined by the division of powers actually written into the British North America Act and later modified by what the courts have since said, the words which describe what those powers really mean. The strength or weakness of the Canadian government relative to the provincial governments has depended in large measure upon political, fiscal, economic and social considerations. The powers of the Dominion government as laid down in the British North America Act include these high functions and sovereign powers by which general principles and uniformity of legislation may be secured in those questions that are of common import to all the provinces, to quote Lord Carnarvon when he introduced the act in the House of Lords. In other words, power was given to deal with all matters of a public and general character, as for example the making of treaties or the making of war, and laws relative to taxation in general. And to the provinces was given those powers which allowed then to deal with all matters of a merely local or private nature in the province.
If you have had the opportunity, gentlemen, to read the British North America Act you will find in one section that the Dominion government is given the power to raise money by any mode or system of taxation. And, if you turn to another section you will find that the provinces are given the exclusive right to make laws in relation to direct taxation within the province in order to raise revenue for provincial purposes. This is very important to remember, for it is these two sections which all down through the past 82 years have caused so much friction in dominion- provincial relationships, and which on more than one occasion have nearly wrecked the union. In other words, during all these years the proper division of power as between the Dominion government and the provincial legislatures has been a continuous source of haggling, and caused a breakdown in the whole federal system around 1937.
A province which hitherto has run and financed its own affairs, on entering into such a union must of necessity lose some of its tax sources to the central. or in this case the Dominion govemment, just as also it will be able to rid itself of some of the costs of government. Take ourselves, for example; if we entered into confederation tomorrow our treasury would lose $10.5 million on account of income tax and about $18 million in customs and excise. On the other hand, we might rid ourselves of the railway deficits, the servicing of our deficit, and a few other charges In other words, by relinquishing $28.5 million we no longer have to worry about these services as a government. But as individuals we would still have to contribute to their costs. For instance, on all those articles we import, other than from Canada, we shall still be charged duty, and the Dominion government would collect from us about $15 million in income tax instead of the $10 million we now pay.
But let us get back to Nova Scotia in 1865. Whilst still a separate province in 1864, Nova Scotia had a revenue of $1.3 million and an expenditure of $1,222,355. leaving a surplus of $77,645. The question was how much of the $1.3 million revenue would still remain to the local legislature after confederation. At that time over 90% of Nova Scotia's taxation revenue came from customs duties, and this, on going into confederation, she would have to turn over to the Dominion government. Acutally it was found that if Nova Scotia entered confederation only $107,000 could he expected to be collected by her from the local revenue sources still reserved. It was found that after she would go into confederation her local expenditures would be $667,000, Now this would leave a deficit of $560,000. How was the deficit to be made up? There were various methods devised: (1) the use of the power of direct taxation; (2) concession of the right of the province to use indirect taxation; (3) divide Nova Scotia into municipalities and let them hear much of the burden with regard to government roads, health, etc. Up to this time town councils were almost unknown in Nova 1008 NATIONAL CONVENTION December 1947 Scotia.
What was finally decided was the form of a subsidy from the Dominion treasury. The difficulty however was to decide on a method of subsidy which would not appear unfair. For instance, to make up Nova Scotia's deficit on account of loss of revenue, it would require $1.70 per capita, $1.33 for New Brunswick, and but 38 cents for Quebec and Ontario. They argued that if Nova Scotia was to receive $1.70 per head of population so should the other provinces. The Quebec Conference very nearly broke up over this matter. That was the Quebec Conference in 1865, I think it was.
Mr. Smallwood 1864.
Mr. Hollett Thank you. What really saved the day was that Nova Scotia, through Dr. Charles Tupper, undertook to try to carry on with $371,000 instead of the $667,000, the actual cost estimated in 1864, a reduction of 40%; Prince Edward Island cut 27%, and New Brunswick 12.5%. Thus, Nova Scotia's position after confederation would be as follows:
Revenue $ 107,000
Expenditure 371,000
Deficit $264,000
This deficit amounted to 80 cents per head of population, and this was made the basic subsidy rate for all the provinces, and if you look at your tax agreement you will find that that is still existing in the tax agreement which is offered us today.
Now how the finance ministers of Nova Scotia and New Brunswick ever hoped to carry on under this static financial arrangement is anybody's guess. The proof that this financial arrangement was a hopeless one is to be found in the fact that Nova Scotia ran a heavy deficit almost immediately, and had to seek better terms from the Dominion government within a year. By 1874 Nova Scotia was expending $755,000 on necessary services, and could hardly be expected to carry on with $371,000 as agreed in 1867. Hence Nova Scotia, as well as the other provinces, had to go repeatedly to the Dominion government to beg for an adjustment, and they have been doing that ever since.
