21lS

AFTER RECESS

The house resumed at eight o'clock.

ANNUAL FINANCIAL STATEMENT or THE MINISTEROF FINANCE

Hon. Douglas AbbaU IMlnistel" of Fin.ncelmoved:

That Mr. Speaker do now leave the chair forthe house to go into committee of ways and muru;.

He said: Mr. Speaker, last year I beganthe practice of tabling the budget whitepaper the day before the presentation of thebudget speech. I believe that this proceduremet with general approval, and I have fol­lowed the same policy this year. I hope thatthe house as in other years will give una­nimous consent to having the white paperprinted as part of today's Hansard.

With the common consent of all groups inthis house the work of this session has beenplanncd so as to begin and conclude ourdeliberations six or eight weeks ahead ofthe usual times, so that adjournment cantake place well, in advance of the dateappointed by Her MOljesty for her coronation.Consequently it has been nec'!ssary to bringdown the budget nearly two months before t~e

FEBRUARY 19. US3The Budget-Mr. Abbott

Those who now argue that they havecomplete confidence in this government, itthey still believe that Canada is a democracyand that the people of Canada are free todecide what government they will have,should be the ones to impress upon thegovernment that consistent with the opinionsthey have expressed they should not pass onsuch wide powers because they might not beconvinced that another government would beso all-Wise, so omniscient as some of themseem to believe this government is.

I know some hon. members do not feelthat we should be discussing Ihis legislationat the length at which It has been discussed.That is what members of other parliamentshave contended from time to time in thepast. Without reflecting upon the motivesof a single member of this government orof this house, it should be decided that it Isnot consistent with our federal parliamentarydemocratic system that at any time whenparliament can easily be called together thereshould be handed to a government the powerto declare by order in council that the rightsof parliament or of provincial legislatures canbe suspended in the way that can be doneunder this act.

Progress reported.

At six o'clock the house took recess.

been bombed out, although for a time theymet in an ordinary subway station, althoughthey met under actual bombing, they neverchose to abandon the supremacy of parlia­ment or the rule of law.

It may well be that those who examineevents from the distant and objective view ofhistory will recall that at a time when Londonwas under the heaviest bombing the BritishHouse of Commons sat for two days and dis­cussed the freedom of men then held on theIsle of Man. London could be bombed, build­ings could be destroyed, but the rule of lawand the supremacy of parliament must bepreserved at every expense. That may wellbe regarded as the most important thingbecause it stands before us today as an exam­ple that we should follow when conditions notonly do not justify any argument for theabandonment of the supreme authority of thisparliament, but demand an insistence uponthe rule of law and respect of our federalsystem under our constitution.

We are in committee; members can askquestions and can express their views, butonce again I urge the government-and Iurge them in all earnestness-to reconsidertheir course, to remember that they havenot put before us a single reason why itwould be necessary to resort to the WarMeasures Act if this act were not passed. Infact everything that has been said shows thatit would not be necessary to resort to theWar Measures Act unless we were underthe immediate threat of war and had diffi­culty In transportation and communication.That would be the only justification.

I also urge the government in all earnest­nes.s to recall that they have not shown usany reason why they need these wide powers.They have referred to the fact that last yearthey used the act so little that we need notbe concerned. about It. If they needed theact so little last yellr, why do they need thesewide powers today?

Every argument put forward by theMinister of Justice is an argument whichshould, on reflection, impress upon thegovernment the desirability of coming tothis house and saying; We have listened tothe arguments put forward; we do believethere is reason for the concern expressed; wedo not accept these arguments as criticismof Individuals now in office, but we havebeen Impressed with the fact that any lawnow passed may affect those who will becalled upon to assume responsibility at sometuture time, and we do not think we shouldpass on powers of this kind to anothergovernment because we sometimes have notindicated our confidence in others to dothings as well as we do them.

2116 HOUSE OFThe Budget-Mr. Abbott

custO'11ary date. Hon. members will appre4ciate that this makes it difficult to obtain com­plete information for the year under review.Many of the figures given in the white paperare of necessity the best current estimatesand will be subject to change as later informa­tion becomes available.

I have again transferred to the white paperthe greater part of the general economicreview which forms an essential introductionto the budget. Accordingly I shall confinemyselt this evening to a brief summary of themain features of recent economic develop­ments and ot the outlook for the future.Before doing so, however, I hope the housewill allow me to pay a brief tribute to thelate Dr. W. Clifford Clark.

Under our system of parliamentary govern­ment deputy ministers occupy a positionwhich is difficult to explain to those who arenot familiar with the actual operation of ourpolitical and administrative system. Theycarry heavy administrative responsibilities,but they are charged with no political respon­sibility. In the Department of Finance, how­ever, it is particularly difficult wholly toseparate administration and publIc policy.The Minister of Finance accepts full respon­sibility for all decisions of policy, but thedeputy minister must concern himselt withan extraordinarily wide and varied range ofpolicy questions, because almost all such ques­tions sooner or later involve revenue orexpenditure. The deputy minister has a con­stant duty to advise, suggest, warn and pointout the short and the long-run implication!of alternative policies. At the same time thefinal decisions are not in his hands and hemust be ready to carry out and administerwhatever decisions are reached.

Dr. Clark for more than twenty years wasa great deputy minister. He was alwaysforthright and vigorous in his presentationof the relevant considerations and the implica­tions of whatever matter was under discus­·sion. He was always completely loyal incarrying out whatever decisions were reached.His capacity for work and his tireless devo­tion to duty were extraordinary. At the sametime he was a quiet and unassuming man,who shunned aU personal publicity. His per­sonal and intellectual integrity was of thehighest order, his appreciation of the publicinterest and his love of Canada were intense.His technical skill in matters of financialadministration held the admiration of all whoknew him, not least among them those inother countries who had occasion to consultor negotiate with hIm. His sudden and unex­pected death was a great shock to me andhas been a severe personal loss to his manyfriends in this house. The people of Canada

[Mr. Abbott.]

COMMONS

owe him a greater measure of gratitude thanthey realize. He has left a lasting imprinton the quality of public service in Canadaand his life and work will remain an inspira:tion to those who follow.

ECONOMIC TRENDS

Turning now to recent economic develop~

ments and the outlook for the future, 1952has been in most respects a successful yearin world affairs. The nations ot the freeworld are in a stronger position than theywere a year ago to protect themselves againstaggression. The North Atlantic communityhas achieved an important increase in Itsdefensive strength. Our production lineshave begun to turn out in substantial quantitythe modern military equipment we need. Thedefence construction program in westernEurope and on this continent is well underway. In Korea, Malaya and Indo-Chinaaggressive communist forces are being held incheck. While much remains to be done andwe cannot relax our efforts the accompUsh~

ments of the past year and the continueddevelopment of close co-operation among ourallies have provided a more enduring basisfor peace and security.

In the economic sphere, there has been anoteworthy reduction in inflationary pressuresin many parts of the world. Prices over awide area have stopped rising and the pricesot many of the raw materials, which rose sosteeply after the outbreak of the war inKorea, have receded to more normal levels.

There has been a growing recognition ofthe close relationship between internal finan­cial stability and the balance of payments.The success ot many countries in dampingdown excessive demand internally hasbrought about a significant improvement inthe world exchange situation during the pastyea". At the end of 1951 the central reservesot the sterling area were falling rapidly, andmost sterling countries were running substan­tial deficits. By the last haH of 1952 thereserves were again rising, and at the com­monwealth economic conference which thePrime Minister and I attended some twomonths ago, the representatives of the othercommonwealth countries were able to reportSUbstantial progress toward their objectiveot a better balance in their external accounts.These improvements make possible a renewedel!ort to remove the barriers and restrictionswhich continue to hamper world trade.

While 1952 saw an abatement of worldinflationary pressures and brought someimprovement in world trade, internationaleconomic relations today are far from satis·factory. Since the war tariffs have beenreduced by many countries, but quantitative

2117

The commonwealth economic conferencewhich was held in London in December madea significant beginning. The conferencedecldcd-

restrictions, discrimination and inconverti­bility of currencies still persist over a widearea.

These continuing difftculties can no longerbe ascribed primarily to wartime losses ofproductive facilities. The efforts of thepeople of Europe and elsewhere, with theassistance given by North Americll, havebeen successful in making good much of thedamage caused by the war, and production inmost countries is now greater than everbefore. By 1950 It appeared that the post­war inftation had about run its course. How­ever, the outbreak of hostilities in Koreacaused world prices again to surge upwardand brought intensified inftationary pressuresand renewed difficulties In trade and pay­ments.

This setback is being overcome but many ofthe underlying problems remain unsolved.The greater economic stability and the betterbalance of lrade achieved In 1952 now givethe nations of the free world a new oppor­tunity to move forward.

The major Instruments for internationaleconomic co-operation which were drawn upimmediately after the war, namely the Bret­ton Woods agreement and the general agree­ment on tariffs and trade, envisaged that('onverobHity of currencies and multilateraltrade would have been restored over a largepart of the world by now. These agreementshave constituted a valuable means of Inter­national co--operation and we need constantlyto examine the manner in which they canbest be used to facilitate a more rapid attain­ment of our objectives. Moreover, the bind­Ings of tariff Items under the general agree­ment on taritTs and trade, which were lastextended by negotiations held at Torquayin 1950, will run out at the end of this yearand further negotiations on a wide scalewill be necessary to continue them in effecton a fl.rm basls. These are some of the majortasks for the coming year. It is clear thatthe time has come for new initiatives.

-Ihal a mo~e posllivp policy can naw be adapted.both by Ihe COlnmonwullh llQ\tntries themselvesand In coneen wllh olher friendly llQ\tnlrlfl., topromote expansion of world proo\tetion and Irade.

