PROVINCE OF NEWFOUNDLAND AND LABRADOR HOUSE OF ASSEMBLY Volume 1 Number 79 ,4th. Session 34th. General Assembly VERBATIM REPORT TUESDAY, MAY 26, 1970 SPEAKER: THE HONOURABLE GEORGE W. CLARKE

May 26, 1970 Tape 976 The House met at 10:30 A.M. Mr. Speaker in the Chair: PETITIONS: Page 1 HSN. W. N. ROWE (Minister of Community and Social Development): JW. Mr. Speaker, I have a petition from Hampden, in my District of White Bay South. It concerns a matter over which this Government, this House, has no jurisdiction, i.e. television reception in this area. 1 seek the advice of Your Honour and the House, Mx. Speaker, as to whether or not to present this petition to the Hon. House. MR SPEAKE&: We have had them on everything under the sun, so I do not see why the bon. member should be refused. MR ROWE: Mr.

Speaker, a portion of the petition reads as follows: ·~e the undersigned residents of Hampden, White Bay Area, protest the present treatment and deplorable television reception given to this area.by the "CBC". "All of us have invested considerable amounts in television sets. "We were promised good television reception for this area only to find, after months of waiting, there has not been any improvement. The reception is so poor that about ninety per c ent of the time we have to turn off our sets.

"We feel that this is very unfair because we are being deprived of a modern-day concenience that ninety-five per cent of the rest of Newfoundland is taking for granted.• 4903

May 26, 1970 Tape 976 Page 2 JW MR ROWE (N.W.) Mr. Speaker, the petition is signed by w~at appears to be every voter in the area of Hampden, Bayside, The Rooms and The Beaches in that area of White Bay. Sir as I mentioned earlier, I support this petition wholeheartedly. I hope that through the House the matter gets the necessary publicity, and that it is brought to the attention of the authorities concerned. I ask Sir, that this position be received and sanctioned by this bon. House: MR. SPEAKER: It is moved and seconded that this petition be received and referred to the department to which it re~ates. MR. H.

COLLINS: Mr. Speaker, it gives me great pleasure to rise in support of this petition, and I notice this morning that the bon. member for Grand Falls is absent, he is usually quick to h~s feet to support a petition from that particular area, so I thought I might fill in for him. Mr. Speaker, this brings to mind the first Throne Speech I had the pleasure to listen to in this hon.

House, it was in 1968, and as I recall it Sir, the Government outlined a very extensive, a very massive plan for complete and thorough coverage by T.V. for all of Newfoundland, a plan envisaged the establishment of many dozens possibly many hundreds of small rebroadcasting transmitters antenna. I remember making a comment at that particular time. I thought it was a good idea, and knowing something about the technicalities involved, I could readily understand where it could have been very successful and very useful in providing 4904

May 26, 1970 Tape C976 Page f Television coverage to the smaller settlements in Newfoundland. I wonder Sir, what has happened to this, and if the Government still has a plan to not only provide service for Hampden and The Beaches and the surrounding areas, but many of the other .small towns and settlements in Newfoundland which today are without T.V. coverage -certainly without satisfactory T.V. coverage. In the meantime Sir, it gives me great pleasure to support the prayer of the petition. MR. CROSBIE: Mr.

Speaker, we also support the prayer of the petition, and if the Government of Newfoundland is not going to take any action on the Speech from the Throne as· the bon. member refers to, we would certainly hope that the Government would make vigourous representation to Ottawa. MR. SPEAKER: Those in favour of the Motion please say "aye" contrary "nay," carried. Answers to Questions: RON. J. R. CHALKER (Minister of Public Works): Mr; Speaker, I have the answer to Question No. (479) on the Order Paper of April 22, in the name of the bon. member for Humber East. And as it is rather lengthy, I will table it. MR.

COLLINS: Mr. Speaker, before we go on to Orders of the Day, we have been told on two or three occasions in this hon. House in the past couple of weeks, that the Minister of Municipal Affairs was about to table an announcement concerning water and sewer and street programs for the municipalities for the present year. I wonder could the minister indicate to us now, when it can be expected after being delayed three times already? HON. E. N. DAWE (Minister of Municipal Affairs): That will be made in due course Mr. Speaker. MR. COLLINS: A supplementary question Hr. Speaker.

That is not a very satisfactory answer for all of the municipalities, the town fathers across Newfoundland, who are desirin~ to know what is going to happen. ORDERS OF THE DAY: MR. SMALLWOOD: Mr. Chairman, before you call Order (4) the Department of Finance, I wonder if the Committee would be willing to revert to Head (3) 4905

May 26, 1970 Page a= Executive Council - 303 Premier's Office, and specifically 303-0202. Could I have permission for the Committee to revert to that? It was left standing, but could we revert to it now? The Committee will remember that were some question as to why wi.th a revised Estimate last year of $4,900, I should be asked this year for $10,000 in the new financial year. And why so high as $10,000? Well the answer is in the first place, that the actual expenditure last year was $7,500 not $4,900. And the answer to the amount we ask for now, and also that this was for cables and telegrams and telephones.

Cables, telegrams and telephones. And having spent that much last year, we think that we will need this amount in the present year, although of course if it is not spent, it will not be spent. MR. CROSBIE: Would the hon. the Premier tell us what the actual expenses of the Premier's office were last year? MR. SMALLWOOD: Well, that is past. This is 02-02~ MR. CROSBIE: When this matter came up before the House the last time Mr. Chairman, the Premier stated that they-did not have the actual expenses for these Items the end of March. We ·are now given the actual expenditure under Office, for the Premier's Office.

So surely there must be available the actual travelling expenses of the Premier's Office for last year. MR. SMALLWOOD: That might very well be so, but the Item that was held 'over and allowed to stand was 303-02-02 Office, $10,000. Everything up to then and everything after then was passed. And we are now discussing this one Item, and I have to give. given the explanation that I was asked MR. CROSBIE: Mr. Chairman, the Premier is showing his usual reluctance to get any information MR. SMALLWOOD: To a point of order Mr. Chairman. I request that you ask the bon. gentle1nan to take that back. MR. CROSBIE: No, never.

MR. SMALLWOOD: No, never? Sit down: Sit dfJwn! MR. CHAIRMAN: Order please! Under Heading Executive Council Heading 4006

May 26, 1970 Tape 119/o Page.k

(3) All Items were passed with the'exception of 303-02, which was left standing. Item 302-01 as the hon. member for St. John's West refers now was passed, and we cannot refer to an Item without the unanimous - revert to an Item without unanimous consent. There was no undertaking giv~n about 303-02-01. That Item was passed. The only Item left out­ standing was 303-02-02. MR. CROSBIE: Mr. Chairman, on the Point of Order. There are two Items under Legislative, which ·'although they are passed, the hon. the Premier said he would get the information because he could not answer the questions at the time.

And those were Items 201-02 Office, and 201-05 Books and Binding, which had significant decreases this year. And the bon. the Premier undertook for example to get information in connection with those Items. We still do not have that information. MR. CHAIRMAN: The "Chair does not have any record of that. The only note we have here is 303-02-02. MR. CROSBIE: The only Item that was asked to stand was this Item that the Chairman refers to. But there are· other Items where the Premier undertook to ~et the information. He said it would be made available. These are under 201-02 and 201-Q3.

Has the Premier got that information yet? Mr. Chairman, i( it is -the position then that undertakings to get the House information that after we pass on we are still unable to ask for that information, then obviously we are unable to pass on these Items~ The Premier undertook and it is in Hansard that he would get information from why Office under Legislative was now down $12,000 to $3,000 this year. MR. CHAIRMAN: A special undertaking was given. The information may yet be supplied, but as far as th~ Chair is concerned, the only Item that was left open was 303-02, and we must move on to the Heading of Finance.

MR. CROSBIE: May t have permission to revert to 201-02-03 in accordance with the undertaking given by the Premier? 4007

May 26, 1970 Tape 0976 A::> Page~ MR. CHAIRMAN: Does the bon. the Premier have leave to revert? Those in favour please say "aye" contrary "nay". The Motion is defeated. Heading for Finance. MR. SMALLWOOD: Mr. Chairman, to a Point of Order, the bon. gentleman is try~ng to make me out a liar. Because we revert to one particular Item and we deal with that one particular Item, he wants at the same time to discuss other matters. I undertook to bring certain other information to the Committee, this I will do.

At the moment we came back to this one si•zle Item, and under that one single Item, he wants to debate other matters. Why does he not lea~ the rules and keep them? MR. CROSBIE: Mr. Chairman, on that Point of Order, the bon. the Premier undertook three or four days ago to get this information, and when it . is asked for today, the bon. the Premier will not give it. So I say the bon. the Premier is not living up to the undertakings he has made to this House, that he would get this information. It is plain as the nose on your face.

The opportunity to give it is now when we are starting out this week on the Items that are be,ing passed over without the information. And the bon. the Premier will not give the information. MR. CHAIRMAN: Shall 401-ol carry? MR. CROSBIE: M~. Chairman, I have a few remarks before we leave this Item. The general subject is Finance. Mr. Chairman, the first thing I want to point out is this, that on · last Thursday, the hon. the Premier proported to answer a question No. (515) having to do with the subject of Finance.

Part (3) of that question was: What was the amount of any demand loans or other indebtedness of the . Government to the Bank of Montreal? And what is the interest rate charged to the Government by the Bank of ~ontreal in connection with any such bank loans to the Government, or any agency of the Government? The Premier answered that question by saying that there were no demand loans, and no monies owed the Bank. The Government of Newfoundland did not owe the Bank of Montreal any money. When we ~ot into the Esti~1tes, it 4908

May 26, 1970 Tape #976 l Page f1' is discovered that that question was answered wrongly. Or was answered mialeadin~ly, because it ha11 since been. disclosed by the hon. the Premier that the Government on that date last Thursday when Question (515) was answered, that the position was that the Government owed the Bank of Montreal $10 million which was borrowed to purchase shares in the Churchill Falls Corporation. And that the Government owed the Bank of Montreal a further $2.5 million in connection with advances that had been made _to the Steel Company and located at Donovans. That made $12.5 million.

That being the case Mr. Chairman, the question naturally arises, why did the hon. the Premier give this misleading answer in reply to Part (3) to Question (515). The question was; What is the amount of any demand loans or other indebtedness of the Government to the Bank of MOntreal, or other indebtedness? This $12.5 million is·other indebtedness of the Government to the Bank of Montreal. If the impression was left in the Rouse last Thursday when that question was answered, that the Government did not owe the Bank of Montreal one red cent. Now how many questions are being answered in this way? MR.

SMALLWOOD: To a point of personal privilege.· If I sit and allow this to be repeated and ignore it, I suppose people would be justified in believing the statement. What I said was that there were no over- drafts and no deman1 loan. That is what I said. No overdraft and no demand loan. Subsequently in a speech or on some other occasion, I explained of what our indebtedness to the Bank of Montreal was. MR. CROSBIE: Mr. Chairman, the best that can be said about that answe·· is that it was weasel-worded.

A weasel-worded answer, a misleadin.~ answer, an answer that can only be called cute, because the <~ue- ,; 1; J.on ·r.ras; what is the amount of any demand -loans or other indebtedness o£ the Government to the Bank of Mohtreal? And if the answer given is the answer the Premier now says, then Hansard would show whether that is so or not. The point is that the Premier was proporting to answer 4909

May 26, 1970 Tape H976 Page ) 0 part (3) of Question (515) and in answering the way he did, deliberately gave the impression that the Bank of Montreal was not owed, that the Government was not indebted to the Bank of Montreal ~t all. And that is not the way Mr. Chairman, questions should be ~nswered if the public, or this House is to get the true information. The answer was $12.5 million indebtedness.

The Premier has not said yet in this debate what the interest rate is that we are obliged to pay the Bank of Hontreal on the $10 million loan for these Churchill Falls shares, or what the interest rate is on the $2.5 million in connection with advances to the Steel Company. Now Mr. Chairman, if the interest rate is at least eight percent, then there is no reason to doubt that at least eight percent,the Government can correct us, give us the right information if it is different than that.