No provision seems to have been made for any expected form of economic or social evolution. Nor is any made today under the various agreements which the provinces have with the Dominion government. There is no flexibility in the system of subsidy per capita per year, or as some provinces have agreed upon now, for a period of five years. For instance, the economic and social revolution in Canada during the 70 years from 1867 to 1937 is indicated most pointedly by the fact that whereas in 1867 the total Dominion, provincial and municipal expenditure was $25 million, in 1937 it was $1,000 million. And it is interesting to note that in 1930. the provinces and their municipalities or town councils were providing 70% of the total outlay on the primary functions of government in Canada. The municipal system of government along with the provincial governments bears most of the burden, so much so that the Hon. Charles Dunning was able to say. "The Dominion government does not render to the people of Canada anything like the volume and value of services performed by the provincial and municipal bodies of Canada".
Now, the sources of revenue left to the province after confederation were mainly four in number:
1. Revenues from fees, licenses and permits.
2. Revenues from lands, forests and mines.
3. Revenues from direct taxation.
4. The annual subsidy from the Dominion government.
The first of these in the provinces, as in Newfoundland, amounts to very little. The second yields but a very modest revenue. The fourth was to be a fixed amount. And it was upon the third — direct taxation — that both the province and the town councils had to rely. The unfortunate circumstances were, however, that the Dominion government also has had to invade the field of direct taxation. Thus it comes about that in Canada we have both the provincial government, Dominion government and town councils, under the provisions of the British North America Act, all resorting in the past in large measure for their revenues, to some means of direct taxation.
Prior to the war, the Dominion and provincial governments were taxing incomes, and the provinces were collecting succession duties; for the Dominion government, as before stated, can raise money by any mode or system of taxation whatever, in spite of the fact that the provinces, under the British North America Act were given the exclusive right to direct taxation.
December 1947 NATIONAL CONVENTION 1009
Mr. Smallwood Not exclusive.
Mr. Hollett What method was left for the municipalities or town councils? It has to be remembered that 93% of all people in Canada live in incorporated areas. Their main method of direct taxation is the tax on property and tax on business. Prior to 1942, Nova Scotia and New Brunswick also taxed income, but now and for the next five years the Dominion government alone will tax income in all provinces except Ontario, Quebec and Nova Scotia, who still retain the right to tax incomes as well. Under confederation the town councils have the right to tax all real property, that is to say your house and land, your boats and nets, your barn and farming equipment, or any other kind of property, as also any improvements which you may make on these properties. If you are unable to pay these taxes on your property, the municipality or town council has the right to take it and sell it or rent it, and as a matter of actual fact the total amount of property taken from the individual property holders in Canada by town councils up to the year 1943, by reason of the fact that the owners or householders could not pay their taxes, was $88,484,188.
However, you cannot have roads and education and public welfare unless you pay for it by way of taxation, and since the provincial governments of New Brunswick and Nova Scotia and the others have surrendered most of their taxing powers to the Dominion government under the present system of confederation, the burden of the maintenance of said roads, education and public welfare must be borne by the municipality or town council.
The trend today in Canada is to nullify the usefulness of the provincial governments and concentrate all power and authority at Ottawa, so that eventually they may have just one government at Ottawa, and the municipal authorities throughout Canada, constituting the Government of Canada. It is just this that all the provinces of Canada last year fought out bitterly with the Dominion government, and against which only Ontario, Quebec and Nova Scotia were strong enough financially and morally to successfully contend.
To fairly understand the position, sir, of Canadian finance at the present time, we have to remember that during the period 1930-1937 the combined revenues of provinces and municipalities fell short of total relief and current expenditures by over $750 million; and this in spite of ruthless cuts on account of education and health services, and the restriction of relief payments in many areas to little more than the barest needs for existence. By 1937 the whole provincial financial structure was falling about the govemment's ears, so much so that the various provincial bodies were unable to issue securities on the New York stock market when they had obligations falling due. Temporary assistance was given by the Dominion government and on the recommendation of the Governor of the Bank of Canada, a royal commission was set up on August 1, 1937. After three years this Rowell- Sirois Commission made its report and recommendations, but 1 need not go into that. The plan was endorsed by the Dominion government, and this was the plan which subsequently was employed as a basis for discussion at the conference of January, 1941 — which as you will remember, proved a dismal failure.
Hepburn of Ontario thought the publication of the report and the conference ill-timed and complained of the $500,000 cost of the report. He held that great financial concerns and wealthy individuals who were holders of provincial bonds had engineered the report. He also objected to the surrender to a central authority of rights and privileges granted under the British North America Act. Most of the premiers spoke against the Sirois recommendations, and refused to sit in further conferences. Said Hepburn, "I will not sell my province down the river for all time to come and allow our social services to remain a victim of the dictatorial methods of a bureaucracy to be set up in Ottawa."