FEBRUARY 19. 1953The Budget-Mr. Abbolt

If this beginning is to lead to concreteresults, there must be close and continuingco-operation between the important tradingnations. No lasting solution can be found,of course, without the active and adequateparticipation of the United States. Early inMarch the foreign secretary and the chan­cellor of the exchequer ot the United King­dom will visit Washington to begin explora­tory discussions on a collective approach totrade and currency problems. It is to be hopedthat this Initiative will lead to constructiveaction. Canada has participated fully in thecommonwealth discussions which have ledup to this new approach. J need hardly addthat we are prepared to play our full partIn any common efforts which are designedto achieve a prosperous and expanding worldtrade.

We here in canada over the past decadehave experienced a period of growth andprosperity unrivalled in our history. A5 anal1on, we have become accustomed annuallyto breaking new records in production,foreign trade, investment, employment andincome. Each year our people set their sightsa little higher; we expect almost as a matterof course that we will do better than we didthe year before.

Even against such a background of pros­perous growth, 1952 stands out as a remark­able year. Last year I based my budget onthe expectation that gross national productionwould rise to $22! billion. Actually our grossnational outJ'ut reached $23 billion, anincrease of mt.ore than 7 per cent in "alue over1951. With prlCC!s relatively stable, most ofthis increase was brought about by a greatervolume of production. The recOf"d wheatcrop was an important factor in this increase,but many other industries also achieved sub­stantial gains.

It is necessary to point OUI that the aggre­gates of total production in 1951 and 1952obscure some rather significant changesduring both of these years. Production wasat a high level in the first part of 1951 butfell off notkenbly towards the end. The year1952 started out trom these lower levels, butbusiness picked up very early in the year anda remarkably steady expansion in productionlook place during the remainder or the year.

The increased outpul represents an impres­liive rise in the productivity of the Canadian

The commonwealth countries stated that it economy. While the improvemcnl resultingis their aim- from the record wheat crop may be regarded

as largely fortuitous, our people as a wholea.·e beginning to reap the benefits of theenormou~ investments in ncw pin nt, cquip­mllnt and development that hll\'e been madesince the war. I might add thnt the recordgrain crop could scarcely have been harvested

-Ia RC1Jre inlernatlonal a.r~'emenl on lhe adop.Unn or poli"i"s by "redllor and debtor eO\tntrteswhich will reslore balance In lhe world economyon the lIne. of "'lrade not aid" and wlll by pro·.reS$ivc sla.es and wIthin reasonable lime, erealean effeclive multilaleral lrade and payments .yslemIlQVerinl the wldesl posIlble al"Pa.

2118 HOUSE OFThe Budget-Mr. Abbott

had it not been for the heavy post-war invest­ment by our farming community in labour­saving machinery.

The total of salaries and wages earned byCanadian workers- during 1952 rose by 12per cent, an increase which is considerablylarger than the rise in gross national output.For example, the average weekly earnings oflabour in nine leading industries were $54.13in 1952, an increase of $4.52 over 1951.

While production, employment and wagesrose in 1952 to the highest levels in our his­tory, it is gratifying to note that prices havenot followed a similar rising course. Theindex of wholesale prices fell by nearly 7 percent during the year; the index of consumerprices declined by 2 per cent. We have beenable to expand our production and incomewithout any apparent renewal of inflation.The strength of our dollar in foreignexchange markets, the fall in world pricesof many of the commodities which we importand the general restraint in our monetaryand fiscal policy have all contributed to thisstability in our general price leveL

The rise in labour income, combined withthe downward trend ot prices, meant that in1952 most Canadians experienced a substan­tial improvement in real income. We havehad periods of rapid growth before, andperiods when our production has risen assharply as in 1952, but it is difficult to recalla time when we have been able to carry outsuch a degree of expansion and at the sametime maintain a stable price level. 1952 canbe justly described as a year ot prosperitywithout inftation.

The stability of prices and the abatement ofinftationary pressure made it possible toremove during the year some of the moredirect anti-inflationary measures which hadbeen introduced after Korea. Last May theconsumer credit Tegulations were lifted. Thatsame month the Bank of Canada expressedthe view to the chartered banks that thespecial restrictions on bank credit which hadbeen in effect for the previous fifteen monthscould be removed. Towards the end of theyear it was also possible to announce thatthe deferred depreciation provisions in theIncome Tax Act would not apply to propertyacquired after December 31, 1952. It will berecalled that these regulations were adoptedin the 1951 budget as a financial deterrent toexpenditure on capital expansion of a lessessential nature. It was hoped by this toreduce the competitive bidding up of pricesof scarce materials which were required formore essential purposes. The improvement

[Mr. Abbott.]

COMMONS

in the supply situation during 1952, par­ticularly in respect of steel, made the regula_tions no longer necessary.

The containment of inflation and thestability of the general price level in 1952have been to me a particular source of grati_fication. Since I became Minister of Financenearly seven years ago, I have been lacedwith many economic and financial problems,but none more serious nor more persistentthan that 01 inflation. It would be foolishindeed for me to predict that this problemhas been permanently solved. Our experiencein 1952 has shown, however, that those whoargued in 1950 that we were in for a siegeof indefinite inflation have been just as wrongas the pessimists who since the end of thewar have been persistently predicting a newdepression.

The annual presentation 01 the budget Isa time for national stocktaking, and I thinkit is desirable belore looking at the prospectsahead to examine some of the basic forceswhich are operating in the economy. We havehad high and rising levels of employment,real income has been increasing steadily, thelevel of production is at an all-time high.The question we have to consider is whetherthe dynamic forces which have brought thisabout are likely to continue.

It is difficult to analyse briefly all thefactors which affect the level of economicactivity. There are four principal forces thatprovide the basic demand for a country'soutput of goods and services. These are theexpenditures by individual consumers, theinvestment in new capital goods, the foreigndemand for the country's products, and thecombined expenditures of governments ongoods and services. Needless to say thesegroups are interdependent; the level of con­sumers' expenditures, for example, willdepend in part upon the level of income,which is in turn related to the over-alldemand for goods.

Possibly the most buoyant element on thedemand side in 1952 was the sharp rise inconsumption expenditures which began inthe early spring. Retail sales in the sCC()ndquarter of the year were more than 25 percent above those in the flrst quarter, andnearly 10 per cent above the same periodin 1951. This rate of increase was maintainedthrough the remainder of the year. It isevident that the rise in consumer buying wasdue to a nwnber of favourable circumstances.In part it represented a reaction from thefalling off in sales late in 1951 and early in1952. The decline in prices and the removalat the credit restrictions also contributed tothe pick-up in purehases. Probably most

2119FEBRUARY 19. 1953The Budget-MT. Abbott

con- value than in 1951, and about 12 per centgreater in physical volume. Total Importsin 1952 were slightly lower in value than in1951, owing to a fall of about 12 per centin the average prices of imports, thus off­setting a similar increase in quantity. Infact, during the past year we experienced asignificant improvement in our terms of trade,or the ratio between the prices of the goodswe export and the prices of the goods weimport. While the prices we paJ for ourimports declined, the prices of our exportswere largely maintained. Taking due accountof non-merchandise transactions we had acurrent account deficit in our balance ofpayments for 1951 amounting to $524 million.In 1952 we had a surplus of $150 million. Theimprovement in the terms of trade and thestrength of the Canadian dollar were factorsof considerable importance in the economyduring the past year. These two factors con­tributed materially to the improvement inour balance of payments and also to thegeneral stability of the price level and therise in real incomes.

A noteworthy feature of our foreign trade:n the past year was the attainment of a widerdistribution of markets. Exports to the UnitedStates were maintained at the 1951 level, inspite of the embargo on our cattle and meatexports which prevailed through most of theyear. A somewhat larger proportion of ourexports than last year went to the sterlingarea. Sales to the United Kingdom increasedby about S100 million. However, our exportsto all other overseas countries, including LatinAmerica and continental Europe, increased bymore than $200 million or over 25 per centduring the past year. Our sales to the worldoutside the United States and, the common.­wealth made up nearly one-fourth of ourtotal exports, equal to the highest proportionin our history. For example, exports to LatinAmerica, recently visited by my colleaguethe Minister of Trade and Commerce (Mr.Howe), amounted to $272 million in 1952, morethan double our exports to that area in 1949.

The improvement in our balance of pay­ments contributed to the strength shown inthe Canadian dolIar during the year. From aposition of approximate parity with theUnited States dollar in. the first two monthsof the year, the Canadian donar rose to apremium of about 4 per cent in September,and then fell off slightly to a premiwn ofabout 3 per cent at the end of the year.

The other major factor in the exchangemarket was the movement of capital acrossour borders. The inflow of capital for directinvestment in oil and mineral developmentand for the building of new ind'Jstries was

important of all was the steady rise insumer income throughout the year.

In spite of the very significant rise in con­sumer spending and retail credit outstanding,there was little apparent change in the pat­tern of net personal saving as comparedwith the previous year. In 1951 the net per­sonal sa"ing of Canadians amounted tonearly $1,250 million, or almost 8 per centof disposable personal incomes. In 1952 itincreased to about $1,300 million or n percent of total disposable incomes. It is note­worthy that the rise in consumer expendi­tures was financed primarily out of theincreased incomes. The rate of personalsaving has been maintained and comparesmost favourably with that of any othercountry and with previous periods in ourhistor;)' .

Investment in new productive facilitiescontinued unabated through 1952. Naturalresource development of a long-range char­acter was again a striking feature. TheKitimat aluminum and Quebec-Labrador ironare projects were brought closer to comple­tion. New oil pipe lines were being constructedand successful exploration for oil and gas can·tinued at a high rate. It is gratifying that thenew discoveries of the past year, includingthe recent promising finds in New Brunswick,have extended developmental activity to anincreasingly wider area of our country. Newinvestment in our manufacturing industrywas greater than in any previous year.

While investment in capital goods, equip­ment, and resource development was higherin 1952 than in 1951, the investment in addi­tional inventories was substantially ·reduced.The rise In inventories in 1951, amounting tomore than $l! billion, absorbed a large por­tion of the total increase in national produc­tion for that year. The increase in inventoriesin 1952, however, is estimated to be under$200 mlJ1ion so that almost all of the increasein national production was available for otherpurposes, including the increased require­ments for defence and higher expendituresby consumers.