This means that this Province is paying out $800,000 a year in interest charges on the shares that the Government purchased in the Churchill Falls Labrador Corporation. It is costing the people of Newfoundland $800,000 a year, and if the interest rate is nine percent, it is costing $900,000 a year. ~d if these shares were bought four or"five years ago, the $10 million worth, this means that the Province has paid out so far in interest on these Churchill Falls shares about $4 million. So that the cost of the shares t ·o date to the public of Newfoundland is $14 aillion rather than $10 million.

Now the Government will know the exact interest rates. The Government will know when they were bought. The Government will· know exactly what they cost to date. But this is senseless Mr. Chairman. This is absolutely senseless. What dividend will we get off these shares if they are held? Dividends in Churchill Falls are not going to start for at least two to three years. Perhaps longer. And when they are paid, what are they going to amount to? Five percent a year? Ten percent? The ten_percent dividend on those shares which is unlikely would then amount to $1 million a year.

In the meantime, by the time the dividends start, we would have paid out seven or eight million dollars in interest. a This does not appear to be sensible investment, and we can only ask the Government to explain when the shares were purchased, and what the interest costs to date has been in connection with the purchase of these shares. 4910

May 26, 1970 Tape f!976 . Page 8"' -; And what the interest rate 1B on the $2.5 million in connection with the Steel Company, a loan that was arranged for advances to the Steel Company. Now Mr. Chairman, there has also been some'attempt made to suggest that questions are being answered ~ro~ptly. Just one further example because it is a financial matter. Question (21) that was put on the Order Paper of this House on February 23, asked by the member for St. John's East Extern; Have the firm Koch Shoes Limited permanently closed? The answer is "no." If so, what are the reasons? And that did not apply.

(3) What amount of additional loans either direct from Government or by Government guarantee has been made to Kock Shoes Limited, since April 1, 1968. The answer given by the Premier was"not presently known." That the Premier did not presently know what amount of additional loan had been made to Koch Shoes since April 1,- 1968. And I pointed out then what an extraordinary answer it was, that the Government did not know what loans had been ·made by the Government to Koch Shoes since April 1, 1968. It was a fantastic answer.

A Government saying "we do not know if we made any loans to Koch Shoes since April 1, 1968; The Premier said that that information would be obtained and would be tabled or given in this House. This is now May 26, Mr. Chairman. As far as I am aware, and I think I have been here for all the question periods,with one or two exceptions, the information st~ll is not given. Has the Government or any agency of the Government made any loan to Koch Shoes Limited since April 1, 1968? Now surely Mr.

Chairman, this is not a matter that would take one, two three months for the Government to"discover, and the answer is still not given to us. We are now on the Estimates of the Department of Finance, and I repeat the question that was asked by the member for St. John's East Extern;· Has the Government or any agency of the Government made any loan or any additional expenditure in connection with Koch Shoes Limited since April 1, 1968? If the answer was not presently known on February, it certainly should be presently known now. That is an example 4911

May 26, 1970 Tape f/976 I • Page g' Mr. Chairman. of now questions on financial matters and other matters are being not answered in this House • or partly answered. And the PTemier is including his answer to question (21) in the total he gave the other day. The question has never bee1\ answered. Now Mr. Chairman, we had heard another vintage speech on Friday afternoon on this debate and a lot of 4012

MR. CROSBIE: and a lot of it irrelevant, scurrilous attacks on members on this shle of the House and the rest of it. The excuses given by the Premier, or the Premier alleges that because this Government has as its syndicate fo{ the sale of bonds, A. D. Ames and Contpany, the Bank of Montreal, Wood, Gundy and other brokers like that and because the Bank of Montreal are the financial agents of the Government that this means that the finances of this Province are in ~ terrific shape, healthy shape that nobody should question them. Now that argument, }tt. Chairman, is one hundred per-cent wrong.

These people advised the Govern- ment· of Newfoundland on what the market conditions are. The Government of Newfoundland decides whether Newfoundland will borrow,not our financial syndicates, not the Bank of Montreal.

The Government decides if the Govern- ment will borrow or if it has to borrow and it asks these financial advis~rs, "Gentlemen, what do you think, do you think that the bond market now will take a $10. million or a $20. million issue by the Province of Newfoundland and if. so, gentlemen, what interest rat~ will we have to use, what discount do you think we will have to sell them at, what terms should they be?" These are financial experts and they will advise, ''Yes, we think the Government of tTe~-7found- 'land can probably float $20. million now but you are going to have to do it at a coupon rate or interest rate of nine per-cent and perhaps you are going to have to sell them at ninety ~ eight and you are going to have to make them five year,bonds with an -option to repaying them for fifteen years and so on and so forth." This is what the financial people advise or they advised, ''No, it would not be the best thing for Newfoundland to try now that the bond market is down and the situation is not good so ~Je suggest you wait a month or two months." That is what these people do, this is their function.

They do not guatantee that the Newfoundland Government's finances are in one hundred per-cent top shape or anything else of that nature. They advise the Government of Newfound- land what is within their competence to advise, when it is best to go to the market and what rates and terms have to be offered; That is their function and no other function at all and they are paid for doing that. They get paid a connnission for selling the bonds or they are earnirtg interest if they are a bank 4913

MR. CROSBIF.: on the loans they make to the Government and so on and so forth. They get . compensation for performing their functionphich is a valuable one 1 and they should and there is nothing wrong with that but they do not $ay to the world, ·~e are now selling the bonds of the Government of Newfoundland, the finances of the Government of Newfoundland are one hundred per-cent in order, you have nothing to worry about." They do not do that. They cannot do that. They would never last in business if they did.

Atlantic Acceptance was mentioned . the other day, they were a reputable investment houses and bond brokers and so on who arranged for the sale of the indebtness, the bonds and debentures of Atlantic Acceptance and Atlantic Finance. That did not mean that they guaranteeded to the world that Atlantic Acceptance and Atlantic Finance was one hundred per-cent safe and as it twrned out Atlantic Acceptance went into bankruptcy 1as we all know. That is not their function and it is to give a wrong impression to try to say that,because the Bank of Montreal acts for this Government or A.D.

Ames acts for it or Hood Gundy,in selling our bonds 1 that they are therefore guaranteeing that our finances are in one hundred per-cent top shape. Now, Mr. Chairman, the issue was not;is the Government of Newfoundland now insolvent or not? That is not the issue and nobody is saying that it is. In fact I say that it is not; that the Government of !lewfoundland is today solvent. ~ot a question about it,in my opinion. That is not the issue. What I would say, Mr.

Chairman, is this,that the Government of Newfoundland is getting itself into a position where within the next two to three or four years it is going to be in a very difficult financial position because it has ever increasing amounts of money needed just to carry ort the services that this Province presently has, the budget must go up $10., .. $15., or $20. million every year just for us to carry on the health services, the schools, the roads ~nd the facilities that we have now, it has to go up.

This budget must go up but~in addition to that, the increased amounts that are going to be necessary,we have a very restricted tax and revenue base, fifty-four-per-cent of our r~venue is coming from the Government of Canada, we have tremendous needs for expansion of services in every field and $100. million coming due that has to be re-financed in the 4D14

MR. CROSni:r.: ------- next three to four year8. Now if we have to borrow $100. million to re :- fin~nce money that hae already been borrowed and sp~nt in tho lA~t three or fo11T ye~rd that cuta rtew" our ability to borrow at the same time for other purposes. That is just common sense. If we have to go out in 1972 and borrow $30. million or $40. million to repay other loans coming due that year that is going to interfere with our ability to borrow that year the $40. or $50. million we need in that year to carry on or to expand public services in Newfoundland.

The market is just not unlimited for bonds and debentures of the Government of Newfoundland. Now that is the situation that the Province of Newfoundland is getting into. Not that we are insolvent today, no, not that we are going to be insolvent next year either or the year after,but within the next two to three years if this keeps up, Mr.

Chairman, or four years at the most there is going to come a point ,,..hen this Province will not be able to borrow to expand its services at all, that it is going to have to borrow just to maintain current services, that it is going to have to bo~row just to deal with its indebtness, to meet pay payments in the sinking funds and the rest of it. That is the position we are getting into. We are not going to go insolvent but the point is going to come where we can do nothing n~V' or we cannot even maintain the services we have now.if more care is not taken about our finances.

It is the same kind of situation as reported in the Royal Commission on,Economdc 'rospects. There is nothing new about these statements, nothing new. A blue ribbon commission of Newfoundlanders reported two years ago, the Royal Commission on Economic Prospects, and forecast the position we are getting ourselves into and what members on this side of the House have been saying since is along the same linesfyet did anybody say that the members of that Royal Commission were slime, Mr.

Chairman, that the ~embers of that commission were slime or . that they were attacking the Province of Newfoundland and trying to reck its credit/ No, it could not be said as it . is obviously untrue and it is no more true of what members on this side of the House are saying here today, the cheap scurvy attempts to defend the Government and to defend what it is doing with our finances which A~-~ "..l.., ...

MR. CROSDIE: are indefencible. Investors Overseas Services, Mr. Chairman, just another example, is now having some financial difficulties and they have sold hundre~s of millions and billions of bonds. The people who helped them sell their bonds and shares are not responsible, did not guarantee their indebtness and our financial advisers do not do that either. The Premier complained the other day in this debate, Mr. Chairman, that his remarks would not get much coverage, there would only be a fet-1 words, that the sensational would be taken, that everything could not be covered. Very true.

I made a speech in this House two weeks ago, a four hour speech and I think had a lot of good points in it, what was on the television newscast that night? Thirty seconds to sixty seconds at the most on some little point I made in the speech. There is nothing we can do abbut that as that is the nature of the media.

If there is a legitimate complaint about that, then why does the House not invite the televi~ron networks and radio stations to cover our proceedings live and 7if they cannot cover them in toto,to cover a ·half· hour or an hour a· day, the high points or low points 1 whatever you want to call them, of the Housel We would certainly welcome that and I have suggested it before. The kind of speech the hon. the Premier made was one calculated to get reported.

I read one newspaper this morning,covering last Friday's debate,and the remarks made by the hon. member for Burin were not ~overed at all and what was covered was the Premier's colourful 1 slashing attack in answer to the hon. member,including the colourful phrase about slime and slimy arguments. MR. CHAIID~: I think we are going a little too far from financial matters. MR. CROSBIE: Fine, Mr. Chairman, I agree. The issue is not whether this Province can borrow now, we know it can borrow now unless the bond market goes absolutely' sour, it is what is going to happen within the next three or four years.

The Premier made a great point about borrowing 1 that if all Governments and people stopped borrowing the economy will come to a halt. t\l'ell, l-Te all know that. That is simple and elementary but we are talking about one particular Government and the question is not whether this Government will ever decide to stop borrc;n-ling 4!)16

tfR, CROSBIE : 1tself 1 voluntarily, The question is when will the point come thnt it is involuntary __ ~ because nohody will huy our honds1 That is the point. We·· know that today the Government of Newfoundland must borrow at least $40. to $50. million a year _just for us to stand still. Of the $40. to $50. million odd dollars being borrowed this year $10. million, Hr. Chairman, is being borrm~ed to pay in the sinking funds. In other words we are not paying into the sinking funds now to meet the principal coming due. We are not paying into that from our current revenue.

Nb.1he Government is going out and borrowing $10. million today to pay into sinking funds to meet indebtness when they come due.because these payments have got to be made in the sinking funds.Rnd since that is put up in the capital account now it means the Government is borrowing now to pay in the sinking funds. Does that indicate our financial position is good? It certainly does noL. It indicates exactly the opposite. You see the Premier's theory is what they call in England the neVer, never~ • • You are buying on t~e installment plan, the never, never •.

The Premier seems to have the theory that in this Province it is the never, never forever. That we can just go on borrowing and borrowing and using a~y kind o~ device and taking sinking fund payments from current account and . putting them into capital account, borrow from the Canada Pension Plan, borrow under DREE, borrow anywhere you can borrow and use the borrowing to help repay borrol-7ing and thinks this can go on forever. Hell, it. cannot, Hr. Chairman, and the day of reckoning is approaching and it "~>rill be here within the next three or four years.

It was very interesting to notice a comment the Premier made. He said that the Government spoke to their financial advisers and they asked them, ''Can you get it?" Exactly what I have been saying this morning, Mr. Chairman. The Government does not ask these financial advisers, "Should the Newfoundland Government do any borrowing or what do you think about our prospects in the next three or four years if we keep borrowing at this rate?" These are not the questions they ask the Bank of Montreal and A.D. Ames and Wood Gundy and the rest.