However, although three provincial premiers had refused to even sit down to discuss the Rowell-Sirois Report, they all agreed to surrender income tax collection to the Dominion government for the duration of the war and for one year thereafter, as did also the municipalities. As a result the municipalities were compensated yearly to the amount of $86 million, Nova Scotia receiving less than $3 million. What would we have got, I wonder? The Dominion finance minister then proceeded to step up rates on personal and corporation incomes to the highest possible point, collecting nearly $1,000 million in 1943 from these sources alone as against $123 million 1010 NATIONAL CONVENTION December 1947 collected by the government and municipalities in 1940.
So great was the opposition to the Rowell- Sirois Report in 1941, that the recommendations used as a basis for discussion at the conference of provincial premiers in 1945-46 were a new and fresh approach to the problem of Dominion- provincial relations. The agenda was to emphasise full employment and high national income. If, it said, employment and income can be maintained at a high level all our problems are manageable: if we fall seriously short they may be overwhelming. Previous Dominion-provincial conferences had been called when most of the provinces were in financial difficulties. The 1945-46 conference, however, was assembled when each and all could balance their budgets. The Dominion government, however, was carrying a staggering burden of debt. In 1940 its national debt was only $4 billion. in 1945 it was $13 billion and mounting; the interest on the national debt would exceed the entire current expenditure on all services before the war. On top of this there was the matter of civil re-establishment of her soldiers, which would run into many billions. I want to point out now the disunity between the provinces, because I think Newfoundland should know the relationships between the various provinces in the Dominion of Canada before herself making the plunge.
The conference of Dominion and provincial premiers met in the House of Commons on the morning of August 6, 1945. The Rt. Hon. W.L. Mackenzie King occupied the Chair. The personnel of the premiers had changed considerably since the conference of 1941, and it was hoped that some real settlement of Dominion — provincial differences could be accomplished. In spite of the almost superhuman efforts of the Dominion prime minister, it was doomed to failure. No comprehensive plan for the whole of Canada could be arrived at, and after nine months the whole conference came to an abrupt end, Prime Minister King in his opening address on August 6 said that
an effort is being made to ensure the maximum of co-operation between the federal government and the governments of the provinces, in order that the Canadian people, working together, may achieve the constructive goal of peace as effectively as they have carried on the essential though inevitable destructive talk of war. Further. just as our fighting men have assured our freedom, so may we use that freedom to win the victories over depression, over unemployment. over insecurity and over want, victories over prejudice, over intolerance and over disunity.
Brave words these, Mr. Chairman. Let me see how difficult of accomplishment they were.
The matter of taxation was the great stumbling block. Said Premier Drew of Ontario, "If the provincial legislatures were to continue as free and responsible legislative bodies within the conception of the British North America Act, then it would seem clear that the provincial governments must have authority over their own taxation within clearly defined fields". He pointed to what he termed "the fundamental weakness of the British North America Act, the restriction of the provinces to direct taxation and the authority given the Dominion government to raise money in any form of taxation".
Premier Duplessis said, "We are opposed to centralisation of power. We are here to collaborate and co-operate. Co-operation and collaboration can never exist where solemn pledges are disregarded and pacts are violated. An accumulation of powers leads to autonomy. Centralisation leads to Hitlerism." He said he regarded the British North America Act as a solemn contract. They had been granted certain taxing powers under the Act, and unless they were allowed to exercise these powers they could not carry out their legislative duties to their people in the provinces and municipalities. Now Ontario and Quebec are the wealthy provinces, 88% of all invested capital in Canada is concentrated in these two provinces.
The Nova Scotia premier was a bit more conciliatory. Premier McNair of New Brunswick spoke of the economic plight of his province, to which geography, national policy and monopolistic competition from other parts of Canada had been basic contributing factors. New Brunswick's per capita income was just about the lowest in Canada. The remedy, he said, lay with the federal authorities through their exclusive control of tariffs, trades, freight rates, credit and monetary policy.
Premier Hart of British Columbia expressed the belief that it was still an indispensable feature December 1947 NATIONAL CONVENTION 1011 of responsible government that the provinces should raise their own revenues by their own tax laws, and not have to depend on handouts from the Dominion government.
Premier Jones painted a gloomy picture of his province. "Prince Edward Island", he said, "had not sought to enter into confederation. It was Canada that had sought to bring PEI into confederation. At that time they were relatively well- off. That had now changed, and they had gradually been reduced to a rather unprosperous state."