The use of productive resources for defencewas considerably greater in 1952 than in theprevious year due to the fact that the pro­duction lines lor major items such as aircraft,ammunition and electronics were getting intovolume production. Except for defence, andpurchases in connection with the support offarm prices, there has been virtually noincrease in the physical volwne of goods andservices devoted to the requirements of thefederal government.

In 1952 Canada's foreign trade again brokeall previous records both in volume andvalue. Exports were 10 per cent higher in

2120 HOUSE OFThe Budget-Mr. Abbott

main~alned. The Intl.ow derived trom theplaclng ot new issues ot Canadian securitiesin the United States, less the retirements atexisting issues, was also substantial, althoughsomewhat below the 1951 level. At the sametime there was a large outtl.ow at other tormsof capital tram Canada induced in. part bythe premium on the Canadian dollar. Theoutflow resulted mainly from the sales bynon-residents at outstanding Canadian securi­ties, and from the shifts in commercialaccounts and balances. Taking all capitalmovements together, long-term and short·term, we were a net exporter at capital in1952. In effect the total savings inside thecountry, taken as a whole, were more thanequivalent to the expenditures on our entiredomestic investment program.

The combined result at our current accountsurplus ar.d the net outflow of capital isreflected in the movement i~ our exchangereserves, which rose by $81 millic.n over theyear to a level at $1,860 million at December31, 1952. As I have stated before, our policyhas been to allow the exchange rate to bedetermined by the normal play of ecolWmictorces without official intervention, except toensure orderly conditions in the toreignexchange market. No attempt is made toreverse persistent trends, but only to smoothout excessive short-run fluctuations.

Although the over-all picture ot the Cana­dian economy in 1952 was highly tavourable,the past year was not without its problemsand difficulties. The outbreak ot toot-and­mouth disease and the ensuing embargo oncattle and meat exports to the United Statesseriously disrupted the livestock industry.The government took measures to relieve theeffects ot this disaster by compensation pay­ments and by purchases ot meat under theAgriCUltural Prices Support Act. In additionspecial arrangements were made tor the ship­ment ot Canadian meat to the UnitedKingdom in exchange tor New Zealand meatwhich was diverted to the United States. Thethorough measures which were taken tostamp out the disease have been successtuland it is expected that the normal marketoutlets will shortly be re-established.

In the early part at the year some at ourindustries were affected by a falling-off indemand tor their products, notably textilesand consumers' durable goods. However, thepick-up in domestic business and a morebuoyant export demand brought about asignificant improvement in the position otmost of these industries in the latter hal! atthe year, which has since been maintained.

I now wish to turn to the outlook tor 1953.It we look first to the prospective level of

[Mr, Abbott.!

COMMONS

capital investment, present indications arethat expenditures on the expansion at indus.try and the development ot resources willcontinue at a high level. The level ofactivity in the construction Industry generallywill be affected favourably by the removalof the regulations regarding deferred depre_ciation, and by the rise in the number othousing starts which is indicated.

The demand tor our exports depends uponbusiness conditions and circumstances inother countries, particularly in the UnitedStates. It is, consequently, difficult to tore.cast, but well-intormed opinion seems agreedon a continuing high level of activity in theUnited States tor the near future whichshould sustain demand for our products inthat important market. In respect at over.seas countries our main .exports consistprimarily ot essential goods and materialswhich should continue to be in a tavourablecompetitive position.

The general increase in consumer expendi­tures which took plaCi! during 1952 has beensustained during the early part ot this year.This increase appears to have been basedprimarily on a substantial rise in real per.sonal incomes. With labour and otherincomes at present running well above the1952 average, there is strong ground torexpecting a continued high level at consumerdemand in 1953.

Translating these prospects into monetaryterms, I think that we can look forward withsome confidence to a gross national productin '1953 greater than the $23 billion achievedin 1952. I based my last budget on ananticipated increase in physical output ot 4 orpossibly 5 per cent. The record grain croppushed the actual increase up to around 6per cent. This is the third successive yearin which the expansion in volume ot totalproduction was of the order ot 6 per cent. Inthe three years since the beginning ot 1950,the total output of our economy has increasedby nearly 20 per cent. In trying to assessthe prospective increase in production in 1953we can get some guide from the Index otindustrial production which for the last quar­ter ot 1952 was from 5 to 6 per cent abovethe average for the year as a whole. Itindustrial activity continues at about thisrate through 1953, total non-agricultural pro­duction would be substantially higher than in1952. On the other hand, we cannot assumeanother record grain crop. It we make theusual assumption ot an average crop, totalagricultural production would be lower thanit was in 1952.

Taking all these tactors Into account I ambasing my budget on the expectation that

2121FEBRUARY 19, 1953The P.udget-M1'. Abbott

these two items our expenditures would havebeen about $110 million less than my forecast,which in turn is largely the result of thedefence program having been unable to getdelivery of all the equipment and materialexpected.

The surplus of $48 million represents justabout 1 per cent of our total revenues. Inother words we came about as close to avirtual balance of revenue and expenditureas is possible in dealing with the magnitudesreflected in our budget. I shOUld, of course,remind the house that neither our revenuesnor our expenditures include the paymentsinto and out of the old age security fund.

I am not going into much greater detailof our expenditures and revenues. These, sofar as they are available, are fully disclosedin the white paper. The increase in expendi.ture, compared with the previous year, is$594 million, but if we have regard to thechange in the treatment of our interest pay·ments from a cash to an accrual basis, theproper comparable figure is about $680 mil­lion. In round figures national defence expen­ditures increased $490 million, subsidies andtax rental payments t'J the provincesincreased $210 million, the service of thedebt $20 million, family allowances andveterans' benefits $40 million, and agricul­tural prices support expenditures $40 mil·lion. These major items total $800 millionof increased expenditure.

On the other hand the new old a~e f;ecurit~'

system has relieved the budget of $110 mil­lion, there is a decrease of $70 million in ourspecial contribution to the civil servicesuperannuation fund, and the disappearanceof the deficit for the Canadian National Rail­ways has saved us about $15 million. Thesemajor reductions add up to $195 million.

This means that all other governmentexpenditures for all other purposes haveincreased $75 million during the year. Theseincreases have been due chiefly to highersalary and wage scales and higher costs ofmaterials and construction, some increasesin services supplied and further increasesin our projects of scientifIC and resourcedevelopment.

The government has not relaxed its effortstoward maximum economy and efficiency inall government operations. There is andthere always will be room for !urtht:rimprovement, and we shall continue to pressour efTorts in this direction. We <lre, forexample, this year inaugurating a suggestionawards plan in the civil service which weare confident will, over the course of time,result in many major and minor improvementsin efficiency of operation and will ccntribute

gross national product in 1953 will be in theneighbourhood of $24 billion, an increase ofabout 4 per cent. I expect this increase willconsist very largely of an expansion in thephysical output of goods and services sinceprices are now below the average for 1952.My estimate assumes, of course, that we willnot experience extensive crop failures norserious industrial work stoppages.

COVERNMENT ACCOUNTS, 1952-53

I turn now to a brief review of the govern·ment accounts for the year which will end sixweeks hence. These are set out in the usualcomprehensive detail in the white papertabled yesterday. As explained there, it isnot possible at this date to estimate our year­end position with the usual degree ofaccuracy. At the time we had to go to presswe had final figures to the end of Decemberonly, preliminary figures for January, butonly forecasts for February, March and theMarch supplementaries.

The over-all results can be briefly stated.Our total budgetary revenues are expected toamount to $4,375 million, our expenditures$4,327 million and our surplus $48 million.

Our total tax revenues will be $4,010 mil·lion which is $31 million greater than I hadforecast a year ago, and this amount, roughlythe equivalent of our additional tax receiptsthis year arising out of the Ontario tax rentalagreement, differed from the forecast by onlythree-quarters of 1 per cent. Non-taxrevenues and special receipts and credits were$64 million greater than my forecast. $45 mil·lion, or nearly three-quarters of this excess,has arisen by our taking into revenue thisyear one-half of our balance in the provincialcorporation tax suspense account. This sus­pense account is still subject to considerableadjustments as fmal tax assessments on cor­porations are completed during the corningyear, but I have felt it right to bring half theamount into revenue this year, and bring allor most of the remainder into revenue nextyear.

Our expenditures this year will be $4,327million, which is $57 million or about Ii percent more than I had forecast. Two largeitems have come into our expenditures thisyear for which I could make no provision inthe forecast which I made in the budget ayear ago. One is the payment of $123 millionto Ontario under the tax rental agre<!mentsigned in October. The other is the $42million which is our estimate of losses whichshould be taken into this year's accounts inconnection with our price support policy forbeef and pork which in turn was a result ofthe difficulties ensuing from the outbreak offoot-and-nlouth disease last spring. But for

2122 HOUSE OFThe Budget-Mr. Abbott

to still furthel' improvement in the moraleand esprit de corps of the public service.

On the revenue side tax receipts are $3~;0

million higher than a year ago and totalrevenues are up about $400 million. Theprincipal increases, in round figures, are per­sonal income taxes up $210' million, or 22per cent, corporate income taxes up $100 mil­lion, or 9 per cent, commodity taxes up $40million. and special receipts and credits up$40 million. Of our total revenues 58 percent have come from direct taxes, 34 per centfrom indirect taxes and 8 per cent from non­tax sources.

As usual I want to say a word about OUI'over-all cash position. Apart from and out­side the budget we have had to find the verylarge sum of $625 million for a variety Iltloans, investments and advances. These areall set out in detail in the white paper. Thelarge items are $125 million to the Canadia::aNational Railways, $65 million tor agricul­tural price support inventories, $75 millio!lto Central Mortgage and Housing Corpora­tion, $50 million to the exchange fund, $35million to the detence production revolvingtund and $100 million to the old age securityfund.