The question they ask and the Premier gave it himself is, ''Can you get it?" They say to them; "t.Je need this year S29. million borrm~ed from the bond market, can you get it?" They do not ask Wood Gundy and A.D. Ames, ··should we 4!)17

!'fR. CROSBIE: borrow this year on the bond market or do you think that the Ncwfoundlnnd "' Government should keep on borrowing at this great rate!or questions like that. They do not ask these people that. They ask those people, "Can you get it?" and there job is to advise whether they can get it for the Government of Newfoundland or they cannot get it. That is the limit of their involvement and that is what they are paid for. The Premier,last Friday,alleged that any criticism made of the Government's financial position was made by people who wanted to get a crack at him. That is untrue.

There is not an iota of truth in it. It is a cheap 1 repulsive remark but with respect to the Premier now everything is on a personal basis. No ·one can say anything critical of the Government unless it is taken personally by the Premier~because the Premier thinks he is the Government. To allege that members of this House are questioning items of finance and ' the Province's financial position just to get a crack at the hon. the Premier is completely repulsive. It ascribes to other members of this House the lowest kind of motive.

That ma~be something the hon. the Premier would do himself but it is not something, Mr. Chairman, that I would do and no one else on this sideJas far as I know. Mr. Chairman, the last refuge of a scoundrel is patriotism. That is a famous saying, ~patriotism is the last refuge of a scoundrel: and when we hear the Premier defending the Government's financial position in this House, waving th~ flag of patriotism and ~hat anyone that criticizes the Government's financial position is unpatriotic, is attacking Newfoundland, we know what is happening. It is a pity to see it.

I can assure this House that I am just as patriotic and just as much for Newfoundland as the bon. the Premier or anyone on the other side, anyone on the other side 1 and that is what worries me about the financial policies of this Government. Now, Mr. Chairman, one last point. The Minister of Finance is responsible for the Newfoundland Liquor Commission, it reports to him, and we have heard in this House a most incredible explanation of certain circumstances in connection with Atlantic Brewing Company Limited that has to be referred to again. On December 30th, 1966 the Premier of Newfoundland gave Mr.

John O'Dea a letter, either gave it to him, gave it to him according to the Premier, in 4918

1-ffi. CROSBIE: connection with a brewery that was to be established :in Stephenville. It was a one page letter, Mr. Chairman, on stationery from the Premier's office and it purported a deal with tax exemption for the brewery at St~phenville. As I remember it there were there items, (1) the SSA tax, (2) gasoline tax and some other tax and (3) exempted }lr. O'Dea and the brewery from the taxes imposed by the Board of Liquor Control and presently amounting to $2.17 per case of beer sold or shipped from the plant. That was December 30th, 1966.

In other words it was a letter p~porting to grant to .the Atlantic Brewing Company Limited which was incorporated later an exemption from paying to the Government the $2.17 for every case of beer that all breweries in Newfoundland have to collect from the public for the Government~when they sell beer on behalf of the Govern- ment. When the beer leaves the plant of the manufacturer, the breweri it is the property of the Newfoundland Liquor Commission, the Government. The breweries are told what price they are to eel! that beer for and in 1966 they had to collect $2.17 and turn it over to the Government.

In 1970,today,they have to collect $2.49 for every two dozen beer and turn it over .to the Government. We know, Mr. Chairman, that there was a writ issued by the Newfoundland Liquor Commission, I believe,in October or November 1969~against Atlantic Brewing Limited 1 clairning an amount of $407,361.59 and the statement of claims stated or alleged that from }lay 1st, 1968 to May 1st, 1969,(now Hay 1st, 1968, Mr.

Chairman, is a year and a half after the letter of December 30th, 1966) from May 1st, 1968 when Atlantic Brewing started into production to }lay 1st, 1969, a year later, they had sold 343,261 and one half dozen bottles of beer on which they neglected to,forward to the Newfoundland Liquor Commission the $2.49 per case so that the amount owing for that period was $407,361.59. We know, Mr.

Chairman, that under the Alcoholic Liquors Act the act specifically states that every brewer must by the 20th of the following month turn over to the Newfoundland Liquor Commission the money that is collected on the sale of beer the previous month. On the 20th of ~lay, this month the 20th of !-fay, every bre~~ery must turn over to the Newfoundland Liquor Commission $2.49 per case for all beer sold in April. We know that as it is in the act, 4919

lfR. CROSBIE: it is in the legislation. It is a duty imposed on the Govenment and on the Commission 1by this House i'et the Atlantic nrewing wns allowed to operate - 4920

·-~ -v~••• .,,. •.., .... ,... .... ;,to &'t.. - .L HR. CROSBIE: wa• allowed to operate for a whole year without paying one cent of this over, not paying one cent why1 The answer was this letter that the Premier gave Mr. John O'Dea on December 30th. 1966. A question was asked in.this House about Atlantic Brewery and a letter goingto them and the answer given was "no", no sy.ch letter had gone. Literally it is correct. Another question asked since then was never answered. Now the other day, on Friday I believe it was,or Thursday, the bon.

Premier made an extraordinary statement, which if it is correct, would be cause in any other province or country for the bon. the Premier to resign. The Premier maintained that Mr. John O'Dea and his associates came to the Premier's office with a letter,typed out on the stationery of the Premier,coneerning tax exemptions for an industry establishing at Stephenville and that the bon. the Premier signed it without reading it, signed the letter without reading it, not only that but signed it without having any official of the Government read it.

Not only did not the Premier read~it himself, which perhaps is inderstandable with all the letters and correspondence that goes through his ·office, not one official of the Government of Newfoundland read it, the Premier signed it anyway. This was a one-page letter, Mr. Chairman, that anyone could read by scanning in fifteen to twenty seconds. It was not a long ten page letter, or eight pages or seven pages br ·six, five, f~ur page, three or even a two page letter, it was a one page letter, I believe.

With these three items itemized, including the taxes imposed by the Board of Liquor Control, presently amounting to $2.17· for a ease of beer sold or shipped from the plant. The bon. the Premier says; he signed it without reading it •. He did not know what was on it. But 0 surely Mr. Chairman, between December 30th. 1966 and May lat. 1968, a year and a-half later, the Premier must have known what was on the letter, and should have corrected the misapprehension that the Atlantic Brewing people were then under. In a year and a-half that is passed surely the issue must have come u~ a~ain.And then from May: 4921

J........ .,,0 MR. CROSBIE: 1st. 1968 to May 1st. 1969. There was no writ issued until October 29th. 1969, which was practically three years after the letter. This issue must of come up after the Premier signed th~ letter. So if he did not know what he was signing on that date, Mr. Chairman, he certainly knew it before May 1st. 1968, and between then and May 1st. 1969. But, if the hon. the Premier signed that letter granting tax exemption without having read it himself, without having one of the officials of his Government read it, then surely tpe Premier should resign.

He should resign because that is gross negligence, gross negligence., the greatest degree of negligence,to sign a ~etter like that without reading it or having any official of the Government read it. What happened after that we do not know too much about, we know there was a .writ tlssued in October 1969. We know that the member for Fortune Bay says that he brought this to the Premier's attention, the Premier confirms it repeatedly. MR.

CHAIRMAN: I do not think you can p~sue that matter too much further because, as that was already discuased under Premier's office~ for-one thing, We are under the Departmen~ of Finance now and the bon. member's remarks should be relevant to the salary of the Minister of Finance. MR. CROSBIE: This matter was first raised under this vote for the Minister of ' Finance~ and it is the Minister of Finance's duty, he is responsible for the Newfoundland Liquor Commission.

It was a duty of the Minister of Finance who was in office from May 1st. 1968 to May 1st. 1969 or at anytime from December 30th. 1966 on to collect this money and see that it was collected. So it is very relevant to the Minister of Finance, and the Minister of Finance during that period, or some part of that period was the member for Fortune Bay.

If the first beer was sold by Atlantic Brewing in May 1968, in June 1968 it became obvious to the Newfoundland Liquor Commission and through them to the Minister of Finance that Atlantic Brewing had not paid the $2.49 per case to the Commission, that had to be obvious by the end of June 1968. And it certainly had to be obvious by the end of July 1968, when 4922

MR. CROSBIE: two months have gone by and no payment was received for May, that had to be brought to the attention of the Newfoundland Liquor Commission and the Minister of Finance by July 1968 at the very lAtest. Now in July 1968, Mr. Chairman, there was no question of Atlantic Brewing being insolvent or getting near insolvency, none whatsoever. The Premier tried to excuse the other day, he said tbat by the time, Mr.

Earle bad brought this to his attention, the member for Fortune Bay, the company was in financial difficult~es and the Government did not want to put them on the spot when they knew they were in financial difficult~es, and they · were trying to sell o~t. For in July 1968, Mr. Chairman, they were not in financial difficulties, that was no reason then for not seeing that the law was carried out. When exactly they got in financially difficulties I do not know, but it must have been after operating for four to six months or some period of time like that.

And they were collecting this money from the public the $2.49, this·trust funds from the public,and not remitting it to the Government. So by July 1968, the Minister of Finance and the Newfoundland Liquor Commission ha~ to know that Atlantic Brewing was not meeting the law. Not only did they have to know that, the~-~~~-to ~et after Atlantic Brewing and they must have been told by Atlantic Brewing then . ~ obviously Mr.

Chairman; we have a letter from the Premier, which exempts us from paying this $2.17 you are looking for:' They must have done that, if the Commission or the Minister of Finance got after them they had to say they had a letter from the Premier giving a tax exemption or an exemption from this amount. It had to come to the notice of the Premier and the Government in Jply 1968, certainly the summer of 1968, it had too. So the facts that the Premier related on Thursday, do not answer, do not answer this iss~ et all or this matter at all, Mr.

Chairman, gross negligence that the Premier did not read the letter, that was gross negligence, gross negligence in the Department of Finance and in the Newfoundland Liquor Commiasion, if they did nothing after June or July 1968 to collect this 4923

I:J.IJ.Y o<.<ll.llo J..7/V rll.. - .. MR. CROSBIE: commission,unless they had orders from higher up that they were not to do anything. And I would •a~ knowing the people concerned, that there must have been orders from higher up that they were not to take any actLon to collect this. So the whole story just does not hang together, Mr. Chairman. But if the story was correct that the letter was signed without being read by the Premier, and he is a very quick reader and a scanner, if that is correct that is gross negligence.

But there is gross negligence all along the way from June of 1968 onward, unless there were orders from the office of the Premier that they were not to take action to collect this amount. There had to be such orders, and if there were ·such orders~why? The letter of December 30th. 1966 was never approved by the Cabinet, the exemption was never brought before the Cabinet, I am sure of that, never. So what happened? The whole thing has not been explained, Mr.

Chairman, to the satisfaction of anyone, and it is sufficient caus~ for the resignation of the Premier and unless, well it is not the same Minister of Finance now, and I believe that the present incumbent only came into office in November 1969, so it has no connection with that h~n. gentleman. It has connect6on with his bon. the predessor, the member for Fortune Bay. The whole thing is a pretty sorrow story, The only tax exemptions Mr.

Chairman that there are for industries locating in Stephenville or Bell Island, as far as we can see in the legislation, is an exemption from the s.s.A. tax in materials going into construction and so on and poasibly one for the gasoline tax, they are not exempted from the S.S.A. tax when they sell their products, they still have to collect the S.S.A. from their customers. But on the materials that go into making up their plant or in replacements they are exempt from the S.S.A.and gasoline tax. Fine.

Legitmate, well and good, but not exemption from general taxation, such as this commission on beer sold by the breweries of Newfoundland. 4924

May 26th. 1970 Tape 978 MR. CROSBIE: So the Government ,still owes1 Mr. Chairman,this House and the people of Newfoundland a complete explanation of what happened in PK - 5 connection with Atlantic Brewing • Gross negligence when the Premier signed the letter without reading it.

