Ontario's Course Is Clear

MR. THOMPSON: Gentlemen, it is with very great pleasure that I welcome this large audience to our first meeting of the New Year. We are particularly pleased to have with us on this occasion, members of the Board of Trade.

The Empire Club of Canada has been greatly honoured in recent years, by being addressed at it's opening meeting of the New Year, by our guest speaker of today, who is a Past President of this Club.

His thoughtful and timely addresses to this Club, have always been of wide interest and. he has chosen to speak to us today on the subject "Ontario's Course is Clear". The most singular tribute that I can pay to him is to introduce to you without further comment, the Prime Minister of Ontario, the Hon. George Drew, K.C., LL.D.

HON. GEORGE DREW: As you may have gathered, it is my intention to discuss with you today Ontario's plans for a more effective working combination of the combined powers of the Dominion and nine provincial governments. After reading the flare headlines last night,) "DREW PLAN HOPELESS", perhaps there may be slime who will wonder if it is worth while for me to discuss those plans. However, it is not the first time that particular newspaper has been completely wrong, and I hope, before I am finished, I may have helped to clarify your minds as to what the issues really are.

Already a number of statements have appeared attacking these proposals, and strangely enough in several cases those who have attacked them most vigorously have indicated at the same time that they have not read the proposals. One such statement from what is, I admit, an extremely irresponsible source, describes our proposals as a blow to the nation's unity. The man who made that statement was one of those who had not read the proposals. But since such statements have been made, may I at the outset quote from the early part of our printed submission to indicate the basis on which we approached these problems. .

"In making its submissions to the Conference, the Government of the Province of Ontario proceeds upon the assumption that the future strength of Canada and the welfare of all its people will depend upon the measure of co-ordination and continuing co-operation which can be established between all governments in Canada and the agencies of those governments. While recognizing that each provincial government owes its primary responsibility to the people of its own province, we fully recognize the dependence of the people of every province on the strength and vigour of the whole nation for their continuing welfare and prosperity. We are also convinced that the strength of our national structure very largely depends upon the strength, independence, and self-reliance with which each provincial government is able to undertake its own allotted tasks. These principles are stated at the outset so that it may be clearly understood that our proposals are made in the belief that they should be equally acceptable in every part of Canada and are in no instance put forward with the thought of giving any special advantage to those who live in the Province of Ontario."

One of the weaknesses of our position in the past has been that there has been a growing tendency to settle differences of opinion in regard to the division of powers between the Dominion and provincial governments by extended litigation, instead of by the sensible system of sitting around the council table and threshing out the difficulties, with a sincere intention of reaching effective agreement. It has been stated over and over again that federation is a partnership between governments, autonomous in their own fields, but legislating in entirely different fields except for a very few instances of overlapping jurisdiction. True, the Dominion Government is responsible for the affairs of the whole of Canada, while the provincial governments are responsible for the affairs of much more limited areas. But the governments carry on their administration, and their legislative bodies pass laws covering entirely different fields of activity. They are, in fact, partners in the true sense of the word. The Dominion Government is the most important partner with the heaviest individual responsibility, but within their own field of administrative and legislative responsibility each government and each legislative body is autonomous. That is no new conception. On the contrary, it is the basic conception of any federation. The leading case interpreting the character of Canadian federalism states the position very simply in the judgment of Lord Watson.

"The object of the Act was neither to weld the provinces into, one, nor to subordinate provincial governments to a central authority, but to create a . Federal Government in which they should all be, represented; entrusted with the 'exclusive administration of affairs in which they had a common interest, each province retaining its independence, and autonomy."

That was the purpose of the Fathers of Confederation. That has been the law ever since. It is the law today. That does not mean, for a moment, that we should be unwilling to discuss the possibility of change; or even the possibility that our constitution has outlived its usefulness. But at the same time, it does not seem unreasonable to suggest that there is nothing disruptive of national unity in simply asserting what has been the clearly stated law since 1867.