To meet this cash requirement for $625million outside the budget we have had avail­able about $450 million trom non-budgetar:...sources. The most significant items arcreceipts ot $65 million from repayment otloans, and of $170 million in accumulations invarious pension and annuity accounts. F'llldetails will be .found in the white paper.

To sum up, our non-budgetary receiptswere $178 million less than our non-budget­ary outlays. We have our budzet surplusto apply against this, leaving a remainingcash requirement of $130 million. To meettnis cash requirement we have increased ourfunded debt on balance $141 million, whichmeans we will end up the year with $11 mil­lion more cash on hand than we had at thabeginning.

This leads me to our operations in thefteld of the public debt. Again I am usinground figures; the exact amounts are detailedin the white paper. During the year ourgross liabilities increased by $27:i million,our net active assets increased by $325 mil­lion, which means lhat our net debt declinedby about $50 million which is, o.f course, theamount of our surplus. During the year weissued new securities in the very-large amou'ltof $3,330 million and we paid off old securitiesin the amount of $3,190 million, or as I sada moment ago we hali a net increase ot $140million in our .funded debt.

[Mr. Abb<ltt.l

COMMONS

Our net debt still stands at a high figure inabsolute terms but thanks to the reducUonswe have been able to make during the past7 years and thanks to the rapid increase inour national productivity it now representsn much more tolerable burden than at theclose of the war. I should like with thepermission o.f the house to insert here inthe record a short table shOWing our netdebt at the end of each year since 1939, andalso showing it in per capita terms and asa percentage o.f our annual gross nationalproduct.

Table INet debt of Canada. 1939-1953

No<Debt 8S a

Net Percenl<llleDebt (In Net of Groaa

Aa at m11l101U1 Debt Per NationalMarch 31 of $) Capita Product

1939 $ 3.153 , 280 60·21940 3.271 287 57·31941 3.649 317 53'11942 4,1)45 347 47·51943 6.183 524 58·71944 8.740 732 7&'21945 . 1\,298 936 94-S1946 13.421 1,092 113·3194.7 13.048 1,040 \08'S1946 12.372 ll6ll 89·91949 11.776 899 75·41950 11,645 849 70'71951 11.433 816 62·819S2 11,185 775 52·11953 11,137 752 48·5

I commend this table to the attention o.fhon. members who will see that while ourtotal net debt has declined by 17 per centsince 1946, the per capita debt has fallenfrom $1,092 to $752 or 31 per cent. In 1939our net debt was equal to 60 per cent otour gross national product for that year, in1946 it was 113 per cent of our gross nationalproduct, and it now stands at only 48 percent. To put it in more realistic terms, our1939 debt represented 31 weeks of the nation'soutput, in 1946 it was about 60 weeks, butloday's debt could be covered by the productot· 25 weeks' work. The real burden ot ourdebt has been considerably more than halvedover the past 7 years.

As hon. members know, interest rates haverisen over the past two years and that hashad its reftection in the average interest ratepaid on the total tunded debt. Two years&go this average was 2· 60 per cent, last yearit was 2 ·67 per cent, and. this year it willaverage 2·76 per cent.

FORECAST OF REVENUE AND EXPENDrrOREFOR 1953-54

So much for last year. I turn now to myforecast o.f revenue and expenditure tor theyear that will begin on April 1 next.

2123FEBRUARY 19. 1953The Budget-Mr. Abbott

screened this is not likely to be as great aswe have experienced in some earlier years.All in all, I have come to the conclusion thatour total expenditure next year will be about$4,450 million.

With prospective revenues of $4,710 millionand expenditures of $4,450 million our presenttax structure would yield a budget surplusof $260 million in the coming year.

Before going on to discuss our tax policy,I should inform the house of our probableposition on non·budgetary account in thecoming year. Apart from and outside thebudget we shall have to find cash for loans,investments and advances. The largest itemshere are likely to be loans to the CanadianNational Railways and to Central Mortaageand Housing Corporation, and I expect therevenues in the old age security fund willstill fall short of payments, although by asmaller amount than this year. On the otherhand, there wiU again be non-budgetaryreceipts mainly from loan repayments andfrom the various pension and annuityaccounts. It is not feasible to estimate whatchanges, If any. there may be in the exchangefund and in the year·end amount of chequesoutstanding and. other fioat items. Apartfrom this, it would appear that our net non·budgetary requirements. excluding fundeddebt transactions, may be about the same asin the current year, that is of the order of$175 million.

Fbcal YurFiscal Year 1952-53

1953-54 (Actual(Forf'castj Pnllmlnary)

(mllllon& of dollars)1,350'0 1,187·7

55·0 M·O1,325·0 1.231'1

40·0 38·0$5·0 379·0280'0 257·0590·0 568·0300·0 284'0

10·0 11'5

Table U

Forf'cast of Tax Revf'nues(Beforf' tax changes)

I said earlier this evening that I expectour present level of prosperity to continuethroughout this calendar year and I expect acontinuation of. about the present rate ofindustrial and general economic expansion.I came to the conclusion that. assuming aver­age crops, we can look forward to a 4 percent growth in total national output. Onthese assumptions I expect that our presenttax stru-cture would bring in total revenuesin the coming year amounting to $4.,710 mil­lion. I should like to ask, Mr. Speaker, forunanimous consent to insert in Hansard atthis point the usual table showing the con­stituents of this total.

Totd tax rf'Vf'nues.. 4.345'0Non·tax rf'Vf'nuu 290·0

Personal Income taxNon-rf'sidf'nt Income taxCorporation Incomf' tax ..Succession dutlu .Customs Import dutlu ..Excise duties ...........•Sales tax .Other f'xcbe t/lXU .Mi.seellanf'ous taxes .

Old Ale Sf'curlty Taxes:2 per Cf'nt sales t/lX .. 148·0 14.2'02 per Cf'nt Individual

Ineomf' tax 82·0 45·22 per cent corporation

Incomf' tax :;0'0 36·9

280·0 224·1

On the expenditure side I have alreadytabled the main estimates which total $4,405million of budgetary expenditure. Theseestimates have been prepared with thegreatest possible care, but there will be, asalways, the inevitable supplementaries. Thereare likely to be some further losses in respectof government holdings of beef and porkWhich will not have been sold before the endof this fiscal year, and I would tbink itprudent at the end 01 the year to set asidesome further modest reserve against ouractive assets. On the other hand there is~rtain to be some lapsing of authorizedexpenditure, though with the increasing carewith which the estimates are compiled and

68108--135

Tot/ll ordinaryrf'Vf'nuf'S 4,6,$'0

Speelal recelptli and cn~dlts 75·0

Total bUdietarynVf'nuf" 4,710'0

4,294'180,'

TAX POLICY AND TAX CHANGES

With the economic outlook and the budgetprospects as I have just stated them, I havehad to decide what tax policy for the comingyear best fits these circumstances.

M:. Gnydon: Special circumstances.

M:. AbboJl: Two years ago, when it becameclear that our own interests required us toassume an important role in a collective pro·gram for ensuring international security, weapproached the financial problem with vigourand determination. We had to frame a policy.severe though it might be, which would carryus through this difficult period, and it wasbound to affect the everyday lives and for­tunes of all of us. This has been done. Theresult is that a large part of the productiveresources of the country, instead of beingavailable to turn out goods and services forimmediate enjoyment and use, has been usedto meet the threat of aggression. I think noone who knows the facts, either in this coun·try or elsewhere, will accuse this governmentof having shirked the task of imposing thetaxes necessary to pay for our major under­takings in the field of defence. We haveinsisted on balancing our accounts. To have

2124 HOUSE OFThe Budget-Mr. Abbott

done less would have been both imprudentand dangerous. The tax measures adoptedIn the fall of 1950 and in the spring of 1951were designed to build a revenue structurewhich would support the added burden ofthe defence program, and they have done so.

A year ago, upon re-examining this rev·enue structure it seemed desirable to removecertain anomalies in the Income tax struc­ture and to give some relief where neededin the special excise tax structure. In doingthis we had to forgo revenue which on afull year basis would have amounted to about$146 million. Fortunately there was leewayenough to enable this to be done and stillanticipate a balanced budget. As it turnedout the results for the year, as I stateda few minutes ago, were very close to theestimates made a year ago, our tax revenuesbeing wHhin three-quarters of 1 per cent ofour forecast.

For the coming year I propose to followthis same policy of budgeting for a balance.This means, from the figures I gave a fewmoments ago, that something close to $250million can now be devoted to tax reliet.That this can be done in spite of the estimatedincrease in the coming year of about 3 percent in total expenditures is, I think, a greattribute to the Canadian people.

In a very real sense this surplus for taxrectuctlon is the direct result of increasedproduction, efficiency and plain hard work onthe part of a united Canadian people. Hereis a real social dividend, not one that hasbeen conjured up out of thin air, but onethat has been well and truly earned by ourpeople. Greater productivity, increased effi~

clency and a willingness to work hard andvigorously for good wages, salaries and proflts-these are the things that power our countrytoday and make possible this surplus fortax relief'.

INCOME TAX CHANGES

With about $250 million available for taxrelief it seemed desirable that a substantialportion of this should be applied to easing thestrain of the personal income tax. Incometax rates if too high can do harm in manydirections. Tax laws should avoId placingtoo great a penalty on successful effort. Everyreasonable incentive should be given topeople to work hard, move to better-paidjobs, take risks and expand their busInesses

[14t'. Abbotl.l

COMMONS

without keepIng one eye continually on thetax-gatherer. This is particularly importantin a growing and expanding country suchas ours where there is so much to be accom_plished.