Gross neg~igence when from July 1968 to October 1969 the Department of Finance and the Newfoundland Liquor Commission did not collect the $2.49 per case which this House has imposed a duty on them to do 1 a statutory duty under the Alcoholic Liquors Act, and if it is not gross negligence. then it means that they did not collect it because they were ordered by the bon. the Premier not to collect it. And if they were ordered by the bon. the Premier not to collect it, it was because he wanted to give Atlantic Brewing this exemption of $2.49 per ease.

Allow them to collect it from the beer buying public of Newfoundland and instead of turning it over to our Treasury keep it, as a subsidy, keep this trust fund as a subsidy for their operations in Newfoundland, despite the fact that ~hey were competing with other local breweries. Now, Mr. Chairman. the. only proper way for this whole Atlantic Brewing situation to be looked into, the only proper way is bJ a committee of this House or a Royal Commission.

There should either be a Commission of Enquiry, it would be under the Public Enquiries Act, I do not think this requires a Royal Commission, there should be a commission of enquiry under the Public Enquiries Act into this whole position with reference to Atlantic Brewing or a Select Committee of this House, that was suppose to be appointed to consider the Auditor General's Report and the statement of the Minister of Finance, should have permission, and of course this is included in the Auditor General's Report, should have permission to get to the bottom of this whole story.

Now with this House rapidly drawing to a close, at least probably in the next several weeks, I would think that a Commission of Enquiry, by a competent and impartial pe~son, is the right way to get the facts of the Atlantic Brewing tax or profit exemption attempted or reported to be 4925

May :l6th. 1970 Tape 978 PK - b MR. CROSBIE: given in this letter of December 36th. 1966 and not only that letter but w~at happened afterwards when the Department of Finance and the Newfoundland Liquor Commission failed to take any steps until October 1969 to try to collect this commission. There is certainly no satisfactory explanation yet 1 only one that arouses further question. There is evidence of gross negligence at the very best on every side. MR. SMALLWOOD: time - Mr. Chairman. I do not intent to occupy too much of the MR. MURPHY: Mr.

Chairman. this past two days two gentlemen have been occupying the House. what is getting wrong with the place? MR. SMALLWOOD: It is in proper order. Do not be a baby now. MR. MURPHY: I am not being a baby. Order me gt:'annyl MR. SMALLWOOD: Mr. Chairman. I do not intent to occupy too much of the committee~ time. and I certainly do not intent to follow the bon .• gentleman who just spoke in all his wondering&. I do not intent to do that. I do want to say a word about three things. first with regard to the state and the function and:the nature of the Financial Syndicate that handles our public borrowing.

This is the syndicate·of financial houses in Canada. in the United States. in the United Kingdom and in .Germany •. headed by the House of Ames. Ames and Company. There are five of these financial houses in Canada. four bond houses and one bank. The four bond houses are Ames and Comapny1 Wood Gundy. Nestbitt Thompson and Royal Securities and the Bank of Montreal. Wood Gundy are Canada's biggest bond house;.the biggest. and Ames and Co~~y·are the perhaps the most noted 1 they are the managers. Royal Securities are extremely well known. they are owned I believe.

I do not know who awns them. perhaps they are owned by the Bank of Montreal. Nestbitt Thompson are extremely well known. and of course the Bank of Montreal is very well known indeed. In the United States the members of the syndicate are Hornblower Weeks. Hemphill.Noyes and Solomon Brothers. In the United Kingdom the members of 4926

May 26th. 1970 Tape 978 PK - 7 MR. SMALU"OOD: the syndicate are the House of Rothchild, llam Bros Bank, and the Western American Bank. And in Germany the Deutsche de Centrale in Frankfurt, and the Dreadner Bank in Dusseldrof. Now there you have twelve outstanding fin·ancial houses, twelve, five in Canada, two in the United States, In New York, three in London and two in West Germany, West Germany being the home of most of the Euro-dollars that are to be found in Europe. All of them famous, all of them firms of great integrity and great experience, and one of them is the Bank of Montreal.

Now the Bank of Montreal have a very special relationship to this Government, since 1892 or 1893, since the bank crash, the Bank of Montreal had been the bankers to the Newfoundland Government. Well we have had other bankers, and we have other bankers, all the' banks in Newfoundland are bankers to the Newfoundland Government, but the Bank of Montreal are special bankers, they have our Exchequer Account, so tbe7 will 4927

Ma)' 26tho 1 1970 Tape no 979 Page 1 Mr;' Smallwood. for they are and for many years, they were the only bankers we had for half a century, for sixty years 1 they were the only bankers this Gove~ent ever had, but since Confederation other banks in Newfoundland have become bankers to the Government, but the Bank of Montreal remains the Bank where the Exchequer Account of the Government is kept. Then in addition to being our bankers, the Bank of Montreal are our fiscal agents - our fiscal agents. They are not only our ban~ers.

Then in addition to being our bankers and our financial agents 1 they are our financial advisers. Mr. Chairman, I ask the committee to take note of that,that the Bank of Montreal are this Government's financial advisers and have been for nearly three-quarters of a century. Finally, the Bank of Montreal has another very s?ecial function, they are managers of our public debt. Now these four functions are remarkable - quite remarkable. The Bank of Montreal are bankers·· to the Government with our E~chequer Account, our main bank account. They are fiscal agents o~ the Newfoundland Government.

They are financial advisers to the Newfoundland Government, and they are the managers of our public debt, and they, then, being members of this financial syndicate 1 are more than just profit takers as the suggestion has been put forward here in this House on Friday and again today. They are just in it, we are told, relatively, we are told, in it for the dollar they can get out of it. They do not have to worry about their reputation, all those twelve famous banking and financial institutions - they do not have to worry about their reputation, their status in the world. They do not have to give that any concern.

They will take any account that anybody will give them so long as they can make a fast buck. If what has been said, does not mean that, it means nothing. If they do not exercise discretion, as to what issues they will handle, if they do not exercise discretion as to what clients they will accept, if they do not exerciae discretion as to what issues they will handle, if they do not exercise discretion as to what clients they will accept, if they do not exercise discretion as to what markets they will 492.8

May -26th •• 1970 Tape no 979 Page 2 go in and for whom and when and under what terms and conditions. If they are mere automaton~. mere dumb agents of anyone who will hire them, then it is putting down twelve of the world's respected and respectable financial institutions into the position of financial harlots. They are either financial harlots or they are highly reputable firms who deserve their high reputation, because of their integrity and because of their long service in that field and I think if this committee has to choose between these two descriptions, they will take the latter - not the· former.

Of course, they are not - the mere fact that Ayre and Sons or Bowring Brothers will make a profit, if you go down and do business with them, the fact that they are in bu~iness to do profit does not mean that they are scallywags. ~e fact that a lawyer will take a case and represent ~ client, that a medical dactor will take a client and do his best - and receive a fee, both of th~, does not mean that they are scallywags and the fact that a bank or a financial house will represent ~he Government of a country or of a part of a country and receive a fee . for so doing, does not mean that thereby they have not exercised any judgment of their own, that they are concerned on~ with the dollar, the fast buck that is to be made, I scvto youi",.Mr.

Chairman, the fact that this financial syndicate handles th~ public borrowing of this Government ought to be a very reassuring fact. It is a fact. It ought to be a reassuring fact. It ought to be a fact to give some comfort and confidence to the Newfoundland people and to this committee and to this House, They will not go on the market for Newfoundland. They will not take an issue to the public. They will not go to the great insurance companies and the other institutions, the trust funds and the other .people with cash to invest. They will not go to them. They will not take our bond issue to them.

They will not represent ua. They will not go to the money markets of the world. They will not. I repeat they will not go. They will not represent Newfoundland. They will not 4929

May 26th., 1970 Tape no 979 Page 3 go. They will not represent Newfoundland. They will not take the onus. They will not take the responsibility without a high degree of endorsation on their part. Now on that, let me deal with that point. Nobody knows more about the financial condition of the Province than this financial syndicate. They have to have every last deta[. They have to know every last detail- our innermost affairs, financial affairs. Our innermost financial affairs must be wide open to the financial syndicate - .must be and is, of course.

They knov exactly what the financial position of Newfoundland is from week to week and from month to month. They are completely familiar with it. Thoroughly familiar and being familiar, it is they who prepare the financial prospectus for every bond issue. Before there is a bond issue sold, before it is offered for sale, a prospectus has to be prepared and laid before the prospective ba~rs of the bonds and that prospectus is compiled and prepared by the financial syndicate which they can do only when they know the facts and which they will do only . when they believe them.

So, that in actual fact, the presentation of Newfoundland bonds for sale, by the financial syndicatefis an endorsation by them of the validity and value of those bonds and of the Government that is offering them. Now, 1 have said that and 1 said it here on Friday and 1 am repeating myself, whether tediously or not, it is repetition of what I said on Friday. 1 said then that it would not be believed by 'those who did not want to believe it and would be believedby those who did not doubt it in the first place.

I repeat the quotation I gave them at that time from Mark Twain, "never explain. your enemies will not believe you, and your friends do not need it." So, in giving the explanation, I do not delude myself into thinking that 1 am confronted by a number of Sauls wtio are suddenly becoming Pauls, all experiencing a general conversion. They know, before I told them. I have not told them anything knew. What I ha~told them, they knew before. They are well aware of it, but it suits their purpose to talk differently. I am going to say just one word about the letter that I signed. I have told it before.

I will repeat it now briefly that when the disaster overtook Bell Island and Stephenville, economic 4930

May 26th •• 1970 Tape no 979 rago 4 disaster, we took a course that in other parts of the world that would be called - what is the term? When Springhill and other places - where Pearson was the member - Eliot Lake. What term did they describe to the economic disaster that came? Not disaster area, but some other such term.

We regarded Stephenville and Bell Island as disaster areas, economically speaking and in the Cabinet , we passed an order saying that any industry that would establish in either of those two places would become immume to taxes imposed by the Newfoundland Government, collected by the Newfoundland Government. They would be immune "to Newfoundland taxes. Now 1 will admit this. I will not admit, I will state this; There has not, to this moment, been a clear definition of what we meaa by that. For instance ~ we mean corporation income tax? Do we mean exemption from the payment of corporation income tax? Remember, ~r.

Chairman, that when a corp.oration in Newfoundland pays corporation income tax, it is paying it to two Governments. The bulk of it is paid to the Government cf Canada, and it is there money - a small part of it is p~id to the Government of Newfoundland and the Government of Canada remits that, they collect it remit in behalf of the Newfoundland Government and they" it to the Newfoundland Government. Does exemption from Newfoundland taxation at Stephenville and Bell Island include - does it include the corpo .ration income tax, the portion of it that has been imposed by this House?

Now the statute that we passed here in this House, I thipk does not give such exemption, but the Order-in-Council that was made the Order-in-Council giving exemptbn is a pretty sweeping thing, exempting any industries establishing either at Bell Island or Stephenville from the payment of Newfoundland taxes, for a period of time. For two years a~ter the industry began to operate, excluding the time they might take to get ready to start producing, but from the moment they began producing, two years of exemption from taxes. Mr. O'Dea was in and out of my office from time to time about this.

He wanted introductions to DREE - not DR}:E, it was not DREE then, it was the 4931

May. 26th •• 1970 Tape no 979 Page 5 ADA, I expect or ADB. the Atlantic Development Board or the Area Development Agency of the Government of Canada, and I gave all the introductions that l could. I smoothed the way all I could, naturally. We were very eager to get industry ~going at both places, and he wanted to start an industry there that would employ, he told us, sixty or seventy men.

Well all right, sixty or seventy men is not a huge industry. and if the only concession we were to give them was to be that of providing a building very cheap, which they would have to spend a lot of money on to fix up; nevertheless, we would provide the building. We would provide it very cheaply and secondly, we would exempt them from the payment of Provincial taxes fef the first two years of their production. We were glad enough indeed t~ give them those concessions and we could not do very much less and we are doing it for anyone else. We are still doing it for anyone.

We are still offering to do it and glad t~ do it for anyone who will move to Bell Island or to Stephenville. We do not apologize for that. We think we are right. We think we are very right, indeed. So, in and out my office - it is a pretty busy office, and there · is a stream of people in and out all the time, and I had precious little time for them beyond saying, _we are all in favour of this. I am delighted. I ho~e you succeed. What can we do for you?