Premier Manning of Alberta wanted a definite understanding about respective fields of Dominion and provincial jurisdiction, a fair and equal adjustment of such burdens as freight rates and tariffs, a settlement of taxation and monetary issues in which Dominion policy has an adverse effect on the provinces. He reviewed the fiscal experience of the province from confederation until their situation became acute with the depression of 1930.
And so it was in this spirit that the Dominion proposals were formally placed before the conference. The proposals of the Dominion government were in three sections:
1. There was an outline of the philosophy with which they proposed to attack Canada's post-war problems.
2. There was a summary of the plans which the government hoped to adopt for an orderly transition from war to peace.
3. This consisted of the actual proposals for the post-war years. It was this third section of the Dominion proposals which the provincial premiers generally would have none of. It offered substantial grants to each of the provinces, on condition that they withdrew completely from the fields of personal and corporation income taxes and succession duties, leaving these taxes solely for collection by the Dominion government. In return the Dominion government offered:
1. A public investment policy whereby the central government would pay 20% of the cost of provincial and municipal public works, provided they were executed within a period named by the Dominion government.
2. A social security programme, embracing a national health programme, a national old age pension scheme at age 70, Dominion-provincial old age assistance at age 65 - 69, unemployment assistance for unemployed employables. That would be in our country fishermen, unemployed employable, at certain times of the year. I think it would also include not only fishermen, but agriculture, forestry, lumbering, logging, transportation, and various other things. Further, in view of the fact that succession duties also would be given up by the provinces, the Dominion government would make a grant of $12 per head of population.
On the first presentation of these proposals all the premiers merely accepted them as a basis of argument. Premier Jones of PEI spoke of the very unsatisfactory economic history of his province under confederation. The revenues were not capable of much expansion. The deficits grew year by year. "The intention of confederation", he said, "was for each province to have a fair share of the commercial benefits. The federal parliament has failed to function as intended, and as the Maritimes were promised it would function. The conditions are blighting the native genius of our people." The premiers of the other eight provinces had further caustic remarks to make with regard to the Dominion government's plan.
A committee then was formed consisting of Mr. King, three Dominion ministers and nine provincial premiers to study the plan. They met in private session on August 9, 1945, but immediately adjourned until November 26. It sat until November 30, then adjourned until January 28, 1946, when it sat for a further five days and adjourned again until April 25. It then was decided to meet in public session on April 29. These public sessions lasted four days, when the premier of Quebec left for his home in disgust. I give you, sir, this brief account of the period of sessions to show how deep-seated is the rift in Dominion-provincial relations and how far they are from agreement on any policy.
Let us see what happened at this public session which began on April 29, 1946, after nine months of study by the provincial governments. Each province prior to April 29 had made written replies, criticisms and counter-proposals. It was found that eight provinces attacked the proposals and the ninth province rejected the whole plan even as a basis of negotiations. Five of the nine provinces suggested that certain tax fields should be left to the provinces. Three provinces December 1947 NATIONAL CONVENTION 1012 criticised the inadequacy of the provisions for unemployment relief since the "self-employed", such as fishermen, who in certain economic areas might far exceed the number of wage earners, were left as a local responsibility. You can see how much that would affect us here in Newfoundland. Three of the provinces disclaimed the entire philosophy of the Dominion plan in that it would eventually destroy the autonomy of the provinces and hence the whole idea of federation. Many other objections were brought forward by individual provinces. All their objections gave an advance idea of what was to happen at the public sessions of April 29 to May 3 when the conference broke up.
When later the per capita rate of grant was raised which brought the Prince Edward Island grant from the Dominion government up to $22 per capita, Premier J. Walter Jones of that province insisted that it would still leave the province $1 million short of what it would need. Nova Scotia said also that such a per capita grant would be far from sufficient. Premier Drew stated that its acceptance by the Province of Ontario would result in a $15 million deficit per year. Premier Duplessis compared the small sum which Quebec would receive with the large sums collected out of the province by Dominion taxation in recent years. Douglas of Saskatchewan stated that a subsidy based on population was unscientific and that there was no relationship between population and needs — and so it was with all the provinces. Said Ontario's premier,
If the provinces were to abandon their most important sources of direct taxation in return for an annual payment on a fixed basis, they would place themselves in a legislative strait-jacket from which they could only escape by abandoning still further powers in return for added payments at some future date. They would become little more than local administrative commissions of the Dominion government, which would ultimately mean the abandonment of the basic idea of federation and the British North America Act, and the eventual result would be despotism.