But there is another reason why the Federal System appealed to those who drafted our constitution. We have special problems in this country which are the same today as they were in 1867, and they are recognized in another leading judgment in recent years again interpreting the British North America Act. In that judgment, Lord Sankey had this to say

"In as much as the Act embodies a compromise under which the original provinces agreed to federate, it is important to keep in mind that the preservation of the rights of minorities was a condition on which such minorities entered in the federation, and the foundation upon which the whole structure was subsequently erected. The process of interpretation as the years go on ought not to be allowed to dim or to whittle down the provisions of the original contract upon which the federation was founded, nor is it legitimate that any judicial construction of the provisions of Sections 91 and 92 should impose a new and different: contract upon, the federating bodies."

When we discuss the rights of minorities, referred to in such judgments, we are sometimes inclined to think of particular minorities.' But it would be well to remember that the four million people of Ontario are a minority within Confederation. We have minority rights to protect which are just as important to us as are the minority rights of other parts of Canada. Remembering that the provincial governments' have the exclusive constitutional jurisdiction over education; property and civil rights, the administration of justice, municipal affairs, , the development of our resources, and most of the other things that affect our personal daily lives, I can state very emphatically that the Government of Ontario has no intention of abandoning its minority rights and powers in those extremely important fields of legislation to a central authority which might, at some time; possess a majority wholly unsympathetic to our way of life.

May I also remind you that one of the conditions of the acceptance of Confederation, which is clearly stated in the preamble to the Act, was that the union of the provinces was not only for the purpose of forming a strong nation but also for the purpose of strengthening the British Empire. One of the rights we intend to preserve is to keep Ontario a strong and vigorous factor in the building of an ever stronger British Commonwealth and Empire.

I have stated these considerations because they have a very direct bearing upon the extent to which the Ontario Government would be prepared to abandon any powers which would help to preserve those minority rights. But as I have already stated, we have no thought of asserting those rights to the disadvantage of any other province We assert them rather in the belief that the strength of Ontario will contribute largely to the strength of other provinces, and that to a very large degree the strength of Canada depends upon the continued vigour, initiative and self-reliance of that province, which with a third of the population has for some years paid almost half of the total taxes in Canada, and has maintained almost the same proportionate basis of industrial production.

It is with these thoughts in mind that we have made our proposals. Some of them are completely new, but some of them have already found partial acceptance at the meetings of the Conference which have already taken place. Remembering that there is no single piece of legislation which can be, passed by any government which cannot be passed by either the Dominion or provincial government, or by both of them working together, we direct our intention first to the setting up of an organization which will assure a continuing and practical functioning relationship between the governments as active co-operating partners in the business of governing Canada.

We urge the setting up of a Dominion-Provincial Co-ordinating Committee, made up of the heads of the ten governments or their nominees, and working side by side with this Co-ordinating Committee on the ministerial level, we propose the setting up of a Dominion-Provincial Economic Board composed of economic and technical advisors from every government. In many ways, this suggestion would create something in the nature of a head office organization of a large business, with many branch plants. Naturally, the head office would be Ottawa, and in Ottawa the partner with the largest share of responsibility would sit as chairman at the regular meetings of representatives of the other parts of the organization and they would solve their problems in a sensible and businesslike way. This could call for a permanent secretariat in Ottawa where all the governments would have immediate and constant access to every essential fact bearing upon their own problems or the broader problems of the Dominion, which affect their own affairs.

Already the wisdom of such a course has been recognized by setting up a temporary Co-ordinating Committee and a temporary Economic Committee. When it is suggested that we are not wholeheartedly co-operating in this effort, may I merely remind you that the Co-ordinating Committee was set up in August on my motion, and the Economic Committee was set up in November also on my motion. I remind you of this only to emphasize the fact that no government represented at the Conference has shown more practical desire to co-operate in the broad interests of Canada than has the Government of Ontario.