Well what do you dol Well we give the building, and they talked about the building and told me the number of th~ building, but it did not mean anything to me, but I telephoned to the manager, the managing-director or whatever he was called of the Harmon Corpor~on and I said, "what is building so and so7" He told me what was building number so and so, and I could not ~e- call it.

I could not place it in my own mind, and I said, ''what is it _being used for'l" Well he said, "it was used for a sort of a machine shop in a garage." 1 said, "that seems like a funny place to put a brewery in." Well he said, "they were out and looked it over and told us of all the rebuilding they would have to do." Well I said, "have we any purpose in mind for. that building?" "No." Well I said, "okay. I suppose that ia all right." So 1 told him, okay! You can have that building. 4932

May 26th •• 1970 Tape no 979 Page 6 Hr. Saallwood. Then what elsei the only other thing we do for you is give you exemption from tax. "For bow long?" "For two years. After we start producing two years you get exemption from taxes." "Well that is fine." So they go off and they see ADA or ADB who ever it was. they go and they see the bank. They had to get some bank credits and then they came back to me and said 1 "the bank wants a letter saying th~t we would be exempt from the taxes." I said, "sure.

I am glad to give you that." "When can we get it?" "Oh1 first chance I can get." I imagine, but I would not swear to this. because I really do not remember. I imagine that they would have in a couple or three times about that and that this 1 I do know. whether it was the first or the second or the third time they came to me. I said, "go out and dictate the letter for me. Go out to Hiss Duff,(that is a couple of offices removed) go out and dictate the letter and bring it in and I will sign it." They go off and they dictate the letter and bring it in to me, and I glance at it 1 exemption from taxes 1 and I sign it.

Now. I believe that they were as straight and sincere as men ever were. I believe that Mr. O'Dea was completely straight and sincere about it that he regarded what was paid as taxes. People still call it tax , that the Liquor Board gets. It is not tax.

They do collect some tax, I think, and the Government of canada collects some tax as well, because liquor and beer are very, very heavily taxed indeed - I suppose the most heavily taxed product in the whole nation, and I think, perhaps, properly so, but very extremely. there is customs' duty and custou5excise. there is Federal sales tax and there is Provincial sales tax, and there are other taxes of one kind and another, like tobacco and cigarettes, liquor and beer are very heavily taxed • Now, but the money that the Liquor Board collects is not taxed.

What the Liquor Board collects is a profit. on the sale of the beer. What not a lot of people do not seem to understand is this: there is~a thimble of beer 4933

May 26th., 1970 Tape no 979 Page 7 that is· brewed in this Province, that is not brewed for the Newfoundland Government. Whatever number of breweries you have, every stain of beer they brew,is brewed in behalf of the Newfoundland Government who are the only buyer& - the Newfoundland Government - the Board of Liquor Control buys every thimbleful _ of beer that comes out of a brewery. The brewery is not allowed to ship a stain of beer, a thimbletul of beer outside the walls of the brewery, except to the Newfoundland Government. The Newfoundland Government are the only buyers.

They are the only customer of the breweries. The brewers have no other customer. They are not allowed to have - there is one and one only and that is the Board o~ Liquor Contro~. The Board of Liquor Control could, if it wished, direct that every thimbleful of beer be delivered inside the walls of any building designated by the board. They could take physical delivery of it. They do take physical de~ivery of a small part of it, and they put it Qn their shelves and they sell it over the counter, but they could, if they wished, take delivery of every la~t bottle that is brewed, because it is their property.

The beer,the minute it is made and avilable for consumption,is the property of the Board of .Liquor Control. They own it, and they pay for it, and they say what they will pay for it. They name the price. The Board of Liquor Control determines the price at which they will buy the beer. The price that the brewers get is the price that the 1iquor Board says they can get, and they cannot get anymore. The price is fixed by the Board of Liquor Control, because the Board of Liquor Control buys every bottle that is brewed.

Now instead of telling the Liquor Board, instead of telling the brewers to bring it along to us, we will ~ake delivery of i;, what they do is this; in effect they say~ you go ahead and deliver it to the taverns. You go ahead and deliver it to the tave~s. You deliver it to the hotels and the motels. You deliver it to the clubs and the lounges and the places that sell the beer. You do the delivering. You collect the money for it !n our behalf ,and the brewers are not only brewers, but they are agents of the Liquor Board, acting for ~he Liquor Board 4034

May "26th •• 1970 Tape no 979 Pas• e i~ the distribution and sale of the beer, but every drop of beer,that goes to a retail outlet in this Province, belongs to the Newfoundland Government until it is sold to the outlet, When the outlet buys it, then it belongs to that retail outlet. And to call by the word "tax" the profit that the Liquor :Soard makes on that beer, is a misnomer. It is not a tax, but I know this now far better than I knew it then, because the Liquor :Soard was not anything in which I ever took very much interest, believe me,· I never did.

I have taken much more since this thing came up, and I discovered - when Price Waterhouse made the survey, made the study, it was then for the first time that I began to eiscov~r that all the beer that is brewed in this Province is brewed for the Newfoundland Government. I suppose that ninety-nine per cent of the Newfoundland people today do not know that, and I would say that ninety-nine per cent of the bon. members of this committee did not know that every single stain, and I said ninety-nine per cent. Ho, everybody is not aware of that. It is not old stuff.

It is old stuff to the bon. gentleman, but it not old . atuffto everybody in this Bouse. I believe that, I believe that. HR.• MURPHY:: I worked there. MR. SMALLWOOD Exactly. I did not. Therefore, I have known &uch less about it. I have known muchless about it than does the bon. gentleman. I admit that. I am not ashamed of admitting it.

It is so, but I have learned in the last couple of years that every drop of beer that is brewed in the breweries is brewed for the Newfoundland Government and the Newfoundland Government is the only buyer and the Newfoundland Government fixes the price that it will pay, and it can change that price anY.time ~t likes, and it is shortly about to do so. And the brewers deliver the beer to the outlets. All right.

When the letter is brought to me to sign, which I sign after a quick glance at it - relief from taxes. 1 forget the wording of it. 1 did not write it, but it says that they were to be ezempt from taxes and then it goes on. 1 signed it. Yes, I admit that. 4035

Kay 26th •• 1970 Tape no 979 Page 9 I signed it. Was it negligent? Perhaps. Perhaps it was. Perhaps it was negligent. But the fact is this. This is the fact that when it was brought to my attention that they were claiming, that they did not have to pay the Liquor"Board's profit 1 I said that they were crazy. No, I have no doubt that they were sincere about it. It is this loose use of the term, "tax." Calling that a tax is ridiculous, but tax it has been called, but it is not a tax. It is a profit. Just as well to call the profits that Bowrings or Royal Stories make on any goods they sell, a tax.

Just as well to call tha~ a tax as to call the profit that the Liquor Board makes a tax. It is not a tax. It is a profit. It is no~ifferent entirely. The Liquor Board buys beer at a price and sells it at a price ' and the difference is profit - not a tax. If Bowring Brothers buy stuff for a dollar and sell it for a dollar and a-half, the difference less their expenses is a profit - not a tax. It is not a tax. It is a profit and the Liquor Board makes a profit on the beer it ~uys from the breweries and sells to the outlets. That is a profit - not a tax.

The confusion between the words "profit and tax" - the usual custom of alling that a tax is what made them regard what the Liquor Board got as a tax and not as a profit and when this was brought to me, I could scarcely believe my ears. Mr. Chairman, I was interested in one other thing that the bon •. gentleman said and that was with regard to the fifty-four per cent of the Government's revenue that comes from the Government 4936 ...

l'A. - ~ MR. SMALLWOOD: from the Government of Canada. If we get fifty-four percent of our total revenue in a year from the Government of Canada, it means that forty-six percent does not come from the Government of Canada, forty-six and fifty-four make up the total revenue of the ~ewfoundland Government, we are talking now of course of current accounts, the ordinary running expenses of the Government. And that reminded me of the choice that lies ahead of this Province. Let me put the choice, Mr.

Chairman, let me put the choice that faces this people, this House, this Province~ We get fifty-four percent of-our total current account revenue given to us by the Government of Canada, they give it to us under various headings. The choices that lie before us are thes.e, that they have to raise that fifty-four percent to sixt~-four or seventy-. four, that is one choice. Now they have paid as much as seventy-four. In 1950-51 they paid slighly more than seventy-four percent, that is the highest it ever went • .

It came down steadly through the twenty-one years, so that now this year it is 54.2 percent, a little over fifty-four percent. What we have got to have in Newfoundland is one or other of four things and one of them is, that fifty-four becames sixty-four or seventy-four or eighty-four. If we are going to have the money we need in this Government it has got to come from somewhere. One of the possibilities is to come from Ottawa. And, Sir, it is not going to be enough~ for current account money to come from Ottawa, capital account will have to come as well and this year, it is coming.

Earlier in this session the bon. the Minister of Community and Social Development made an announcement of a capital account program that Ottawa agreed to finance, agreed to give us some $90 odd million of capital account money. Now this is over and.above . the current account money, they are giving us fifty-four percent of our current account revenue in the current year, fifty-four percent is coming from Ottawa, but over and above the fifty-four percent running expenses, current account, ordinary running expenses of the 4937

rl&Y .LOt:n • .L~IU ·!:ape Ytsu PK - 2 MR. SMALLWOOD: Government coming in now from Ottawa, over and above that we are getting this year $90 odd million. What was the exact, $94 million was it? $98 millions. Capital account,tn otherwords, you will find that this year, Mr. Chairman, were the Government of Canada are giving us fifty-four percent of our current account revenue~ they are giving us well over fifty-four percen·t of our capital account revenue. Just think of that, may be the committee had not thought of that before.

For the first time in our history .as_a Province the Government of Newfoundland this year are receiving in addition to the fifty-four percent of all our revenue on current a~count, we are receiving well over that percentage of our capital account from Ottawa as well. And I say that this is one of the four choices before us. We get more money from Ottaw~, on current account and capital account to build schools with, capital account to build schools and roads and water and sewer systems and do paving. That is one choice. Now that is not the best choice. It could be that it is the only one open to us.

Another choice is ta.:.tax t:he~people-""more, get more of our revenue by putting on more taxes. I think that is out. I do not think there is a chance of that. I do not think that the taxable capacity of our people today is high enough to enable us to get more money out of our people. If you ta~ our people more heavily t~an they are.taxed now, their revenue will begin to dry up, you will not really get more money, you will reach the point of dJminishing returns. Unless that is now, unless we can greatly increase the taxable capacity of the people, and thereby hangs a tail.

I will pass over that point for the moment. So I say, unless the taxable capacity of the people can be greatly increased there is no future in sight, right now9 of getting more revenue by taxing the people more. That is two. The third is to borrow more. To finance the building of schools and to finance the .building of hospitals, and the building of new roads 4938

MR. SMALLWOOD: and paving and so on, and so on. To borrow more, if not to borrow more to continuing borrowing at the present rate. This is one of our choices, this is the course we can take, indeed we are taking. Now there is a fourth course that is open to us, and that fourth course is so easily stated, it is dismal, it is discouraging, it is dis­ heartening even to think of it, even to say it, even to pronounce the words, and that is not to tax the people any more, not to borrow any more money, not to get any more money from Ottawa. This would mean that Newfoundland at first would stand .still.

But how long can a Province stand still? I say at first we would stand still, it would be a stand still for a while, but you either go ahead or go behind, you do not stand still long, you cannot stand still long. You either go ahead or yqu go back, ahead or astern, you cannot stand still very long. And the immediate reault of stopping your borrowing, of not taxing the people for ·more, of not getting more from Ottawa, the immediate results 9f that is to bring the Province to a dead stance and then rapidly abe goes astern. You would have stagnation.

Utter stagnation! ~nd this is true not only of Newfoundland but it is true of every part of Canada. I asked a question here on Friday, what would be the result in Canada, if for a period of say three years running, I can imagine it happening for one year; it would be 11ear disaster if it did, but I can imagine it happening just the same1 I can imagine this happening, that for one year no mUDicipality in Canada, no Government of the Canadian provincesand the Government of Ca~ada, and no industrial corporation, and no commerical corporation, nobody1but nobody 1 for more than a year borrows any money.