Premier Duplessis voiced the same idea when he said that
The evils of centralisation mean totalitarianism in the end.... The exclusive rights of the provinces in matters of social legislation, education, civil law, etc., should be conserved one by one and safeguarded, if confederation is to survive. The federal proposals would destroy the inalienable rights of all the provinces: then tend to establish and increase the growth of bureaucracy which does not suit and can never suit either a democracy or a country ruled by parliamentary institutions.
It was evident to the Dominion government that their proposals would not be acceptable, and so they made other offers to the premiers. They were briefly as follows. In return for specified payments to the provinces the Dominion government proposed that the provinces undertake, for the next three years, not to levy income, corporation and succession duties taxation. The annual payment was a guaranteed minimum of not less than $15 per capita based on the population either in 1941 or 1942 as the provinces might elect. It was to rise with national income and population. I want you to know that under this tax agreement the subsidy which we shall get depends on two variable things. It depends on increase in population, and it depends on the gross national product of Canada — two variables, and I shall point out to you later just how they did vary. Under this proposal PEI was to receive $2 million in 1947, Nova Scotia $10 million and New Brunswick $7.5 million. The Dominion government was also prepared to allow the provinces to make tax levies on mining and logging operations. Further, the Dominion government was prepared to seek an amendment to the constitution so as to enable the provinces to levy an indirect tax on retail sales. It also would allow the provinces to tax property. They also were prepared to pay part of the burden of health services, to the extent of 40 cents per head of population. Assuming that we were a province that would amount to about $120,000. When we remember that our health estimates for this year are approximately $6 million we can see how insignificant such help would be to us. They would take care of old age pensions and grant some unemployment assistance. Altogether this was a much better offer, but still the provincial premiers decided they could not agree. Nor did they agree.
The Premier of Ontario claimed that in 1945 the Dominion government had collected over December 1947 NATIONAL CONVENTION 1013 $700 million from the people of that province alone on account of income and corporation taxes, and yet in return for the complete withdrawal not only from these fields, but also succession duties, the Dominion government now proposed to pay to the Government of Ontario $64 million. Premier Duplessis of Quebec also spoke strongly against the Dominion government plan, and described it as "the scuttling of confederation". MacDonald of Nova Scotia pointed out that the provinces were left with "great and growing obligations" to their people, but to meet them the only exclusive fiels of taxation proposed to be left to the provinces are real estate and automobiles in the hands of their owners. He expressed the view that the provinces had made a bad bargain in confederation. He predicted, and these are his words, that "Provincial autonomy will be gone, provincial independence will vanish, provincial dignity will disappear, provincial governments will become mere annuitants of Ottawa, provincial public life — and I do not think these words are too strong — will be debased and degraded". Premier McNair of New Brunswick spoke like MacDonald of Nova Scotia against the proposals. Premier Garson of Manitoba in his address made remarks which show only too clearly the differences between the provinces, particularly between the provinces of Ontario and Québec and the comparatively poor provinces, as did also Premier Hart of British Columbia. Premier Jones said that PEI had entered confederation upon the understanding that it would receive from the federal government such subsidies as would enable it to carry on the public services allotted to the provincial government without resorting to direct taxation. "The subsidies paid in the past to Prince Edward Island", he said, "and the amount now offered are totally inadequate." Premier Douglas of Saskatchewan expressed great disappointment over the Dominion government's proposals and stressed the need for an emergency grant to meet such crises as drought, crop failure and agriculture relief. Premier Manning of Alberta stated that the proposals failed to meet the conditions which his government thought necessary for a remedy.
The conference then adjourned until May 1, 1946, and then the Minister of Finance, next day, in a speech which lasted for 1 3/4 hours, stressed that in spite of the objections raised by the nine provincial premiers, the Dominion government would stand firm and had no intention of modifying the proposals. I would ask you to look at your Grey Book again, and see what Premier King says about the proposals: "it is the best we can offer". His speech only served to increase the anger of the premiers, and particularly so of those of Ontario and Quebec. Said Mr. Duplessis, "if the Ottawa proposals are in the nature of a 'take it or leave it', I will leave it and take my train back to Quebec." You will find that he did do that. Premiers MacDonald, Manning and Douglas also spoke that day, as also did Premier Drew of Ontario; and when the conference adjourned, the word "failure" could be written across the whole proceedings. Manning attacked what he called "the uncompromising rigidity" of the Dominion government. Their attitude, he said, was "indefensible" and he laid the responsibility for failure on the doorstep of the Dominion government. Drew of Ontario complained, as had Duplessis, of the 'take it or leave it' attitude of the Canadian government. He commended to Finance Minister Ilsley the careful reading "of a book called Mein Kampf." He said he would find there clearly set out the formula that the authority of small individual states ought to be diminished and their power invested in a central government. Mr. Ilsley, he said, had spoken of a "heavy obligation" involved in carrying health insurance, baby bonuses and old age pensions, but it happens, he said, that there were to be financed by new levies upon the taxpayers. He, Mr. Drew, was certainly opposed to double taxation in any and every field. Subsidies, repeated Mr. Duplessis, cannot compensate for permanent rights. Centralisation gave birth to bureaucracy, and bureaucracy was the enemy of democracy.