Two years ago the house will recall theincome tax was increased by means of a20 per cent surcharge which I stated atthat time was a temporary measure. Lastyear in discarding the surcharge deviceand in revising the rate structure about two­thirds of the full weight of this surchargewas built into the new schedule of rates.It Is now proposed to drop this remainingportion of the surcharge entirely. Thisproposal will be given effect to simply byrepealing the present ra tes and re-enact.ing the 1950 rate schedule upon whichthe 20 per cent surcharge was originallyimposed. The effect of this change will bethat the average taxpayer will have hispersonal income tax reduced after July 1by a little more than II per cent. Thisreduction, of course, does not apply to theold age security tax which stands unchanged.

Because we are on the pay~as~you-go sys­tem the present rate of the withholdingfrom wages and salaries will have to remainIn force for several months before changescan be introduced; accordingly the change­over giving effect to the tax reduction will,as usual, be made in the middle of theyeAr. From July 1 onward the incometax deducted from the wages and salarieswill be reduced for the average taxpayerby about II per cent.

Since the reduced rates will have beenin force for only six months in this calen­dar year the average individual's tax billfor the year as a whole will reflect, ofcourse, only one-halt the full reduction.The full rate of reduction, however, wIll,as I said, be re6ected from July on. It isestimated that on a full year basis thischange will cost in revenue about $155million, and for the coming fiscal year about$87 million.

With the consent of the house I am placingon Hansard the usual tables showing theincome tax payable

m for the calendar year 1952;(2) for the calendar year 1953 if' no changes

were made;(3) for the calendar year 1953 with the

new rates in force;(4) for a full twelve month period after

the new rates are in force.

FEBRUARY 19. 1853 2125The Budget-Mr. Abbolt

TABLE III

Effect of Propoeed Income Tu Changes

Single Tupayer

IncomeTn

paid for1952

19$3 tal ateli!Jting

rates belore,,,,,,,,,,dehange

Tu lor 19S3(II months atpresent ratesand 6 monthll

new rates)

Tu in rullYeAr at

new ralee

•1,000 .1.200 ..1,!iOO .1,800.•.2,000...

2,250 .. 2,500 .

2,750 .,.3,000 " .3,500 .

4,000 .5,000 .7,500 ..

10,000 ..20,000 ..

30.000...•..50.000.... . , ..15.000..... .. .

100,000 .200,000 .

400,000...•.•...

• • • •"'35" .......... .. ... . ...

" " 3088 " " "140 136 128 120

17S 170 101 100,,, '" '" 1882i4 '" ""

,,,323 313 29' '78372 200 340 3"'84 .70 .43 415

'96 580 54' 310820 '00 '50 700

1.487 1.450 1,360 1.2702,301 2,2:,() 2,105 I,""6.951 6.7W 6,355 5.9GO

12,371 11.950 11.305 10.66025,11li> 24,354 23,084 21,814-42,985 41,554 39,409 37,26461,1l{il) 00,,,," 56. S~9 as. ,\4

145,880 lU,4().! 133, 00!l 126,414

3Z7.5'O 318,344 300,729 283.114

NOli: (I) The old age security tu 011 per cent of taxable income (muimum ttu $30) in 1052 nnd 2 per cent of ta.xa.bleincome (maximum w $GO) in 1953 is payable in ll.I.idition to above ...mount!.

(2) In caleulating the ...hove taxes it ha.s been D.o;aumed tbat whe~ ineomc~ arC in clr.ess 01 $:lO.oro, that part ofincome which i.s in excess of $30.000 is from investments. but no aecount ha.s been taken of the taE creditlor dividends from Call/ldian corporatiol\ll.

68J08-1351

2126 HOUSE OF COMMONSThe Budget-Mr. Abbott

TABLE IV

Effect of Proposed Ineome Tu Chana:611

Married Taxpayer-No Dependents

3.500... ........... ,,. '" 88O",000... .......... '" 360 34011,000.•.. ................. ........... '" 'SO '"7,500..... .......... ............. 1,206 1,175 1.103

10.000.... . . . ........ 1,9t6 1,900 1,780

20,000.... 6.0131 6.250 5.88030,000..... ........... 11.796 11,400 10,78050,000.... 2".565 23,754- n, ""75,000.... ........ ........ 42,280 "0,9001 38,7801

100.000.... .......... 61,220 59,304 66.1801

200,000... .......... 145,060 140.604 133.159"00,000.... ..................... 326,690 317,48' 2911.92"

1953 tal at ITal for 1953exiatinll: rates (6 months at

before preaent ratesproJl'llMd end 6 monthschange at new ratElll)

Income

•2. 000 .2.250 .2,500 .2,750 .3,000 .

Tnpaid for

1952

• ..88

m

'"

•43

"188170

•40

"120160

Tal in fullyear at

new rates

•38"

"113160

'"320"01,11301,600

6.51010.11IO21.2lK20,,,"53,""

125,714282.364

NO'n: 0) The old age aecurity tar of 1 per C$ntof wable income (marimum tal: 130) in 1952 and 2 per cent of tuabl.income (madmurn w 160) in 1953 ia payable in addition to above amounts.

(2) In calculating the above wes it hM been aaeumed that where incomes are ill uce. of $30,000, that PlIrtof income which is in erceA of 130,000 is from inveltmentll, but no aooount hae been taken of the tal. creditror dividendllrom Canadian eorporatiollll,

tMr. Abbott.)

FEBRUARY 19. 1953 :Ua1The Budget-Mr. Abbott

TABLE V

Effect of Propoaed Io(ome Tu ChlLOiEl'

Married Tupayer-with Two Children Eligible lor Family AllowanOO8

Income

•2,300 .2,400 .:l,WO.... . .2, no .3,000 .

3,500 .-4,000.... . .5,000....1,500.

10,000....

20,000.30,0005O,0Cl0 .n,ooo.

100,000 ...

zoo,ooo .-400,000 .

19S3 ta:r at Tu lor 1953Tu e~isting ratee (6 mOnthll at Tuin

Paid lor belore present ratea full year19~2 ,........ and6 monthll at ne" ratell

change at nel'" ratell)

• • • •'''is' . ... . ............. . ......

" " "3.1 34 32 30

" 77 " "123 119 112 105

'" '" '" 134313 303 2M ,..329 '" '" 45'

I, 129 1,100 1,032 ".1,8M 1,810 I.'" 1,582

6,215 6,100 5.138 5,315II. 624 11,235 10,623 10,01024,316 23,51-4 22,331 21,099-42,015 -40,709 38,591 36,48400.905 59,094 55,982 52,869

1-44,814 140,364 132,934 1~,5G4

326,-426 311,226 299, tl83 282,139

Nan (I) The old age security tax all per cent of tallable incolne (ma~imum ta~ 130) in 1952 and 2 per cent of tu­able income (muimum tu $60) in 1953 is pnyable in addition to above .&mounts.

(2) The above figul'e8 show the actual income tu liability of a taxpayer with family allowance children butin order to arrive at hiB true net polIition the amount ollamily allowances received lor his children mustbe oITllet lll;lainet bUi tax Ii&bility.

(3) In calculating the above t/lle5 it hIlS boon Il.llllumed that whe1"1l incomes &re in ex~ 01 130.000, that partor the income which UI in exCeM of 130,000 is from invllI!Itmenta, but 110 ILCcOunt has been taken of the ta:rcredit for dividends from Canadian corporations.

2128 HOUSE OFThe Budget-Mr. Abbott

For .lome years I have expressed concernover the high level of taxes on corporateprofits. It seemed appropriate, therefore, thatpart of the amount available tor tax abate­ment should be applied in this direction. At-present the tax. excluding the old age secur·ity tax of 2 per cent, takes 20 per cent fromthe first $10,000 of profit. and 50 per centtram the excess over $10,000. In the firstplace it is now proposed to increase from$10,000 to $20,000 the bracket to which the lowrate applies. This, it seems to me, is a usefulway to give relief to relatively small busi­nesses which generally have to do theirfinancing out of their own earnings.

While by far the greater part of our cor·poration tax revenue comes trom large cor­porations, the small corporations are by farthe most numerous. All corporations, ofcourse, both large and small, will be affectedby this widening of the low tax bracket. Itis estimated that as a result of increasing the$10,000 figure to $20,000 fewer than 30 percent of our corporate taxpayers will in futurebe paying the standard rate of tax or, statedanother way, about 70 per cent of corporatetax-payers wiH pay not more than the low rateon all their profits.

My second recommendation in this fieldis for a moderate reduction in tax rates. 1propose reducing the standard rate ot cor·poration tax from the present 50 per centrate to 47 per cenl, and to apply an 18 percent rate instead ot the present 20 per centrate to the first bracket which, as I have saId,will in future be $20,000. As a result ofthese two changes the new rate structureapplying to profits earned on and after Janu­ary I, 1953, will be 18 per cent, plus 2 percent old age security tax, on the first $20,000,and 47 per cent plus 2 per cent on profits inexcess ot $20,000. It is estimated that as aresult of these changes in the corpora te taxstructure the revenue loss for a full yearwill be about $120 million, and for the com­ing fiscal year about $85 million.

In 1949 provisIon was made in the IncomeTax Act for a credit against personal incometax of 10 per cent of the dividends receivedfrom Canadian tax-paying corporations. Atthat time I said this was a first step in deal­ing with the situation under our present taxstructure where, after taxing corporate profitsat a very high rate, the individual is requiredto pay at graduated rates on the dividendspaid out of corporate profits. I now proposea second step of the same length and in thesame direction. That is to say, for dividendsreceived 1n the calendar year 1953 and there­after the tax credit will be Increased from 10per cent to 20 per cent. Canada Ls fortunatethese days in being able to attract enterpris­ing foreiin capital. ThLs is desirable and we

[Mr. Abbott.l

COMMONS

welcome it. At the same time it would seemto be a good thing it Canadians were encour_aged, where they can safely do so, to joinin a wider participation of equity ownershipin the expanding industrial wealth of ourcountry. This dividend credit of 20 per centshould, I think, ,be of considel'able assistancein encouraging our people to increase theirstake in Canada's future. On a full yearbasis this addition to the tax credit is estim­ated to cost $20 million in revenue, and $12million for the coming fiscal year.

During the past year or so there has beenconsiderable discussion in this house andelsewhere regarding -the income tax d~uc_

tion for medkal expenses. At present thelaw recognizes unusual medical expenses, thatis, expenses in excess of 4 per eent of thetaxpayer's Income. The government has beenurged to consider removIng this 4 per cent6001' and, in effect. to allow a deduction forusual as well as for unusual medical expenses.As the house knows, I have given very carefulconsideration to this widely-supported pro­posal. Quite recently in speaking on theresolution dealing with this SUbject, spon.sored by the hon. member for Winnipeg NorthCentre CMr. Knowles}, I gave my reasons fornot being able to recommend completeremoval of the 4 per cent 6001'. I shall notrepeat these reasons now. At that time,however, I promised to look further into thequestion of the level of the ftoor and to con­sider whether some towering of it might bejustified. My colleague, the Minister ofNational Health and Welfare (Mr. Martin),ha'S also considered this maller and hascarefully reviewed the latest statistical datain this field. From this review he concludesthat while the broad field of medical expensesas commonly understood mayan the averagebe at least 4 per cent of income-it is 5 percent in the United States--it would appearthat the range of medical expenses whichwould qualify for inclusion in the deductionunder the Income Tax Act would not on theaverage exceed 3 per cent of income. On thebasis of this further consJderation of the datait is now proposed. that the 4 per cent floorin the present law be lowered to 3 per centwith effect this year. ThIs move is estimatedto cost about $10 million on a full year basIs.

There are quite a number of otber incometax matters which deserve mention. Forexample, it is proposed in future to allowparents to claim a deduction for dependentchildren attending university even though thechildren are over 21 years of age. The figureof $600 now prescribed as the upper limit otincome which a dependent may earn and rti11be regarded as a dependent will be increased

2121FEBRUARY II, 1953The BudQet-Mr. Abbott

will not be allowed as a deduction by thecompany in compuUnI undistributed incomeon hand. Where notice is liven by a com­pany of the redemption of an outstandingissue the shareholders ordinarily can beexpected to govern themselves accordinlty.

For the tuture it is proposed also to repealthe tax on premium received upon redemp­tion of preferred shares. I shall be recom­mending that henceforth any company payinga premium on redemption or acquisition ofpreferred shares mwt chule such premiumpaid against its tax-~d undistributed incomeon hand or, alternatively, pay a tax of 20 percent on the amount ot premium so paid toshareholders.

Other recommendations in the income taxfield will include the extension tor an addi­tional year of the allowances now granted formineral and petroleum expenses, includingthe special provision tor deep-test weUs.Also, an additional year will be added to theperiod within which, upon coming into pro­duction, new mines will be given a three·yearexemption.

In addition to the renewal of these allow·ances there are two new provisions whichwill be recommended and which, I think,deserve mention hen. The first of these isthat mining companies be allowed a deduc­tion in respect of oil or ,as explot'ationexpenses. This, I think, is a sensible proposi·tion havinl relard to the similarities in thesetwo fields of natural resource development.For the future, therefore, these two IJ'oupswill be eombined tor purposes of the allow­ances in respect ot exploration expenses. Itis hoped that the 'l"esult of this amendmentwill be a:reater participation by Canadiancapital in the oil and las industry.

The other proposal in this ll.eld is to includeamong deductible expenses the so-calledbonus payments for leases which turn outto have been unproductive. The deductionwill be allowed In the year ot abandonmentot the lease In respect of which the bonuswas paid. This provision should considerablyImprove the competitive position among com­panies bidding for oil leases in our westernprovinces.

The income tax amending bill will as usualcontain numerous technical changes of whichmention cannot be made here. To a largeextent these changes follow upon representa­tions [rom responsible or,aniutions and theyare important in keeping our law up to dateand as fair as possible.

I shall be proposing no amendments thisyear to the Dominion Succession Duty Act..

to $750. Expense allowances tor electedmunicipal omcials will be made deductiblefor income tax purposes If they conform withthe limits established in respect of the allow­ances for federal and provincial electedmembers, that is, they will qualify to theextent that they do not exceed one-halt theamount payable by way of salary, indemnityand other remuneration. Specla.l provisionwill be made to alleviate the tax on retundspaid out as a result at reorganizations otpension plans. This will apply, ot course, Inthe case of the Canadian National Rallwayspension plan reorganlution which has beenof Interest to many hon. members.

During the past year certain other featuresof the income tax have given rise to consider­able concern. The subjects are quite techni­cal and, accordln,ly, they are not appropriatefor full elaboration in the budget speech butI should like to comment briefly on !lOme otthem. For example, the inoome tax appealboard in a number of cases involving "'hesale of tickets for goods or services to bedelivered or pertormed in the tuture havedismissed appeals against assessments whichdisallowed claims for certain so-calledreserves. In the meantime this general ques­tion has been liven careful study, and whileI cannot here 10 into all the details I can saythat I believe a proper solution has beenfound for most ot the problems of this sort.

The taxation of interest on bonds soldbetween the dates on which interest is pay­able has caused some concern in the tlDanclalworld and various briefs from nationalorgani%ations have urged consideration of thJsproblem. Am~dmentswill be made which Ithink will take care of this problemsatisfactorily.

Numerous complaints have been TeC'eivedin past months from persons who haveincurred considerable tax liability throui::hthe acquisition by certain companies of theiroutstanding preferred shares. Under the lawthis premium over the par value paid in thepurchase price is taxable income to the seller.It has been established that on selUng theseshares people were not aware of the tactthat the issuing company was the actual pur­chaser of the shares. In order, theretore, tomake sure that the law has not operatedunfairly in these circumstances it is proposedto repeal, et'fective January I, 1949, this pro-­vision which places a tax on the shareholderwhen a company acquires its shares at apremium other than upon redemption afternotice. At the same time an amendment willprovide that the amount of the premium paidby the company to shareholders upon acquisi­tion durin, the period covered by the retro­active repeal ot this tax on the shareholder

2130 HOUSE OF' COMMONSThe BudQet-Mr. Abbott

FEDERAL-PROVINCIAL RELATIONS

I should now like to say something aboutthe general problem of federal-provincialftnancial relations, because the budget speechhas traditionally been the occasion for review­ing broadly the main problems in the fteldof financing the services of government.

All federal states are inevitably faced withsome conl!id of jurisdicUon between differentlevels of govemmenL Just /U; inevitably theproblem, in an ever-changing world.. is boundto be a recurring one. No solution can everbe more than temporary. In view of thefundamental changes in the situation tacingall levels of government in Canada whichhave taken place over the past few decadesit is not surprising that federal-provincialrelations should have thrust up new problems.The wonder is that our confederation insteadat breaking down under the strains has gainedstrength and stability !rom decade to decade.

May I illustrate what I mean by reviewingthe situation confrontina: the federal govern­ment today. The bud,et I am presenting thisevening-a peacetime budget mind you­calls tor the collectina: and spending of someS4t billion. Of the main items making upthis total, over $2 billion Is needed fordefence. Interest on the national debt, whichcan be almost entirely ascribed, to past wars,amounts to about $450 million. These twoitems taken together add up to more than$2' billion. Together they can be regardedas the price for international security.

The general field of what might be called·weltare expenditure absorbs about anotherbillion dollars. This amount can be describedas the current bill for social security. Thus,out of total tederal expenditures of $4tbillion, $3i billion, or nearly three-quarters ofthe total goes towards maintaining eitherinternational security or social security. Ifnow we look back to federal bud,ets of, say,25 years ago these two items which todayabsorb $36 billion, or nearly three-quarters ofour total expendIture, were scarcely in thepicture at all, or were small according topresent-day standards.

If the federal budget at today consIstedonly of the sort at expenditure which, underthe prevailing ideas of only a few short yearsago, was regarded as alI that was necessaryor proper for the federal government toundertake, I could come very close to bal­!lOcing my budget U I had only at my1isposal the traditional nineteenth century.ources of the federal government revenuewhich were liquor, tobacco and customsduties. In such a situation I could probablywith safety recommend the complete repealof all federal inC('Clle taxes 00. lndivlduw

[Mr. Abbott.!

and corporations. The general salejl tax of10 per cent, and the 15 per cent excise taxesalong with ,succession duties, could aU b~wiped out. These fields of taxation thencould all be left to the provinces. Underthese conditions there would, I think, be novery difficult problems In the t1.eld of federal_provincial financial relations.

If the federal government did not have totax to obtain $3i billion for defence, welfareand war debts, the tax fields would certainlynot be so crowded. There would, I think, beample room for the provinces, certainly forthe more wealthy ones. I am not so lUre,however, that even this would enable aUprovinces to finance their requirements inde-­pendently of the federal treasury.

I do not believe the majority at the peoplein any province of Canada would favourdiscontinuing the present billion dollarnation·wide program of ~Uare expenditure.Nor do I believe that in any province themajority of the people would have had thefederal government do otherwise thanembark, In common with other (:ount.rles,upon a defence program of the present pro­portions against communist .,gression. If Iam right in this belie!, then it seems to methat the federal government :mould scarcelybe blamed if the expansion of provincialtaxation has become more difflculL Of ooursethe extent of federal taxes does make sub­stantial tax increases by provincial cavern­ments more difficult. No royal commission I.sneeded to discover thls truth. I have goodreason to know the 30rt of problems whicbprovincial ministers of t1.nance have to face,and I think they know that they have mysympathy.

But no group of men at Ottawa is respon­sible for this problem. It finds Its orlgin inthe will of the majority of the people of theten provinces which, of course, is Canada. Noone in Ottawa has any liking for centraliza­tion as a principle or obJective. No onewishes to deprive provincial governments oftheir rights or to take over their responsi­bilities. No one has any desire to aggravatethe already difficult problems facing pro­vincIal governments which, In common withthe federal government, have to meet therising demands for government expenditurein a democratic country.

The government at Ottawa over the past20 years has done its utmo.st to find faIr andreasonable solutions from time to time overthis period when, because of desperate (:on­dltlons or swiftly changing events, the oldworkable pattern of federal-provincial rela­tions has become so obviously Inadequate.

In the late 1930's the federal government..ppointed the Rowell-Sirols c:ommLuion to

2131FEBRUARY 19. 1953The Budget-Mr. Abbott

in other provinces in respect of the burden ofcorporate income tax. The loss of revenueto the federal treasury in a full year will beapproximately $17 million.

The federal government has, I think.demonstrated its desire to avoid, whereverpossible, encroaching upon tax fields usedby the provinces. After the war, for instanee,we a handoned the taxes on gasoline, amUSe·ments, parimutuels, and electric: powerbecause the provinces were depending uponthe use of these taxes. I propose to makea further move of this sort and repeal tnefederal tax on the transfer of securities. atax which is also imposed on a parallel basisby the two central provinces.

This will mean a loss of revenue to thp.federal treasury of some $3 million perannum.

One does not have to study for very longthe problem of overlapping tax jurisdictionsto realize there is no easy answer. A re-allo·cation of tax sources between the two levels ofgovernment does not seem to be a workablesolution. This appPoach might be helpfulif the various tax sources were of equalvalue to all provinces which, of course, theyare not. Accordingly, in giving up tax

sources sufficient for the needs of the wealthierprovinces, the less well-off provinces wouldbe left without enough to meet their require­ments.

Some students of this problem have beenattracted by the idea of straight fiscal needsubsidies to less well-off provinces as a sup­plement to some undertakings or arrange­ments regarding the use of certain tax fields.This double-barrelled system would, I think,imply the unanimous acceptance by aU prov­inces before it could be adopted. This mightnever be possible. As a matter of fact, I amby no means sure 1! I were a provincialminister of finance that I would agree to suchan arrangement. I am afraid I would findsomething repugnant in the idea that an out-·side body-a board, council or commission­would be investigating provincial affairs anddetennining the size of the fiscal needs for aparticular period which amount in turn wouldbe the measure of the federal grant.

In the United States, where they have thesame problem to an acute degree, the ques­tion of federal-state relations has for manyyears been the subject of much painst;;lkingstudy but nothing by way of a gcneral solu­tion has been achieved. In the absence ofany over-all plan, the majority of the stateslevy personal income taxes, corporation taxesand retail sales taxes. It is estimated, forexample, thnt about 60 per cent of the taxrevenue of the states is obtained {rom retail

make an exhaustive study of all aspects offederal-provincial relations. This commissionmade a very thorough and penetrating studyand Its recommendations were far-reaching.They were found to be not acceptable to theprovinces. Perhaps some on re·examlningthese proposals today would conclude thatthey were too drastic and did call for a sur­render of some provincial jurisdiction.

The rejection of the Rowell-Sirois recom­mendations of course left the federal ministerof finan~, the Right Hon. J. L. 115leY, underthe necessity during the desperate days ofthe early 1940's of speedily improvising someworkable compromise for the war period.The good faith of the provinces and theirwillingness to co-operate in helping to finda proper solution was reflected in their accept­ance of the plan embodying the wartime taxagreements.

After the war the problem was still thereand the federal government put forward onits own account a comprehensive plan to tak~

up where the wartime tax agreements leftof'!'. This plan was also unacceptable to thl!provinces. Again, it is possible to argue thatthis post-war plan attempted too much, tooquickly. Undoubtedly it did propose a far­reaching overhaul of the status quo not onlyin revenue fields but in the expenditure pat­tern as well

Again Mr. Ilsley had to devise some tem­porary workable arrangement for the post­war era.

As the house knows, his proposals tookthe form of optional agreements relatingsolely to taxes, known popularly as tax rentalagreements. The virtue of this approach wasthat it was not dependent for success on theunanimous acceptance by all provinces. Acardinal principle in the offer was that nopressure, direct or indirect. should be placedon any province to accept an agreement. Thishas bccn a fundamental position in the federalgovernment's attitude ever since.

In the prcsent tax rental agreements, anundertaking is given that upon expiry of theagreement lhe federal government will allowII credit against its corporate income taxequal to 7 per cent of the profits earned byC'ompanles in that province. This, of course,is to enable any province to re·impose Itsown tax up to this 7 per ccnt level withou:penalty to corporations in that province. Inow propose to increase the 5 per cent taxcredit at present being allowe<i in our Incom<!Tax Act in respect of profits in any provincewhich has not entered into an agreement tothis same level of 7 per ccnt. The gen£'raleffect of this will be to place corpora:ions inQuebec. which is without a tax rental a~re'!'

ment. on the same basis as those opcratia;::(;.8108-130

2132 HOUSE OFTl'e Budget-Mr. Abbott

sales taxes. Those who are at times criticalot the Canadian situation mIght do well toexamine the situation which obtains southot the line.

After reviewing what other countries haveaccomplished, I must say that I think wehave done reasonably well in Canada in work·ing out a common·,rense method of a«:ommo­dating federal-provincial financial relationsto the major upheavals of the past fewdecades.

Certain aspects of the tax rental agree·ments may, perhaps, cause some mild con­cern to the purely logical mind. The patternfor these agreements is found in no treatise ortext book. No royal commission produced theformulae. The provisions ot these agree­ments have been hammered out on the anvilof hard experience. Our approach has beenessentially a pragmatic one and our solutionis one whlch does lend itself to the practicalrealities of the sltuatlarl. in which it mustoperate.

Mr. Speaker, I am afraid that I may haveimPOSed on the patience and good nature otthe house in commenting at such length onthis subject. It is an important one, how­ever, It has deep implications tor our exist·ence as a federal state. Our national unitymust always be built on a foundation whichgives practlcal effect to the constitutional dis­tribution of sovereign powers and admlnlstra­tive responsibUiUes between the central andthe provincial authorities.

I hope that the statement which I havemade will have been of some value In clari­fying the issues, establishing the facts and inrevealing the sincerity of the federal gov.ernment's desire to work amicably towardreasonable solutions in this field of our rela­tions with provincial governments.

CUSTOMS TARIFF

The budget resolutions relating to thecustoms taril'r which I am tabling containproposals respecting certain tariff Items wherereductions in duty are desirable. In a numberof cases I am proposing changes in wordingand classification which would remove uncer·tainties, anomalies, and administrative ditH­cultles which have arisen. No increases induty are proposed.

Reductions in duty are proposed on par­ticular items which enter into the costs of

(Mr. Abbott.)

COMMONS

production of our primary industries. I amproposing to add some additional items to thealready extensive list of equipment andmaterials which enter duty free for use Inagrfculture. Reductions are proposed on twoimportant categories of equipment used inthe tlshlng industry, namely gasoline enginesand wire rope. In the case of the miningindustry the proposals include reductions oncertain specialized equipment.

I am proposing to widen somewhat theexisting classifications under which universi_ties, schools and public hospitals may bringin scientific and medical apparatus free ofduty. It is proposed also to extend the exist­ing classification whIch grants tree entry tocertain articles used for religious purposes.Finally, the customs tariff resolutions con­tain a proposal for the establishment of anew item under which personal and householdgoods acquired abroad by members of theCanadian armed forces may be entered freeupon their return to Canada under certaiDconditions which are specified.

COMMODITY TAXES

I now turn to the field' of commodlty taxes.With some regret I have come to the con­clusion that I cannot this year recommendany change in either the general sales taxrate or in the special excise tax rate. Broadlyspeaking I believe we have achieved iD thiscountry a pretty sensible balance in our taxstructure between direct and indirect taxes.I am aware, of course, how acceptable itwould be it substantial tax reductions couldbe made in the field of commodity taxes, butit is quite clear that the moderate leeway atmy disposal this year will not pennit this tobe done.

While the general rate structure in thesefields must be maintained, a few important.changes can be accommodated without toogreat loss of revenue. A further reduction inthe levy on cigarettes seems desirable. It isclear that following the reduction made lastyear there was a quite deftnite increase incigarette sales which, trom the point of viewof the revenue collector, is very encouraginC.Smuuling, I regret to say, is still a diftlcultproblem. I have accordingly decided torecommend that the excise duty, and cor­respondingly the customs duty, on clgarettdbe reduced by $2.00 per thousand which, fora package of twenty c:i~arettes, meaDS tourcents of!. Not knowing in advance what

2133FEBRUARY 19. 1953The Budget-Mr. Abbott

benefit from such service. It also wishes theC.B.C. to have a direct source of revenue, onwhich it can buded over a period, and not tobe dependent upon annual appropriations tofinance its operations. We wish to empha­size that it is 8 sepante corpoI11'te body,under the general control of parliament butnot a part of the government.

Television operations have just recentlycommenced and their development bas beenfinanced by loans specifically authorized inthe estimates. It is now npected that, inaddition to commercial television revenues,the C.B.C. will require about $6 million inthe next fiscal year to meet operating costsof television, includine Interest on loans.This requirement will increase over the nextfew years, perhaps to about $10 million.Some part of these needs during the devel­opment period may properly be met fromloans, and paid from future revenues, butwe should start now with a plan to provideadequate revenues over the long run.

It is therefore proposed that the CanadianBroadcasting Act should be amended toprovide that tbe corporation should in futurereceive from month to month the amount ofrevenue yielded by the present 15 per centspecial excise tax on television sets andthe picture tubes for such sets, and on suchparts and accessories for television sets asare taxable under the excise act. In thisway those who buy sets, or the replace­ment tubes for them, will be providina: thebasic revenue necessary for C..B.C. tele­vision services. In order to make this planeffective, It will be necessary to revise theregulations to provide that tourists return­ing to Canada may not include as baggageeligible for free entry television sets orthe picture tubes for use in them.