I can imagine that. lt would bring all Canada to a quick standstill, And Canada can no more stand still than can Newfoundland. It is not only Newfoundland that cannot stand still; no country, no part of a country can stand still. you go ahead or you go back, one or the other, but you could 4939

May 26th. 1970 Tape 980 MR. SMALLWOOD: bring Canada to a standstill if all borrowing stopped dead in its tracks from coast to coast for one year. Because there would be no construction of houses, no construction of shops, no construction of factories, no construction of schools, no construction of office buildings, no con,truction of hi.gh-rise apartment buildings, no construction. There would be no construction of water and sewer systems, there would be no construction of electric plant or electric transmission lines. Ho construction means that for that one year Canada would come to a dead stand still.

But carry it on for three years, for three years let there be no borrowing , and you will have utter stagnation, economic stagnation. In otherwords, they have no choice, they have got to go on, the whole economy is geared to that. The American economy and the CanadlaP Economy would perish, Mr. Chairman, it would collapse, it would not survive. Not only could it not go ahead, not only would it go behind, it would collapse. The creation of debt~ is the very bases of our modern finance capitalist system, the creation of debt ;-:.. It has to create debt.1. It is the foundation of it.

It is the foundation of our modern finance capitalist system, it has got to create debts~. Any economist in the world will tell you that. It is not only ancilliary, it is basic, it cannot survive without it. It will die. if it does not borrow. The whole economic system, the economo-financial system, economic and financial system of modern capitalism will collapse and die. if it does not borrow, if it does not create debt. Now what is true of the world in general , and Canada in general is equally true here in Newfoundland.

If we ever reach the day when we can no longer borrow anywhere. on that day we stop building schools, we stop building hospitals or enlarging them. we stop building roads, we stop paving roads. we stop putting in water and sewer systems, we stop extending electricity. we stop building, creating. constructing anything new, because the only way to do that is to borrow 1 to borrow to do it. You do 4940

May 26th. 1970 Tape 980 MR. SMALL\oi'OOD: not suggest surely that you can tax yo'iar people and borrow PK - 5 not/money every year, not only to run what you have but to create new things as well.Surely we have not got that kind of money in Newfoundland/ Our economy. would not bear that bu~den of taxing our people more, pressing them down under an even heavier load of tax burden . than is on them now. Nobody can suggest that. All right, all right. MR.

HICKMAN: Inaudible. ~m. ~~LWOOD: Unfortunate. the position would be unfortunate and let this be clear, let it be very clear,that the justification of borrowing can only be the creation of new -services, new dividend~producing them. 8y dividends I really mean wages, new wages, the creation of new jo~s. And so 1 will come back to ~here I left off,at the second alternative, which is tax the people more. And~then I added as parenthetically, but only if the tax base is broader, only if the taxable c~pacity of the people, the tax paying capacity of the people is made greater.

You dare not tax the people any more, unless you first giye them the means to pay more. N~ how do you do that? How do you get more money into the hands of the people in any given economy, in the econom1 of this Province~or example? Bow do you go about getting more money into the hands of the people in the aggregate? How do you go about doing it? You go about doing it by creating entirely new dollar-earning · industries. Not more shops necessar~ly.

But productive industr~es more mines, more mills, more factories, more fish plants, more industries that create new wealth that can be sold in return for new dollars bro~ght in. The problem is a problem of dQllars, the problem is a problem of getting enough dollars to go around. The way to get dollars is either to beg them from Ottawa, get down on your knees and wag your tail and plead and beg with Ottawa to give you more dollars. that is one way to get dollars. And another way,Sir, , the only way to earn dollars y~urself is to create 4941

MR. SMALLWOOD: industry to do it, create industry that employs men. that gives jobs and pays wages. Where did all that money come from to pay the wages? It comes from the dollars that yo~ get when you sell the products of that industry. If you have a fish·plant, ·you ship the products· of that fish plant to the United States and dollars come back and it is those dollars that come back that pay the wages of the people in the plant, and give the Government some money as well.

If an new mine is started, the miaerals are sent away, dollars come back and those dollars pay the wages and give the Government some revenue. If you start a new paper .. mill, the paper is shipped away, the dollars come back and those dollars pay the wages, and the Government gets a share of it. The only way the Government can get more money out of the people, unless you are going to crush the lives out of them, is for the people to have more money in ~heir pockets. You cannot get blood out of a turnip.

You cannot get taxes out of people beyond a certain point without crushing them to death~ If you are going to get more revenue from the people, first see that the people have more money to give. This means more industry, means more wages, it meaqs more jobs. Now how do you get new industries? If you are an Island lying off the eastern coast of this continent, how do you get more industries? How do you get them? DO you get them by just looking respectful? By being polite? By just car~ng on the Government? By just balancing your budget?

By just trying to find the money you need each year to meet your running expenses? While all about yo~ governments are stirring themselves to entice and encourage industries to come in. Mr. Chairman, let me give you one example: In our neighbouring province of Nova Scotia, the cLosest part of it 1Cape Breton, they built a great heavy-water plant. Now t~is heavy-water plant, as God should have it, was built in c,pe Breton and not in Newfoundland. God knows I tried hard enough to get it. I tried hard enough to get it and I failed, and for once I thank God for my failure. Nova Scotia Government. sot it.

Now here was a great heavy-wa~er plant that was to be built in three years, completed _· 4942

1"18J 4UI.IIo ~:0 /U .Lctpe ::>OV l'K - I MR. SMALLWOOD: in three · years and would employ 200 men. It would giw 200 new jobs, and it would cost $40 million for 200 jobs, $40 millions, 200 jobs three years to build. Three years ago, the three years expired it is now si~ years , it has eost so far $106 million, it will take another three years to finish it. What was to be built in three years, w!ll.~e finished in nine years. What was to cost $40 million, has already cost $106 and the Canadian Gove~ent have agreed to lend them another $40 million.

In fact they have agreed to lend them $46 million, and $46 million and $106 llillion is $152 millioa, nine years to build, was to cost $40 million, is costing $152 million, more than three times the estimates, taking three times as many years to build i,t ., and tt is still the same 200 jobs. Not only that 4943

MR. SMALUIOOD: not only that but with the 200 jobs, }tr. Chairman, that plant three years from now with $152. million in it, that plant with 200 jobs will turn out a product which was not the product it was built to make. They have to ship that product off to another plant to be finished. An incomplete product is coating $152. million, nine years to build and employing 200 men. Now, thanks be to God we did not get that industry, thanks be to God that is one we did not get. Thanks be to God we did not get Claritone.

Claritone came down and the Nova Scotia Government went all out and all praise to them for it, all credit to them. It was, I think, Hr. Stanfield when he t-Tas Premier. He went all out, he spared nothing, all out to bring Claritone into Nova Scotia. He gave them all kinds of concessions to bring them in because they were going to employ 400 or 500 jobs, they were going to employ 400 or 500 persons.

They brought them in and the Nova Scotia Government advanced them money, then they advanced them more money, then they advanced thet:J. more money and finally they are now up to $18. million in that one plant, Claritone, $18. million and the plant instead of employing 400 or 500 is employing now maybe a couple of hundred people. Most of it is now gone back up to Ontario and most of the people are employed in the Province of Ontario. lVhat was that third one?

There was a third one where they got another $14. million out and industry after industry the Government of Nova Scotia and all credit to them for it went out an~ offered, they offered in~ucements and encourgement and help that Newfoundland has never even dreamed of doing and some of them have paid off but some of them have been horribly unsuccessful. But, Sir, to this moment any businessman can go to Nova Scotia and the Government of that Province will give that businessman tt-rice the help, ·the finaacial help, twice the financiaf help than this Government are ever willing to give anyone.

Ttfice as much they will give and this is tJhat we have to compete with. The same in New Brunswick, the same in Quebec, the same in Ontario, the same all across Canada, we have to compete with it and it is difficult for us to compete with it for two reasons (1) we have not the dollars that other Provinces have and (2) we are an island stuck out in the Atlantic Ocean half way across to the Continent of Europe. 4944

MR. SMALLWOOD: As I stand here this morning I am closer to the city of Warsaw,inside the Iron Curtain,than I am to the city of Vancouver, much closer to Warsaw. The distance between Vancouver and St. John's is roughly abobt the same as from St. John's to Hoscow. You are stuck out in the Atlantic Ocean, you cannot get any further, the next stop is Ireland. This is in many ways a terrible disadvantage just as in other ways it is a great advantage. It is a great advantage to be out here for certain types of industry but for others it is death, it is death, there is not a chance.

Well, in spite of that we have to endeavour, we have to try and what is the alternative, Mr. Chairman? Let us become orthodox, let us bec.ome regular, let us be ordinary and we will die, this Province will die. The only hope we have is to get new industry and to take chances on it and make mistakes in doing it just as other Provinces·have made horrible mistakes. Is there any hon. member of this Committee who would stand up in his pface here today and condemn the Government of Nova Scotia for taking the utterly desperate chances they have taken?

Would anyone in Newfoundland, in this Chamber here,stand up and honestly and . conscientiously aondemn the Government of Nova Scotia for the desperate chances they have taken and continue and go right on taking? What is the alternative in Nova Scotia to their taking these desperate chances? Death, economic death and here too. This is why I coined the slogan years ago, "Develop or perish." We will perish if we do not develop, we will perish there is nothing surer than that. We will perish as a Province, we will perish if we do not develop this Province.

We cannot expect to go on forever living on charity from Ottawa. We are getting fifty-four per-cent of our revenue from that Government now and it is highly unlikely that they will raise that very much on current account. On capital account t-hey have begun, thanks be to God, they have started in to give us large sums of money to spend on capital account, to build roads, to pave roads and to build water and sewer systems and to build technical schools and to build academic schools. Thanks be to God, at last after twenty- one years of. Confederation, at last the Government of· Canada sees the \o~isdom of 4 f:

MR. SMALLWOOD: helping certain Provinces of Canada with capital grants, capital gifts and capital loans •• well becAu•e not all of thie $98. million ia gift, is it? Part of it is loan that they will lend ua, quarter of it is•lent to us and three-quarters of it is given to us as gifts but thanks be to God at last, at last I have lived long enough and I have been Premier long enough to see this come about.

At last the cry we have raised for nearly twenty years is heard and is being acted on, at last Ottawa is beginning to pour capital money into Newfoundland to help us to build ?ew schools, new roads, new paving, new this and new that and our struggle now meanwhile is going to be to find the money to maintain the thin&s that are built, that are already built and that are going to be built in the future. There tt is, Mr. Chairman, that is the summation of it.

If I were.to walk out of this Chamber today and never come back into it, if I were just to hand in my resignation today and this was my last speech you know what the speech would be, it would be this; it would be addressed through this Chamber to the people of Newfoundland; You have four choices before you - one is to go begging with your tail wagging to Ottawa and ask th~ instead of giving you fifty-four per-cent of the money you need just to run the Province, never mind building anything new at all just run what you have, instead of giving us fifty­ four per-cent of the money.we need give us sixty-four or seventy-four per-cent or eighty-four per-cent.

That is one choice, you could do that. You could humiliate yourselves, you could cheapen yourselves, you could turn yourselves into beggers, into paupers, you could turn your Province 1 quite frankly,into a Canadian colony, you could if you wished you could turn Newfoundland into a Canadian poor-house. You could do that, that is one way. Go to Ottawa and beg and plead on your knees for them to give you a higher percentage than fifty­ four per-cent of your reven~e, your current account revenue. That is one course that is open to us 1but I do not advise it.

The other course is to tax the people more than you are taxing them now and finally tax them out of existence. It is silly, it is foolish, it is stupid and in any case it is impossible. You cannot get blood out of a turnip. Well, that course does not lie before us. That is not an alternative, that is not 4946

. · ~ - --··· - ... . MR. SMALLI.JOOD: possible, we cannot do that, that is impossible but it is a thing to look at, you can look at it, you can consider it. Is it practical? You come to the conclusion, no, it is not practical. It does not make sense unless, and I will talk about the unless as another alternative.- The third is to borrot.r and go on year after year borrowing,as every Province of Canada does remember, remember that. We would be the only Province in Canada that did not do it,if we did not put there is no -Province that does not, there is no American state that does not. Not one.

There was one Canadian Province which for I suppose fifteen years that never borrowed a dollar, Alberta. They did not need to as they could not even spend all the money they had. They piled up vast reserves of cash which they invested and drew interest on from the sales of their oil leases. Every year their auction.s take in ten, twenty, thirty, forty, fifty, sixty, eighty millions in one year, they stash it away, stash it away but today Alberta is borrowing, even Alberta is borrowing.

Tha~ great source is dried up and she is bo.rrowing today, Every Province of Canada is borrowing without exception.They are all borrowing. Why are they borrowing, Mr. Chairman? For the same re.ason we do but you do not dare tax your people to get the money to build new roads with. You do not dare tax your people to get the money to build new hospitals with, rou do not dare tax your people to get the money to build new schools. You do not dare tax them to put in water and sewer systems. You do not dare tax them to do new paving. You do not dare tax them to put in rural electrification.

You cannot tax the people to get that much money as they have not got it. If you took all they had you still would not have enough to do that. So that course is not open to you to pile the taxes on. Therefore~what you have to do is what everybody else does. If Bowaters,tomorrow, that vast corporation with great mills in _three Continents, that world-wide firm, if that firm wants to enlarge the mill at Corner Brook tomorrow they have no choice but go out and borrow the money to do it with.

That is what they have always done and that is what they will always have to do and the same thing applies to the Government of this Province. Now you say, alright~ so you go on and you borrow, year after year you borrow and you spend. When you spend 4t'47

MR. SMALLWOOD: that money, are you making Newfoundland a Province where more revenue will be generated? Well, let me answer that. If you build roads pulp wood can be hauled over the roads, fish can be hauled over the ro2ds, minerals can be hauled over the roads, fuel and produce can be hauled over the roads. If you build roads they are the arteries of commerce and industry, they do make your Province sounder and in any case you have no choice as you have to build them or you would lose your people.

I do not look upon the motor cars and the gasoline consumed as the right reward a Government gets for building roads. The real reward of a Government for building roads is to stimulate industry, to stimulate trade, to stimulate the exchange of goods, the movement, the transportation of people and goods and when you do that you are spending money wisely. You are also spending it wisely by allowing centralization of population to take place. This is what road building does.

Centralization of schools, centralization of hospitals, centralization of infrastructure of public services, so when you borrow money to build roads it is not money down the drain, that is not money wasted, that is money which strengthens your economy and certainly the same thing is true of schools.

Suppose in Newfoundland you decided as a matter of firm decision, firm conscience policy, let us be modest from now on, never mind colleges and universities, ne~~P~technical schools and vocational schools and the fisheries college and the technical college, never mind that stuff, that high-falutin stuff, let us just have ordinary elementary schools, elementary and high schools and let us go to grade eleven. Let us do that for ten years in Newfoundland and I will tell you what you will have done.

In ten years you will have raised up a new race of ignoramuses and illiterates and if any industry did come to Newfoundland everyone that came would have to bring in every last person to be employed. They would not find anyone in Newfoundland capable of taking a job except with a pick and shovel or except as a mess hall boy in a mess hall or a waiter or a oish washer or a person making up beds. There would be nobody with any kind of technological competence, no··one with any technical anility and we would be hewers of wood and drawers of water in our olin land and we 49J8

MR. SMALLI/000 : will see a new aristocracy come in here of trained Canadians from Nova Scotia and Quebec and Ontario and acroRs the border in the States and we ourselves would be here as untrained and unskilled lnbourera. That ia what we would be. \-1e could easily do that and we could save a lot of money but that would be penny wise and pound foolish because that would be the death of our Province.

If we do not make the Herculean effort, the monumental effort to build up our school system in Ne,~foundland, ever . bigger, ever better schools, more of them, hire more highly qualified teachers and that means more highly paid teachers with a university, with the trade schools, with the technical institutes and if we do not do that we are condemning Newfoundland to death. The death might take ten or twenty years to come about. You have to do it and you have to borrow to do it and in borrowing, in answer to my hon. friend, in doing it you are spending it to strengthen the economy of the Province.

Tell me, Your Honour, do you think it is possible to spend millions of dollars on the building of schools and the _equipping of schools, do you think it is possible? Training teachers and go from 2.400 to 7,000 in twenty years, to go from an average of $1,000. a year salary for all teachers up to an av~rage of $7,000 or $8,000 or whatever it happens to be today, do you think . it is possible to do that?

To go from 70,000 students to 150,000 or 160,000, to put in a dozen technical schools, to build a great fisheries college, to build a technical college, to build up a great university, do you think it is possible to borrow millions of money to do those things and not make Newfoundland stronger and greater? It is not possible.

You could not do it if you wanted to, if you tried to do it you could not do it. t~ether you like it or not you are making a greater Province, you are making it economically sounder and whether you do it on roads or schools or hospitals or water and sewer systems or any other kind of thing that makes it a more liveable Province because remember this you have another problem. You have another problem, Mr.

Chairman, and that other problem is this: not only must you make Newfoundland a Province where you have industry and good economy but you have to make Newfoundland a pleasant and an attractive place ::- to live in because you see, suppose Newfoundland had nothing but jobs, lots of jobs but no roads, no parks, no p!E~asures, do you think you could just 4949

!fR. SMAI.umon: offer young men pouring out of school, pouring out of univeraity or pouring out of the trade schools, do you think it is enough just to offer them a job, do you· think you will 'hold them in Newfoundland that way? No, sir, you will not. You have to make a pleasant Province as well as one where men have jobs. You have to make it an attractive Province. You have to make it a Province that is exciting to live in. You have to make it a Province where young men and young women can feel and can feel sincerely and with confidence that there is a great future her~you have to do that.

It is not enough to create industries. Side by side with the creation of industries you have to create a pleasant Province. "Nor will my sword sleep in my hand until we have built Jerusalem·:· Here in IJ Newfoundland. lvilliam Blake with a little adaptation. That is our task, that is our task now and what are the ways to do· it?

Go and get on our knees and wag our tails and look plaintively up into Ottawa's face and say, "Dear, kind Uncle Ottawa not fifty-four per-cent make it sixty- four, make it seve~ty-four per-cent of our needs will you,· not fifty-four as you are not giving us enough." Learn how to beg, learn how to plead, learn how to implore that is one way. Tax the people until you tax the lives out of them, that is another way. I do not recommend either one of them. A third way·is borrow to build the roads and to build everything else to make it a good Province economically and socially.

You have to do that whether you like it or not and if you do not you would be the only part of the ea·rth that does not do it, the only Canadian Province and that is one uniqueness we do not want. \Ie have to have the things that we will spend the money on when we borrow it. We cannot do without these thingsJthough,thanks be to God,that this year for the first time Ottawa is beginning to pour millions in here to help us to build these capital ventures, these new improvements, these new social infrastructures and these new public services. At last that is beginning to come in. 4950

---, -- -· .. • --.- ..,-~- i!'OL C~ - ~ MR. SMALLWOOD: and there is finally the alternative of stagnation. Will we follow Mr. J. Parker's advice? Will we come to the conclusion, a fair and reasonable conclusion, if it is fair, it it is reasonable, will they come to the conclusion that there is ~o hope for us? It is not possible to development any econom1, here on this Island, that will support more than say 300,000 souls 1 with a decent standard of living. Do we admit that, do we come to that conclusion?

And if you do, the 300,000 people, how do you propose to maintain the schools you have got, how do you propose to do that? With 300,000 population, how do you propose to maintain your university? How do you propose ·to keep your Fisheries College going? And how will you keep your Techniea~)College going? And how will you get the great new regional high schools? And how will you keep going those you have got? How will you keep going your school-bus transportation system, how will you do that.with a population of 300,0001 It is hard enough to do it with a pop~lation of 500,000.

How do ·you keep Newfoundland going,with the trappings of an elephant on the back of a mouse? The mouse is 300,000, at least if we are not a mouse to4ay with 500,000 souls, if we are a mouse we are a very big mouse. We find it hard enough to maintain the trappings, and what would you suppose a population of a quarter of a million or a little more than a-half what it is today, would be capable of doingZ You see whether you like it or not,· and you can look at this in many ways, you can look at it purely politically, how can we get that Smallwood out? How do we get him out? How to get rid of him?

What is the cute way to do thatl What is the deep way? What is the smart way? How to get rid of Smallwood? There is that way to look at it. You can look at it that way, you can sit down at night and you can use scrutility and shrewdness, you can cook up this and you can cook up that, and you can cook up the other and you can a~ange to have your daily dose of propas4nda to go over the air, you can cook all kinds of things like that. Do you think that is helping the people of Newfoundland? Has anyone in this 4951

t18Y -'O'tn, i:7/U PK - 2 ~.~~J~iUnQ! Vt@VtH~~ t~~~y ~ftt A ~l~~t~t Yi~t~" ~f thP ~~"~teffi @f Newfoundland and ita possible solution? Has anyone got it? Has anyone in Newfoundland tonight,tbreading shoe leather. this morning,thought more about Newfoundland? Is there anyone alive and breathing today in this Province who~ considered more and wondered more and thought more and read more and spoken more about the Newfoundland problem than I have? Who is he? Give me his name?

Let me have his name, I would like to have a look at him, the man who thinks more about Newfoundland and worries more and is more deeply concerned about Newfoundland, and Newfoundland's future and the possibilities of growth and the possibilities of death. Who is it that has thought more about it and examined more and examined every conceiveable angle of it, and has argued more and listen to more argament and been in more bull-sessions, day after day and night after night, ·catil all hours of the morning, with the young men and the middle-age men and the old men, show me the man. Show me. I would like to see him.

He would be a great sight for me to see. Some man who bas thought to worry more about Newfoundland's future than I have done; or who sees it with clearer eyes than I do, I would like to see that. I wouJd like to~ him. I would like to meet the person who bas done that. And if you say that vision is not enough, clear-eyed understanding is not enough, you have got to have strength and vigor, show meT the man, with the more strength and the more vigor. Come on let me see him. Ego yes!· I ~ proud of that. I am proud.that God gave me the energy, mental and physical. I do not take .credit for it, but I am proud of it.

Proud to have it. That is something to be proud of. That is something to be proud o~that God has ~iven you energy, mentally and physically, loads of boundless energy, that is something to be proud of, not vain about it~ but 'proud of it, thankful to God. I did not do it. No doubt I have it, is there notl Does the Leader of the Opposition doubt that I have got loads of energy? MR. MURPHY: Thousands of it. 4952

~J&y •V LU • .&.!1 I v .1.8pt: ,. .... .tA - .J MR. SMALLWOOD: Thousands of it. Thousands of energy. Thousands and thousands of energy. He may doubt that I see clearly, that I have a clear vision, when I look at Newfoundland, and Newfoundland's future, he may doubt that. He may feel that he has a clearer vision, or he may know of others that have. He may know of others who have a clearer vision. I do not, that is my misfortunate. I do not know anyone who thought more about it . and examined it more and worried about it more and thought about it more._ than I have done. I just do not know anyone.

Now this does not mean that because I thought more about it, therefore, I have got to be right. You can think and think and be wrong and wrong and wrong. You can examine it, and analyze and analyze, and come up in the end with the wrong answer. But I do not know any answers than these. Go after Ottawa for more ~han fifty-four percent, beg and plead with Ottawa. Tax the people more, than you are taxing them now. Go out and borrow to do it. Stand still and stagnate. Now is there a fifth? I say there is. And the fifth is the one that I advocate all the ways increase the taxable capacity of the people.

Increase the tax base. Put more money into peoples pockets, so you can take more out of them. Put more money in the ~eoples pockets, so the Government ean take more out of the peoples pockets. They have got to have more put in their pockets. There have got to be more people working than there are, or ever were. More people working, getting more income, than the Government can get more money. lbat is the best way of all,is it not? Is there a better way than that? MR. MURPHY: There is another way, about equal with it. MR. SMALLWOOD: There is another way, about equal with it.

All right the bon. gentleman, I would be terribly interested to hear. I say that the ideal way and the only workable wa~,and the only way that will allow us to save our self-respect as a people, is that more money goes into the pockets of the people and thereby enable the people to pay more money to the Government, for the Government to do the things that only the Government can do, and only the Government should do. You want more money, you borrow it. That is 49~3

.. ape ~o.t PK - 4 MR. SMALLWOOD: wrong. Well, then go to Ottawa and beg it. That is wrong. Well then get it out of the people' Well that is wrong too, unless they have more money to give you than they have now. Surely the solution is to see that more money gets into the pockets of tbe people. Surely there is no other solution. Surely all else is subterfuge, surely all else is an unsatisfactory substitute, just a substitute.

Now it can still be argued that this is not the right Government to do that, ~hat is a fair argumentl A good sound argument) That is a fair argument and a sound argument, ~Everybody in this House or everyond::·on the other side might · say, "Smallwood, you know you are right hang you, dam you, you are right". That is one course, go and beg more from Ottawa, but that is humilitating. We Newfoundlanders are not beggers~ you are right on that Smallwood. And Smallwood, you are right on this, . that you cannot go taxing the people any more than they are taxed now, ' you are right on that, we agree with you on that.

And Smallwood, you are also right when you say .. you should not borrow too much. But you got to borrow some. And Smallwood, you are absolutely right, when you say. that the other course is stagnation, 6nd that the only real so~ution is. to get more money into the pockets of the people, by having more industries, more jobs, more wages, higher wages, all adding up to more money in the pockets of the people.

Now you might ·agree with me right up to that point, and then the disagreement could start, you could say, 11 )!es, so thus far you are right, we agree with you, we do not demure at all, we are in complete unison with you, but where we begin to disagree is in thinking, ~hat you are not the one, to do it Smallwood. Smallwood, you are not the one to do it. We know people who can do it, better than you can do it. We think we can do it better, than you can do it.

But the thing that you say should be done, we agree with you,should be don7more money somehow got into the pockets of our Newfoundland people, so they can yield up more revenue to the Government, to enable the Government to do the things that the Government should do. Now on this we agree with you. But we think you are the wrong one to do it, we think we can 4!)5LJ

MR. SMAl.LWOOD: do it better than you can." Now maybe this is so, may be there are others who can do it more competently than an administration led by me. MR. MURPHY: Inaudible. MR. SMALLWOOD: No they cannot say that, you have to give what you have to give. You cannot give less than we will bring them. If you give less than we will Qring . them they do not come. So that is not a solution, if they do not come you are losing your solution.

You have got to bring them in, you got to bring the industries in, if that is the solution, industry is the solution, industry provides employment, provides jobs, provides wages, puts the money in the peoples pockets, if industry does that, then you have got to get the•industry, and if you do not get the industrY, you do not get the result, if you do not use the means, you do not get the result, so the~efore you must do what must be done to bring them in. Now there is such a thing as giving them more than would have brought them in. May be you could have brought them in for giving them a bit less.

That is always a touchy business, that is always touchy. lf the capitalist says, ,.I will come in, if you will do this, and if you will do that, and if you do the other, 1 will come in: We.zwill say·, "well, we will do this, and ,, " we will do that, but we are not willing to do the other. And he says; well, if you are not will to do the other, I am afraid the deal is off.~ It is always dicey, it is always touch and go. May be he will come in, if you do not do the other for him, may~be he will not. You are always taking the chance.

Nova Scotia took the chance on the heavy-water plant, DD the Claritone plant, on the other pne, whose name I cannot remember. Nova Scotia took chances, and they gave and they gave and they gave, and they lost and they lost and they lost. We have taken chances . and we have lost on some ~hings, and gained on others. AN HON. MEMBER: Inaudible. MR. SMALLWOOD: Yes, we could have that Hudson's Paper Company here fifteen 4955

.&.ape ~o.t. .I.A- U MR. SMALLWOOD: years ago with a third mill, but we were not prepared aince then we found provinces given almost the entire capital needed to atart a paper mill. 4956

May 26, 1970 Tape 11983 Page 1 MR. SMALLWOOD: almost the entire capital that was needed, we have found Canadian Provinces giving that completely, the full hundred percent amount to start a paper mill going, as an outright gift. And in one case they have taken, n0Csome1 a large part of i~ an outright gift, and part of it loaned, but they have either given or enabled the full complement,_ the full amount of the capital required, yes, and the timber. And not only that, but they have also undertaken to deliver the pulp wood, the Crown pulp wood, not the Company's, the Crown, the public timber.

They have agreed to cut it and deliver it and put it into a paper mill at a price well below the cost of doing it. They have done that. They have done all kinds of things, and we have to do all kinds of things if we are going to get industries in here. And as t~e bon. the Minister of Welfare, or his new title, has just remarked, there is the problem~ ~re you giving them too much? If you gave them a little less~ Possibly. That is always dice. But the further off you are,land we are far off.

We are projecting right out in the Atlantic Ocean} The farther off you are, the more remote you are, the more isolated you are, especially if you are an Island 1 then the more diff~cult it is. Mr.

Chairman, if God had only lifted Newfoundland and Labrador, right up in His great hands, and laid us down in the middle of the Continent, with the resources we have, with the minerals, base metals, iron, uranium, with the timber we have, with the water powers we have, with the natural resources we have, if God had only put us down in the middle of the Continent of Canada, we would be the richest province in all Canada today. w~ would be the richest of all Canada's Provinces. We have those same resources now, but we are an Island. We are far out. We are stuck out in the Atlantic Ocean.

And Labrador still~in the minds of some peo?le, is down in the Artie Circle. Labrador is classed with Iceland and Greenland. Labrador, the Frozen North. And we are paying a penalty for our geographical position, We are paying a penalty for it, and it makes it all the more difficult for us to attract industries to our shores. We ought t:o gamble, we need more to gamble than other provinces. We do not gamble nearly 4957

May 26, 1970 Tape 11983 Page 2 as much •• Nova Scotia. You can ~o up today 1 Mr. Chairman, you know what you can do today Your llonour. If Your llollour wanted to atart an induatry. You would come to the Newfoundland Government and we would put on a magnificent show of friendliness, of co-operation, of help. We would do everything but kiss your hand. We' would do everything to get you established in Newfoundland, and you would hear our story, you say, "all right, I will let you know." And you go off to Nova Scotia. That is the last we will see of you. In Nova Scotia, there is double anything we will do.

Do you know what they will do in Nova Scotia? If you want to build a factory in Nova Scotia, do you know what they will do? They will give you land free. They will build the building for you. They will equip the building for you. You are ready to walk into a factory,· ready to go. And every nickel of it comes from the Government. We cannot do that. We cannot equal that. We cannot match it. We cannot come ~~ .. near it. And we~this fierce, fierce task.

It is not a question really of getting one government out and another one in, unless the one that came in tackled that problem with the same fierce intensity, and the same, if I can be forgiven for using the word. (I will not use the word) I will say with the same dear love of native land. There is a short word for that. But that short word is the last refuge of a sco~ndrel. Every- body who is patriotic is a scoundrel. Does that follow? That is the insinuation. That is the flavour of that remark. If patriotism is the laat refuge of a scoundrel, then no honest man can have anything to do with patriotism.

If a church is sought as a refuge by a murderer, a foul murderer, he takes refuge in a church, T~t no honest man go near a church. So I will not use this di·rty word "patriotism" or the word "church" or the word "religion," because scoundrels take refuge. Patriotism is the last refuge of a scoundrel. So I will not advocate patriotism, but I do say this, that whoever are the government of this Province, if they 4!H)8

May 26, 1970 Ta.pe #9ru Page ] do not have a fierce and ineradicable, an ineradicable, fierce love of native land, and a compassion in their heart for the people of Newfoundland, Lf they do not have that they are criminals to be the government. They might be all right if they were not in the government, but if they are in the government and do not have that, they are a menace. They are taking the room of good men.

No men should be in the government of this Province for the next twenty years anymore than one that should have been in the last twenty years 1 no one should be in the government that does not see 1 first of all, the terrible need to take great chances, and to str.ive mightily, and do it always imbude with a fierce and ineradicable love of this Province and the people in it. You can put a fancy name on that if you like, but that is the simple truth of the matter. What is the use of all this Mr. Chairman? What is the use of it?

I sit and 1 listen to an bon. member and I make up my mind; ~ell let him " talk, let him get it off. Then when he finishes someone else will get up an~grin and bear that, then somebody, and after three or four of them have spoken, and got off their stuff, then we move on to the next Item. 1 make up my mind every time. That is how 1 make up my m;Lnd. Now the bon. gentleman is over there itching to get up. And it is going to be pure and unadultered and undef~d patriotism he is going to utter. Arid 1 will let him go on~and make up my mind 1 will not listen. 1 will not answer him. 1 will listen but not answer.

Time will pass. After a while his voice will get tired and he will sit down and then we hear from Burin, the great liberal from Burin. And we will listen again. And there will be snide remarks aplenty. That will grab me. That will really grab me. And,of course, before I know it , 1 will be up again. But what is the use? MR. MURPHY: 1 was wondering when the bon. the Premier is finished if 1 might have a few words during the week, if there is a ch~nce. MR. SMALLWOOD: Well 1 would hope to hear them, if the bon. gentleman 49~9

May 26, 1970 Tape U983 apeak• only half aa well in thia Chamber as he did and I heard him do in the Tory Convention, 1 will lhten wtth tnf"'"""' f'll!lt\11111\-.t, At\1• 1\1\1!1 thing I am sure of, there will be no knife-in or twisting, nothinR dirty, nothing filthy. It will be straight from the shoulder, honest and honourable and sincere. Of this I am absolutely sure. And if it is delivered half as well - no, no member of this House would use a knife to cut anyone's throat. No member would. No bon. member would. We know that,not in this House. No member has ever done a thing like that in this Chamber.

Knifed anyone, stabbed anyone in the back, cut anyone's throat, put a knife in and turned it. No bon. member would dream of doing anything like that in this House, and if he did, it would not be permitted. On motion that the committee rise, report progress and ask leave to sit again, Mr. Speaker returned to the Chair. On motion.report received and adopted, committee ordered sit again 13feaently. MR SPEAKER: I now call it 1:00 P.M., and do leave the Chair until 3:00 P.M. 49-JtJ

PROVINCE OF NEWFOUNDLAND AND LABRADOR HOUSE OF ASSEMBLY Volume 1 Number 80 Ath. Session 34th. General Assembly VERBATIM REPORT TUESDAY, MAY 26,1970 SPEAKER: THE HONOURABLE GEORGE W. CLARKE

- May. 26th'. 1970 Tape no 984 Page 1 The House resumed at 3:00 p.m. MR. SMALLWOOD: Mr. Speaker, I wonder, if I might be permitted to depart momentarily from the more recent practice of the House so that I may be enabled to express a very warm word of welcome to two distinguished native­ born sons of this Island of ours in the person of Major General William Carr. General Carr was born in Grand Bank. I knew his father very well indeed, He was a bank manager and then general manager of a commercial firm. He was born in Grand Bank, I think, Grand. Bank.

He was certainly brought up in Grand Bank, and he became a very famous pilot, and he had the great honour of flying the Queen across Canada on the occasion of her visit to Cana4a, and he was very famous in Canada, as the pilot who flew the Queen. He is now a general, and he is not the first native-born Newfoundlander to become a general, but there have not been too many. There have not been more than a half dozen since Newfoundland was born.

The first native-born Newfoundlander was General Sir Henry Pynn - the first native-born Newfoundlander. to be knighted, the first native-born Newfoundlander to become a general.p from Conception Bay, and we have had several other generals, and we have had several admirals. But I think that General Carr is now, at this moment, the only living Newfoundlander in the world with the rank of a general, and we are very proud and happy that he is here with us today.

He is accompanied by another distinguished native-born Newfoundlander, Major Robert Vardy, the nephew of a close personal friend of mine, in fact, my Deputy Minister of Economic Development and Major Vardy has been stationed in Newfoundland in charge of the Canadian Forces in this Province for a few years past and they are both accompanied by the general's ADC, Captian Clement LavoiE 'Ibey.are extremely welcome here today. We are very proud and very happy to welcome them to the people's House, We commiserate with Captain Lavoie. We pity him. We are sorry for him, We know it is not his fault.

He is not a NewfoundlaDd~ but he is doing the best be can. He is associating closely with Newfoundlanders aad some of it should rub off on him.· If he keeps close to those Newfoundlanders long 49G1

Hay 26th •• 1970 Tape no 984 Page 2 enough, he will feel the virtue flowing into him. While I am at it, I would like to express a most cordial welcome as well to some seventeen students of Grades VII