The rest of that day, sir, was spent in a wrangling spirit of angry speechmaking, something like we get here sometimes, and the sitting adjourned until next morning, May 3, when Mr. Ilsley endeavoured to show how utterly impossible for the Dominion was the counter-proposal of the Ontario premier.
More speeches in the same tone as on the day before were made. "Ontario has gone the limit", said Drew. Duplessis said, "Dominion proposals were not acceptable to Quebec." He again quoted Sir Wilfred Laurier as saying that, "A policy of 1014 NATIONAL CONVENTION December 1947 federal subsidies was wrong, and always led to extravagance." He quoted Mackenzie King himself as saying in 1930, "that it was a vicious principle to have one body raise the taxes and another body spend the people's money thus raised." When the conference resumed its sitting after lunch Premier Duplessis was not present. He had gone back to Quebec City as he had threatened, and after another 1 3/4 hours, the conference adjourned and it has not again been reconvened.
Certain provinces have since made five-year agreements with the Dominion government, whilst others have refused to do so, that is to say, Ontario, Quebec and Nova Scotia. This, very briefly, is the story of a Canada united in war, but greatly divided in peace. This is the Canada which we, as Newfoundlanders are asked to pledge our word to unite with. I ask you gentlemen to consider it well. You have heard the opinions of the prime ministers of the various provinces of Canada. I take it they are the best men that Canada can produce. These are their reflections on the tax agreement which has been offered to Newfoundland today. We have no prime minister, we have no parliament, we have no place where men can get together with a mandate from the people, as did Duplessis and Drew and all the others. These men came together and consulted and they came to the conclusions as I have just quoted,
There are certain things, sir, which stand out very clearly:
1. All provincial premiers agree that the provincial governments can best look after the welfare of their own people.
2. To do this they must have money.
3. To get the money they should be able to adjust their own taxes in certain fields, and not be in the position of beggars to the Dominion government.
4. In a changing world both economically and with regard to social services, a govern-ment's revenue must also change from year to year. It cannot be bound by fixed subsidies.
5. A people's welfare is subject to the hazards of their occupations, and the hazards of the fisheries, mining, lumbering, manufacturing, etc., are all different, and consequently the elected government in every area, whose duty is towards the people's well-being, cannot have its hands tied. There must be a certain flexibility.
What of us in Newfoundland? Shall we rush blindly into something upon which the nine provinces of Canada, after many months of deliberation, themselves cannot agree? Now having the picture of Canada under confederation before us, let us take a look at what Mr. Mackenzie King and his Dominion government have to offer Newfoundlanders.
[Short recess]
Mr. Hollett Mr. Chairman, I come now to a consideration of the terms which have been brought back from Canada. I will try to be as brief as I can, but I do not expect to be able to finish this by the time we conclude.
Now when we look at these documents which have been brought back from Canada by the Ottawa delegation, it will be well for us first to refer to the letter of Prime Minister King, in which he says that he was of the opinion that the questions to be discussed with the delegation are of such complexity and of such significance for both countries that it is essential to have a complete and comprehensive exchange of information, and a full and careful exploration by both parties of the issues involved, so that an accurate appreciation of the position may be guaranteed on each side. There was one gentleman who fully appreciated the significance of Newfoundland's entering into union with Canada.