Having decided upon this plan in regardto television, we have now come to the con­clusion that a similar transfer of the 15per cent special excise tax revenue can andshould be made to assist In financing radiobroadcasting, in place of the present licencefee. Although the continuation of this feehad been recommended by the Massey com­mission, experience has convinced us that itis uneconomical to collect such a small indi­vidual fee from such a high proportion ofCanadian families, if any satisfacto:-y alter­native is open. We believe that paymentto the C.B.C. of the amount of revenuereceived. from the 15 per cent special excisetax on radio sets and the taxable parts andaccessories for them does provide a satis­factory alternative, at least for the nextfew years until the present statutory grantfor radio broadcasting Is reviewed. at theend of its five-year term. Consequently we

Tbere is one further subject on which Ihave important changes to announce. Thegovernment has been seeking a fair and eRec­tive source of revenue for the national systemof television broadcasting being developed bythe Canadian Broadcasting Corporation Inaccordance wtth the general polley that wasannounced by the Prime Minister <P.ir. St.LaurenO. The government's policy is to havethe cost of the national television service paid,as far as that is practicable, by those who

effect this further cut will have on thevolume of consumption, or the amount ofsmuggling, it is impossible to estimate whatthe revenue loss from this move will be. Afair estimate is that it will not be more than$11 milllon.

It is proposed to repeal the stamp tax oncheques, money orders and other instru­ments. This tax is definitely of tbe nuisancevariety and I am sure that only the Ministerof Finance, who has to forgo about $12 mil­lion of revenue, will mourn its passing.

Another amendment, and one in which Iam quite happy to join in acclaiming, wHIrepeal the sales lax on books. I have beenimpressed with the breadth and sincerity ofthe representations for this action, and I havebeen convinced that it would be in the publicinterest to forgo the modest amount ofrevenue now received from this source. Con­currently wilh this repeal of the sales taxon books the tax will likewise be withdrawnfrom materiais used. in the production ofmagazines, books and newspapers. This wiJleliminate the difficult task we have had towrestle with In recent years of drawing aclear and acceptable line between newspapersand magazines.

Materials used in the manufacture of thelist of foods now Included in the schedule ofexemptions will be freed from sales tax.Similarly a .group of items which alona: withthe 5O-call~ "consumable materials" are ex­pend~ in the process of production will beexempt from sales tax.

All these changes In the sales tax will resultin a loss of revenue of about $8 million. Asusual it will be provided that all the abovecommodity tax changes will be effective frommidnight tonight In accordance with standardpractice my colleague the MiniS'ter of NationalRevenue (Mr. McCann> has asked me to givenoUce that no claims for refunds arising outof tax reductions in respect of goods on whiebtax has been paid will be entertained.

There will be a number of other minoramendments Included in the bIll -amendingthe Excise Tax Act but these need not detainus here.

GSl08-l:!51

COMMONS

Table VIEffect on Revenue ot Proposed Tax Chan(~

Reduction Reduction InIn FuJI Fiscal YearYear 1953-Sf.

(in mllliona ot dolla")

361 237

2134 HOUSE OFThe Budget-Mr, Abbott

are ,proposing that the broadcasting actshould provide for this transfer of revenue,as well as that for television, and that theorder in council under the Radio Act set·ting the present licence fees of $2.50 shouldbe revoked with effect from April l.

Mr. Fraser: It should never have been puton.

Mr. Abbott: Don't you like this, Gordon?

I estimate that the amount of revenue tobe received by the C.B.C. under thesearrangements will be approximately $12 mil­lion in the next fiscal year, Ute amount inrespect of radio probably exceeding some·what that for television. The public willbe relieved of paying something over $6million in radio licence fees, this next fiscalyear, and our expenditure in collecting suchfees, anticipated at $700,000 in the estimates,will be saved.

SUMMARY or TAX CHANGES

I am now in a position to summarize thetotal effect of all these tax changes on thebalancing of the budget, and I ask leaveof the house, Mr. Speaker, to insert inHansard at this point the usual summarytables.

Personal Income tax:Reduetlon In rate

SChedules .....Reduction In lower limit

for medical expense•...Increased credit tor

dividends .Corporation Income tax:

Reduction In rateil .•....Increased bracket to

which the lower rateapplies ...........•.....

Increased credit for profitsearned In provinces notcovered by a tax·rentalagreement .

Exclse dutYIReduction on cigarettes ...

Exclse taxu:Repeal ot stamp tax on

cheques. etc..........•Repeal of security transfer

tax .Repeal of .ales tax on

varioW! Items .....Loss of .ales tax revenue

as reault ot loweringexcise duty on cigarettes

10....

11

"12

,8

,

87

1

12

50

25

12

"12,8

•

TABLE VIIRevise<! Forecast 01 Revenue;, lor FiacaJ Year

1953-.54 taking Account of TIIlI Changes

Forecast01 revenue

lromexisting

taxes

D~~in revenua

frombud~t

propolla.ls

Revi$edForecut

of revenuero<

1953-54

(in millions 01 dolla.rs)

Per!lOna.l income w ....... ........... ........... 1,300 100 1,250Non·resident income taI: ..•.. 55 ........... "CorJ)CrBtion income tax. .......... 1.325 97 1.228SucCt's-,ion duties ....... 40 40Customs import duties. '95 '95Excise duties................. ...... .... .............. 2SQ " '"Sales tlU _...................... "" 10 .\SOOther excise ta.xe~ ............. '00 " '"MiseellanooUll tuxe~ ..... 10 10

Total tax revenues. 4,345 237 4,108

Non-tax rovenues ..... "" ""Total ordinary revenue!! ........... 4,635 237 4,398

Special receipts ~nd credit.3..... _ " ........... "Total budgetary revcnue!! .... ............ 4,710 237 4.473

Old Alto! Security Taxes:2% .",.Ies tat. . . . . ........... .......... 148 2 14'2% individuul income tax ........ 82 822% corporation income tu .. ........... 50 ........... 50

280 2 27'

[Mr. Abbott.]

2135

THE INCOME TAX ACT

Resolved, that it is ex'pedient to introducea measure to amend the Income Tax Actand to provide, amongst other things:

1. That for the 1954 and subsequent taxa­tion years the graduated rates of tax atpresent applicable to income of individualsbe reduced by sUbstituting therefor the fol­lowing graduated rates of tax:

(a) 15 per cent of the amount taxable ifthe amount taxable does not exceed $1,000,

(b) $150 plus 17 per cent of the amount bywhich the amount taxable exceeds $1,000 ifthe amount taxable exceeds $1,000 and doesnot exceed $2,000,

(c) $320 plus 19 per cent of the amount bywhich the amount taxable exceeds $2,000 ifthe amount taxable exceeds $2,000 and doesnot exceed $4,000,

(d) $700 plus 22 per cent of the amountby which the amount taxable exceeds $4,000if the amount taxable exceeds $4,000 anddoes not exceed $6,000,

(e) $1,140 plus 26 per cent of the amountby which the amount taxable exceeds $6,000if the amount taxable exceeds $6,000 anddoes not exceed $8,000,

FEBRUARY 19. 1953The Budget-MT. Abbott

halted, and indeed has been reversed. Wehave enonnously improved·, even it we havenot wholly solved. the complicated relation­ships of federal-provincial finance, and wehave done this in a growing atmosphere ofgood will and of mutual respect and under­standing.

The outbreak of aggression in Korea com­pelled us for a while to reverse the steadymarch of tax reductions, but within 18 monthswe were able to resume our course. A yearago taxes were reduced by $146 million a year.This evening I have proposed further reduc­tions totalling $361 million a year. Thismakes the very substantial total of $507 mil­lion of tax reduction in two years, and meansthat we have been able to withdraw two­thirds of the additional tax burden imposedin September, 1950, and April, 1951, and stillcarry our proper share of the costs of col­lective defence.

This is a record of which I am franklyproud. It is a· record of which we can all beproud, but those of us who have consistentlysupported the policies on which it has beenbased are perhaps entitled to a special senseof satisfaction.

Mr. Speaker, I shall now table the resolu­tions which I will move wJien· the house is incommittee.

The net reductions in taxes which I haveproposed amount to $237 million in this fiscalyear, and to $361 million in a full fiscal year.Radjo licence fees have never been treatedas part of our tax revenue, but including thedropping of this item the full saving to thepublic in the coming fiscal year will be about$243 million.

Of the tax reductions in the coming year$100 million is on the personal income tax,$97 million is on the corporate income taxs.nd $40 million is on commodities.

In a full year the reduction in the personalincome tax will be $185 million, in the cor­porate income tax $136 million and in thecommodity field $40 million. .

My revised forecast shows revenues at$4,473 million. My forecast of expenditureswill, however, have to be increased to $4,462million to take account of the proposed trans­fer to the C.B.C. On this basis the forecastsurplus is $11 million. As was the case lastyea'f, this is, of course, budgeting in fact foran even balance.

That, Mr. Speaker, concludes the presenta·tion of my budget. This is the eighth budgetwhich I have had the honour to bring down.The years covered by these budgets havebeen remarkable years. They have had theirdifficulties-serious difficulties-yet they havebeen years of sustained progress unmatchedin our previous history. These achievementshave been the collective achievements of theCanadian people-rapidly growing in num­bers-who have been busy about their ownaffairs, working, developing and exploring,saving and investing in the future. The taskof government in these times has Ibeen topromote a healthy climate for sound develop­ment, to promote a climate in which bothwealth and welfare can flourish, in whichwe can all enjoy the highest combination offreedom and security in both social andnational terms.

The recoro of this Liberal government inthe past four years is one of which we canall be proud. We have expanded and improvedour earHer programs of social welfare andwe have introduced a sound system ofuniversal old age security. We have providedlarge financial assistance to improved healthservices in every province. By our expan­sion of scientific services and technical sur­veys we have been steadily rolling back ourfronticrs. In reply to threats of externalaggression we have played. a significant rolein developing an effective system of regionalcolIective security and· we have financed ourproper share of its cost. We have balancedour budgets and reduced our publlc debt.The threatening surge of inflation has been