We have also proposed the setting up of a National Adjustment Fund, starting at $20,000,000, out of which would be paid annually the whole of that amount to those provinces in need of special assistance. It is merely indicative of the carping, narrow form of criticism one encounters in times like these that I read in the press today that one critic had said that this didn't really mean very much because all the provinces would be contributing. Yes that is true. Ontario will be contributing nearly half. Quebec will be contributing a very large amount. So Will British Columbia. The provinces which would receive the most would be contributing a very small fraction of the total sum. That is no reflection on them in any, way. It simply represents the very economic situation which this National Adjustment Fund is intended to meet. But there is in such a criticism the clear evidence of a fundamental misunderstanding of where our taxes come from. Because; we suggest that each of the provinces contribute to this, fund out of their own revenues, it is said that those provinces which receive would also be paying out, no matter how small that payment might be. What these critics completely fail to see is that, if such a fund is created by the Dominion Government, the same provinces will be paying into that fund through Dominion revenue in exactly the same proportion. For some reason, many people will forget that there is only one set of taxpayers. They are the people who live in the nine provinces of Canada. They don't pay any more and they don't pay any less because taxes happen to be collected through one channel or the other. The only thing that matters is what the total amount of taxes ultimately amounts to.

It is interesting to see some of those who were enthusiastic about the Rowell-Sirois Report lightly brushing aside this proposal for a National Adjustment Fund. That was the recommendation in the Rowell-Sirois Report which received the warmest approval in those provinces which do require special grants. That is exactly what we are proposing, and upon the same principles recommended in that report. The difference is that instead of a fund of $14,900,000, recommended by the Rowell-Sirois Report, we are recommending a fund starting at $20,000,000. In doing so, we know that Ontario will pay out nearly half of that amount without any expectation of receiving a' cent in return. We do that in recognition, of the principle we have always accepted that the provinces of Canada are one great team, and that if we happen to have any advantages we are prepared to share those advantages with the other, members of the team for the purpose of building a strong, vigorous and united Canada.

We have also made a very important proposal in regard to corporation taxes. We recognize that the location of head offices in Ontario and Quebec does give these two larger provinces special advantages in that field of taxation. We propose that companies, conducting business on a national basis will make returns showing the business done in each province, and that the taxes paid from head office will be apportioned on the basis of the business done, not only insofar as those taxes are imposed upon domestic business but upon export business well. In the face of proposals of this kind, which completely implement the suggestions of the Rowell-Sirois Report in that respect, and in fact go even farther, I read today the report of a statement that I am seeking to "penalize Canadians because they live in provinces not so fortunately situated as Ontario, which enjoys not only great national wealth but also the tribute exacted by industry and finance." That malicious criticism, incidentally, was also made by a man who admitted he had not read the proposals.

Then I might point out that in spite of what you may have read to the contrary, we actually recommend, without reservation, the acceptance of the principle of deferment of postponeable construction under the inducement of Timing Grants. Dealing with this point, and with the type of criticism which must be met in trying to make any constructive proposals, I might refer to a statement I read last night that this could not be done because we recommended that these Timing Grants be under the direction of a body which was not elected by the people and not responsible to any government. What utter nonsense! We recommended that the Timing Grants should be approved and the ultimate decision as to the date of construction made by the Coordinating Committee on the advice of the Economic Board. The Co-ordinating Committee made up of all Premiers or their representatives is fully representative of all the people of Canada. It is in fact the combined representation of all the governments. I can think .of no safer and no more businesslike way of dealing with this extremely important attempt to build up a back-log of public construction against the threat of any broad cyclical recession of export trade or private domestic investment which would otherwise produce unemployment. We have gone farther than the Dominion Government. We agree on the basic proposals and recommend a much better system for the, approval of the grants and the timing of the construction. We also approve in broad principle of the welfare and health proposals, except that in the case of welfare we recommend that instead of having old age pensions payable between 65 and 70, with a means test, and over 70 without a means test, all pensions should be payable over 65 without a means test. In our opinion, anything else would cause confusion and great unhappiness in families where conceivably two members of the same family might be receiving pensions in two different categories: Our proposal in that respect is perfectly clear and I think just and fair to old age pensioners, who, under the Dominion plan, are to receive some form of pension from 65 on in any event.

There are a number of other proposals worked out after we have had the full benefit of the constant meetings of the Economic Committee since last November. I am convinced that every one of them is sound. We have had the advantage of an, extremely competent Treasurer and a staff of trained economists with long experience in government financing.

The only basic point of departure between our proposals and those of the Dominion Government is that we insist on the return to the provinces of their own taxing powers which they had before 1942, and which the Dominion Government solemnly undertook to return undiminished to the provinces at the end of the first fiscal year following the cessation of hostilities.

In regard to this proposal, I read in the same paper whose name shall be unmentionable at this meeting that as a result of this particular proposal there would be a loss of $400.000.000 annually. Even with its long record in that field, I must pay my respects to this particular newspaper for an all-time high in complete and utter falsehood. There will not be a loss of one cent. Surely it is clear that the people of the nine provinces who are the only taxpayers after all are only going to pay the same total amount of taxes for the same services, whether the taxes are imposed by the Dominion Government or whether they are imposed in part by the provincial governments and the Dominion Government for the same purpose.

It has been axiomatic even since before the rather dramatic experience of Charles the: First, that the power to tax is the power to govern. If the provinces give up any discretionary authority over the amount of taxes they are to collect in their most important fields of taxation, conferred upon them at Confederation, then they become mere annuitants of the Dominion Government and will be utterly helpless to use their own initiative and their own discretion in developing their resources, settling their land, and increasing the welfare and prosperity of their own people, in accordance with the combined vigour, courage, and hard work of those people.

This outcry against the proposal that the taxes should be returned to the provinces and the suggestion that this threatens the whole structure of national unity sound verb strange indeed when one reads the explicit under-taking of the Dominion Government, given as recently as 1942

When all the provinces gave up certain taxing powers for the period of the war and the first full fiscal year thereafter, in return for fixed annual payments by the Dominion Government, they did so with the recognition of the, fact that the Dominion Government had already centralized all authority, under the War Measures Act and Mobilization Act. They did so in. a patriotic desire to give every possible power to wage total war to the government charged with the full responsibility for waging the war. But the intention of both the Dominion and provincial governments was made clear in the preamble to the Ontario Agreement which was similar to the agreements entered into between the Dominion Government and every other province. Let me read you from the preamble to the Act

"Whereas the province shall not, by agreeing as hereinafter provided to desist from imposing certain taxes during-the term of this agreement, be deemed to have surrendered, abandoned or given over to the Dominion Government any of the powers, rights, privileges or authority vested in the province under the provisions of the British North America Act, 1867, or any subsequent act of the Parliament of the United Kingdom, or otherwise to have, impaired any of such powers, rights, privileges, or authority."

Surely, that is clear enough. All we are asking is that this statement be recognized. But in the event that any one may suggest that this was merely a statement of principle, may I remind you that there is a' section in the agreement under which the Dominion Government' gave the most positive undertaking in regard to personal' and corporation income taxes, which are the major taxes under consideration. It reads as follows:

"The Dominion shall have the sole right to levy taxes on personal and corporation incomes of the calendar year ending on the 31st day of December nearest to the date of the termination of this agreement, and with respect to personal and corporation incomes in the following calendar year undertakes to reduce its rates of taxes by such an amount ms will enable the province again to use the income tax and corporation tax fields."

Far from there being any occasion for the provinces to defend their position in asking for the return of their rights to tax in these fields, it would be extremely hard to understand how any new agreement could have any value whatever if the Dominion Government is not prepared to carry out that clear and positive undertaking. May I say in fairness to the Dominion Government, in spite of all that you have read, that there is no indication from them that they are unwilling to recognize this obligation.

Perhaps some will say, "Oh well but the situation was very different when these agreements were signed, and it is not possible now to carry out what seemed possible at that time." The situation has changed but changed very much for the better. That agreement was signed when our military fortunes were at their very lowest ebb. British naval power was at its most critical point. Rommel was threatening not only the occupation of the whole of Africa but seemed likely to sweep across the Suez through to Persia. The German armies were driving deep into Russia and threatening the Caucusus. The Japanese armies were sweeping into incredible speed through China, Malaya, Burma, Java, the Southern Pacific Islands, and to the very door of Australia. At that time there was no reason for any one to believe that by January 1946 we would have shared in the most complete and overwhelming victory of all history, and that Canada would have emerged stronger and snore vigorous than ever before. The reasons are far stronger today for being able to fulfill that undertaking than they were in March 1942.

However, we still find the objection that our proposals would mean a duplication of taxes and heavier taxes. Our proposals make it clear that we want no duplication of taxes and no duplication of tax forms. On the contrary, we urge that in every case there be single tax forms, not only as between the Dominion and the provinces but between the provinces as well in such fields of overlapping taxation as succession duties. And may I repeat again that it will mean no additional taxes because the total taxes must be the same wherever the incidence of taxation lies. May I repeat that our proposals will not raise the taxes of the people of Canada by one cent.

On the contrary it is my belief that our proposals will reduce taxes because it will bring the administration of affairs black under the provincial departments trained to administer those affairs. Ever since 1791, municipal affairs have been the responsibility of the provincial government. So too have property, and civil rights, and all those other things which mean so much in our daily life. If we were to accept proposals which meant the centralization of the control of these fields of legislation, it would man the setting up in Ottawa of duplicating civil service, and it would be necessary to train people who have no present knowledge of that work. The closer government is to the people, the better government always .is, and if we get the administration of our local provincial affairs back under the hands of the provincial governments and the municipalities, instead of increasing the total of taxes to the people of Canada, we will see the first prospect of that measure of reduction of taxation which is essential if we are to keep our production-costs in all types of production to a level where we can compete in the markets of the world for that export trade which is the very life blood of our economy. A very wise Greek stated a simple but everlasting truth more than 2000 years ago in these words

"A statesman who is ignorant of the way in which events originate is like a physician who does not know the causes of the diseases he undertakes to cure."

Those who fail to see the dangers of centralization, in spite of the loss of democratic freedom in nation after nation through such centralization, have not learned the way that events originate. Quite apart from economic reasons and other arguments in favour of the Federal System, particularly inherent in the Canadian situation, there is the fact that distribution of authority over local affairs under local governments is the surest way of preserving the very form of democratic government which was preserved by force of arms in the war which has just been won.

It was that great spokesman for the fundamental principles of democracy, Thomas Jefferson, who said this

"What has destroyed liberty and the rights of man in every government which has ever existed under the sun? The generalizing and concentrating all cares and powers into one body."

That is exactly what we wish to avoid. But in avoiding it, we want to make sure that the central government is strong and free to carry on the business of the nation and to conduct our international affairs. We want only local affairs under the local governments with their trained staffs, which have been gaining experience and traditions of public service in those fields for a hundred and -fifty years. Our proposals make that possible under a system of continuing and effective co-operation, such as has never before existed in Canada. With a permanent secretariat in Ottawa representing all the governments, and with the Co-ordinating Committee meeting at least once every three months, we would place the combined business of government in Canada on a thoroughly businesslike basis, where any differences of opinion or problems of conflict of authority can be threshed out in a friendly way around the council table. May I close with the very statement with which we closed our submissions to the Conference. We have presented our proposals, with the acceptance of the basic principle, that while each provincial government owes its primary responsibility to the people of its own province, the welfare and prosperity of the people of all provinces depend upon the strength and vigour, of the whole nation. With a spirit of co-operation, understanding, and mutual good-will, this Conference can, lay the foundation for Canada's greatest period of expansion arid prosperity, without any fundamental changes in the constitutional structure upon which has been built a strong and confident nation.

That gentlemen, is I believe the best way to make sure of a strong Canada within a strong and united British Empire.