Well, what did our delegation do? We have some idea now of what they did. They got together certain facts and figures here before they went to Ottawa, put them together and went off to Ottawa, only to discover that these things which were brought back to us from Canada had been prepared months before they went up there. That to me looks very funny. The proposed arrangements, as I stated before, are set forth in the document, the Grey Book, and Mr. King, Prime Minister King again says, "I feel I must emphasise that as far as the financial aspects of the proposed arrangements for union are concerned, the Government of Canada believes that the arrangements go as far as the government can go under the circumstances." The government could not readily contemplate any change in those arrangements, so what you have, you have in the Grey Book, and Prime Minister King says there is to be, as far as he can see, no change whatsoever there. December 1947 NATIONAL CONVENTION 1015 Now let's take a look first at the services which will be taken over by Canada. You will find those in section 5. You have all read it, and I don't need to go over it.... Now let's look at the financial arrangements, and first as to the public debt, let's take a squint at that. Canada, as you know, will assume and provide for the servicing of the debt now guaranteed by the United Kingdom, that is $63,569,074. Now what happens really is this, gentlemen, that the guarantee of our debt would simply change hands from the Government of Britain to the Government of Canada, for mark you, our Newfoundland people would still raise the money to pay the interest. Don't forget that. Don't let us have our people think that Canada is wiping out the debt. She is just putting herself in the same position that Great Britain is today, as a guarantor of our debt, but don't forget that she will see to it that we people in Newfoundland will service that debt by the taxes which she will impose upon us. And another point, if I were a bondholder under that debt I would as soon have the guarantee of Great Britain as I would that of Canada. Be that as it may, I want you to note that Canada, in taking over our debt does nothing to help us along these lines whatsoever. We would pay for the servicing of the debt under confederation as we pay it now, through taxes, only it will be administered by the Dominion government. Well, let's say that disposes of the sterling debt, but remember that we would still be left, as a new province of Canada, with a total debt of $10,465,593, besides interest at from 3.75% to 3%. Canada does not guarantee this interest for us. This interest, with our local dollar debt of $10 million, is at the present time practically $500,000, when you add on the $123,000 which our friend from Bonavista Centre forgot. You will find that the interest on our national debt is $499,000 and some odd hundred dollars, practically $500,000, and that is the first charge on the new province.
Now let us take a look at where our revenue came from this year— I think that 1947-48 would be as good a guide as any other. The Customs Department gave us $19.5 million. As a province we give that up completely. Posts and Telegraphs gave us $1.7 million. That too, we surrender to Canada. The Assessor's Office yielded $10.5 million. That too Canada takes over, only more so on account of higher taxes in Canada. Home Affairs gave us $194,000, and that's out, practically. Education will yield the provincial government nothing. Last year the Justice Department was supposed to yield $47,000. Natural Resources and Public Health and Welfare yield precious small amounts as we know. In other words, practically all revenue producing sources are handed over to Canada. Now let us assume, and I am not talking about the latest budget brought in, but the budget prepared by the Ottawa delegation in these books, let us assume that these figures of revenue as a province are correct, or practically so. They say the yield will be $1.25 million. On that they added, for a large profit, $1 million, and that makes a total provincial revenue of $2.25 million. Now what monies do we get from Canada? You have it outlined there in your Grey Book. They give you $6.8 million. I think it is. But remember that's their estimate, based upon the irreducible minimum and the adjusted subsidy, which, as I already pointed out, depends on two variables: the increase in your population, and the increase or otherwise in the gross national product of Canada. The gross national product I think you all understand. Now I want you to look at page 148, book 1, and turn over to the next page, and see what I have taken. Instead of taking, as the Ottawa delegation did, the adjusted figure of $6.8 million, I have taken the irreducible minimum, and that is $15 per head of the population, and the statutory subsidies, the irreducible minimum. I want you to look at this particular list of figures here, and you will find that the minimum, for instance in Nova Scotia in 1944, was $12,524,000, and the next year it was $12,244,000, and the next year, 1946, it was $11,521,000. Then they take a three year average, and they say, "For 1947 the Nova Scotia subsidy will be $12,096,000." Well, if you look back to 1944 you will see that it was $12,544,000, practically $500,000 less than the estimated figure for 1947. Then you can look all along these figures and you will find that in every one of these provinces, the estimate for 1947 under this tax agreement is far, in some cases $1 million, below that which it was in 1944. Why? Why was it?
Mr. Smallwood Which it would have been...
Mr. Hollett Why was it? Why say, "It would have been"? It is immaterial. Why should it have been? Simply because there was a change in the population of the province, and there was a 1016 NATIONAL CONVENTION December 1947 change in the gross national product of Canada. Therefore I say this which the Ottawa delegation has brought in — $6.8 million — is something which we cannot take for granted. We don't know what the gross national product is going to be this year, or next year, or the year after. The gross national product in Canada in 1944 and earlier was tremendous. Why? Because they were working and turning out guns, ammunition and ships, and all sorts of war material to send across to win this war. That in itself gave employment to people and put up the gross national product as never before in the history of Canada. The war ends, and as soon as the war ends all that industry has to cease, and has to be changed over to peace time industry, and it is inconceivable to think that Canada could, in such a few years, get back to the high peak of gross national product as it was in the war years.
That figure of $6 million, I put the irreducible minimum in the books, and that's official — $6,211,000, and that is the only figure that we can take. You cannot take the $6.8 million, because by the time we, if we do, go into confederation, the gross national product of Canada may have changed to such an extent that we would not get any more than our gross irreducible minimum. To prove that, on the same page on which you are looking, you go to Saskatchewan. In 1944 Saskatchewan received by way of subsidy, or would have received, $16,525,000. Now you notice in 1946 they got $15,291,000, and you will notice Note D: "The adjusted figure being less than the guaranteed minimum, the guaranteed minimum is substituted." In other words, the population of Saskatchewan had changed, and if you go back to the population at the top of the page, you will find that the population in Saskatchewan in 1941 was 895,000, in 1942 it was 883,000, in 1944 — 858,000, in 1945 — 845,000 and still coming down. In 1946 it was 832,000, as against 895,992, so you see that change in the population in Saskatchewan over that brief four of five years made such a difference in the amount that you would have been glad the irreducible minimum was put in there, so the federal government gave Saskatchewan the irreducible minimum. So I take that figure. Yes, you will get that much, which is guaranteed, but anything more you cannot bank on. Now! Adding that and the revenues which I have already mentioned, this gives us a total revenue, more or less assured, of $8,461,756. From this we must take the amount before mentioned for interest payment on our debt of $499,628, leaving $7,962,000, and that, gentlemen, is the amount of hard cash which you will have to run your province under confederation, unless you are prepared to impose new taxation on the people. The Government of Canada however, realises how hopeless that would be, save that in the first three years (this is a sop, now) they will give us an amount of $3.5 million, or a transitional grant, in order to facilitate the adjustment of Newfoundland to the status of a province, and note, "the development in Newfoundland of further revenue producing service".
In other words then, your revenue in the first three years of confederation will be, after paying the interest on your debt, $11,462.128. After the first three years this amount of transitional grants is reduced each year by $350,000, until at the end of the twelfth year you are back where you started, and the amount is $7.9 million, or practically $8 million, unless you increase taxation, and we understood that we have to. We must increase taxation if we are to partake of the glories of confederation. Mark that down. You have to increase taxation in this country if you want to go into confederation.
Somebody will say, "Oh yes, but you won't have any customs duties to pay." Mr. Smallwood will tell you. Gentlemen, I put it to you, if we enter into confederation it is the plan of Canada that we shall buy all the goods that she can make us buy. We are going to buy from Canada, don't worry about that, and isn't it reasonable to expect that the manufacturers will take advantage of that, and put the prices up to such an extent that the amounts which our people will pay for the things which they will buy from Canada will be about on a par with those which the people have to pay today under our customs duties. I don't think there is any question of that. I think, Mr. Smallwood, you will agree with that.
Mr. Smallwood All that's very sound, you could not deny that.
Mr. Hollett No question about it at all.
Mr. Smallwood No, not at all.
Mr. Hollett There is no question about that at all, but your provincial government — Mr. Smallwood will probably be prime minister December 1947 NATIONAL CONVENTION 1017 — will not be so stupid as to allow that, because by that time they will have employed some or all of their multitudinous forms of taxation now known in Canada, such as taxes for your lands....
Mr. Smallwood Cod traps.
Mr. Hollett Oh yes, on your cod traps — I would not think you would tax Labrador cod traps, at any rate — taxes on your trees if you like, or in other words stumpage rates, sales tax, tax on amusements, education tax, poll tax or head tax, a poor tax and dozens of others. Mr. Chairman, if anybody in this House says you are not going to have a land tax, a county rate and a school rate and a poor rate, they don't know what they are talking about. I hold here in my hand a tax notice issued by the municipality of Cape Breton County to a poor man who is deceased, and the tax notice has come to the trustee or administrator of the estate. He had a piece of land when he died in Cape Breton County, valued at $100 — no house or anything on it. His assessment on that $100 piece of land: county rate $4.12, school rate $2.75, poor rate 30 cents, total $7.17. The man, being sick and dying, did not pay it from 1944 to 1946, when this final notice was received, and the administrator of the estate received this bill for $28.62 for four years, taxes on a piece of land valued at $ 100 in Cape Breton County — over a quarter of the value of the land.
Mr. Figary Taxed by the provincial government?
Mr. Hollett It was the municipality of Cape Breton, under the Province of Nova Scotia. So don't anybody dispute the fact that you will be taxed. You have to be, you have to get the money from somewhere.
Now Mr. Chairman, I understand that as far as the Broadcasting Company are concerned we can't carry on any further, so I move that the committee rise and report progess and ask leave to sit again tomorrow.
[The committee rose and reported progress, and the Convention adjourned]


Newfoundland. The Newfoundland National Convention, 1946-1948 Vol 1: Debates. Edited by J.K. Hiller and M.F. Harrington Montreal: Memorial University of Newfoundland by McGill-Queen's University Press, 1995).



Selection of input documents and completion of metadata: Gordon Lyall.

Notes de bas de page:

  • [1] Probably a reference to Mr. Nimshi Crewe.

Personnes participantes: