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DOMINION-PROVINCI~AL \

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RELATIONS \.

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BOOK ,I CANADA: 1867-1939

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CANADA: 1867-1939

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MAWA, a y 8,1940.

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Rt. Hon. W. L. WC~NZIID KING, P.C., M.P., Prime Minieter of Canada,

.. '. 7 . :Ottawa. -. < ,, _L ..

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Desr Mr. King,

I have the honour to transmit, herewith, the Report of the Royal Commission on

Dominion-Provincial Relations, pursuant to the Order in Council of August 14th, 1937,

P.C. 1908. .-X

As noted in the final Chapter, the decisions underlying the recommendati~na of the

Report were reached before the outbreak of war. The Commission has einm reviewed

its recommendations and, in spite of the great and relative changes in the financid

outlook for Canadian governments, it believes its recommendations to be appropriate

to meet the new strains and emergencies of war conditions.

I have the honour to be,

Your obedient servant,

'l CONTENTS PAGB

......................................................... Order in Council P . C . 1908. August 14. 1937 9 66 P . C . 2880. November 18. 1937 ...................................................... 10 (8 ...................................................... P . C . 2946. November 22. 1938 11

.......................................................... . Hiitory of the ~ommissio d.. ............. ; 13

....................................................................... CHAPTER I-Confederation .......................................................... 1:- ............................................................... . l-The Forces leading to Confederation

%The Economy a t Confederation .............................. The Maritimes-dependence on wood. wind and water techniques

.- ' The Last Phwe of the "Golden Age" of the Maritimes-the coming of the steamship and the railway .............. The Canadas-their concern with transportation-common and conflicting interests

.................................................. The Rise of Manufacturing in the Canadaa .................... Self-sufficiency-the importance of the family as an economic and social unit

The Economic Outlook of the British North American Colonieehhe coincidence of unfavourable ........................................................................ developments .................................... Union-a common means of escape and renewed expansion

................................................................. i l 3 T h e Nature of Confederation ...................................................................... Principal' Objectives ......................................................... The Division of Legislative Powers

.............. .......... ... The Problem of Interpreting the Division of Legislative Powers .X ;

Historical Interpretation of the Intentions of the Fatherearguments supporting a broad view .................................................................. of Dominion powers Historical Interpretation of the Intentioqs of the Fathers-arguments supporting a broad view .................................................................. of provincial powers

................................................ The Limitations of the Historical Arguments .............................................................. "Public Finance a t Confederation ......................................................... The Sphere of Government in 1867

...... The Burden of Debts incurred for Developmentthe necessity for centralization of finance ..................... Public Expenditures before Confederation-the importance of development

................. The Principal Sources of Public Revenue-the dependence upod customs duties ............. The Division of Responsibilities and Revenues under the B~itish North America Act

........ Revenues Left t o Provinces Fall Short of Requirements-gulf bridged by federal sutsidies Summary-the great responsibilities and the dominant financial position of the Federal Government

.............................................................. I CHAPTER' 11-The First Thirty Years ................................................. 1 T h e Economic and Constitutional Background

Rounding Out the Union-Dominion's aggreseive program to build a transcontilentsl cconomy; ...................................... all-Canadian transportation and Western settlement ..................... The Dominion's Paternalism toward the Provinc-its claim to dominance The Great Depression-check to the Dominion's aggressive program of development and the ...................................... adoption of the National Policy of protective tariffs Stagnation-unfavourable external influences and the disappointing results of the national economic ............................................................................. policies

........... Regional and Provincial Discontent-the challenge to the dominance of the Dominion Provincial Rights and the Constitution-the interpretations of the Privy Council widen the powers ...................................................................... of the provinces

...................................................................... 2-Public Finance, 1867-96 The Financial Settlement on Trial-an extremely tight fit for the Maritime8 and revision8 of the ............................................................................. formula ....................... The Finances of the Dominion-concentration on economic development The Straitened Circumstances of the Provinces-the growth of expenditures and the slowness of ............................................................... municipal development ............. The Provinces embark on Direct Taxation-corporation taxes and succession duties ....................................................................... Summary, 1867-96

MS-l

........................................................ CHAPTER 111-The Wheat Boom. 1896.1913 ................................................. l-National Economic Expansion and Integration

....... Succeaa at Last-the turn in world circumstances brings a settlement boom on the Prairies .Settlement Boom makes National Economic Policies Effective-- general expansion and nations1

economic integration ................................................................. All-Canadian Transportation-the great policy of national development and the foremost object of ................ federal finance; unbounded optimism and the birth of the railway problem A Booming Market for Manufactures-protective tariffs direct demands of railway expansion and .............................................. Western settlement into Canadian channels The Inrush of Foreign Capital-its great importance in the rapid provision of capital facilities; the

rising but vulnerable prosperity ........................................................ Effect of Wheat Boom on the Regional Economies-Prairies the main exporting region; Ontario .............. and Quebec the industrial and financial centre; slow progress in the Maritimes Growth of National Unity and Rise of Canadian Nationalism--s uccess of Dominion policy and ..................... common basis of prosperity alleviate regional and provincial discontent

2-Public Finance, 1896-1913 ................................................................... Rapid Riae in Government Evenditures-extensive assistance to development, the occupation of ........................................................ the frontier and urbanization.. Finance8 of the Dominion-booming customs revenues spur on agressive program of development; .......................................... the lavish assumption of railway commitments Finances of the Provinces-pre-occupation with development; the rapid increase in debts and .................................................. expenditures of the Weetern Provinces The Rise of Municipal Expenditures-rapid urbanization in the East, and the establishment of ...................................................... new cities and towns in the West Expansion of Provincial Revenues-inelastic fedetal subsidies intensify development of provincial ..................................... revenue souroee; the growing importance of taxation Summary-1896-1913 ....................................................................

............................................................ CHAPTER IV-The War Period, 1914-21 .......................... INTRODUCTION-The general economic, political and social effects of the War

From Wheat Boom to War Boom-major dapreeaion averted; Canada pays for War by swift rise in export production .................................................................

................................................................. l-The War and National Unity A United Nation Enters the Conflict-War efforts evoke 8 atrong spirit of unity and nationalism The Conscription 1&e-the disruption of national unity, the political isolation of Quebec, the ............................................... unfortunate effects on Canadian federalism

......................................................... 2-The War and the Canadian Economy War Finance-War costs met by internal borrowing; loan funds made avdeble by inflationary

credit policy ......................................................................... War-time Regulationsof Business and Industry-its effects on social philosophy and the post-War ................................................ expansion of government responsibilities War-time Increase in Federal D e b t w a r and railwa nationalization add $3 billion to liabilities; ...................................... revenue syatern greatly expanded to support b u d n Provincial-Munibipd Finance-the War-time restraint oh expenditures; sharp increases in debt ......... ............................. and expenditures on public welfare during 1918-21 , B d c Effects of the War on the Canadian Economy-large increase in export production, and ...................................... development toward financial and induetrial maturity

........................................................ 3-The War, Political and Social Changes Weakening of Old Political Partie-political revolt of farm and labour groups; reaction against

inequalities in War scrcrifices and profiteering ............................................ .................... The Growth of Organized Labour ..................................... n

The Rise in the Political Power of Organized Agriculture-- the election of fafmers' governments in ................................ Ontario and Alberta tqnd the rise of the Progressive Party Summary, 1913-21 .......................................................................

ZHAPTER V-The Post War Prosperity, 1921-30.. ................................. . . Impact of Economic and Social Changes on Federal Relationdecline in unifying influences of .............................. national policies and growing diversity of regional interests.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l-Prosperity and theICli4nging Structure of the Economy. World Influences-short post-War depression; reconstruction and revival of international trade

and investment bring renewed expansion to Canada.. .................................... Continued Rise in Wheat Export-increasing dependence of Prairie agriculture on temporary

............................................................................ markets The Investment Boom-large investment in transportation facilities and development of northern

resources; effects of hydro-electric power, improved mining techniques and the gasoline engine. Maritime Provinces--foreign markets and technological changes unfavourable; prolonged post-

War aepression and federal assistance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prairie Provinces-renewed expansion following recovery of wheat prices; diversification in Manitoba

and increasing dependence upon wheat in Saqkatchewan and Alberta.. ..................... British Columbia-rapid economic expansion; the stimulus from the opening of the Panama Canal,

low ocean freight rates and rising demand for non-ferrous metals.. ......................... Central Provinces-technological changes and favourable foreign markets induce rapid development

of forest and mineral resources; increasing industrial and financial concentration in this region. Significant Changes in the Canadian Economy-rise of new export areas and decline in unifyin

influence of wheat; growing vulnerability to external fluctuations, increasing rigidities ........................................................................ specialization

2-PublicFinance ............................................................................. Cautious Policy of the Dominion-consolidation of past developmental projects and avoidance of .................................................. . responsibility for expanding services.. Rapid Expansion of Provincial-Municipal Expenditure-provinces assume major share of cost of

expanding services; public welfare and highways.. ....................................... The Doubling of Provincial Revenues-appearance of new sources; liquor control, gasoline taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and motor vehicle licences. The Vulnerability of $he Provincial Fiscal Systems-the reluctance of tho Dominion to relieve or ................... assist the provinces and to compensate for the great regional disparities..

.............................................................. 3-Dominion-Provincial Relations. Eclipse of Federal leadership-completion of developmental program, reluctance to assume new ................................... financial burdens, and lack of new national objectives. Ascendancy of Provincial Governments-development of provincial resources, aggressive highway

programs and extension of welfare services greatly enhance their importance and strengthen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . their political support. Federal Concessions to Provincial Claims-Maritime claims, natural resourcee question, water- .......................................... power, Dominion-Provincial Conference, 1927.

............................................................................. Conclusions

................................................................... CHAPTER VI-The Depression ............................................................ l-World Depression and Recovery..

Economic Dislocations in the Post-War World--effects of the War, peace treaties and technological .................. changes required basic readjustments in international economic relations..

Failure to Achieve Solutions to International Problems-resort to national controls and temporary makeshifts; development of agricultural crisis and over-extension of raw matcrial roduction. .

World Depression-cessation of international lending; strangulation of trade; breakjown of gold standards; sharp and disproportionate decline in raw material prices; severity of impact on .................................... debtor countries and exportem of primar products.. .......... Recovery-failure of international efforts andrintensifkation of economic nationalism..

Economic Isolationism and Self-Sufficiency-reduced importance of world trade and unfavourable ............................ circumstances of debtor countries and exporters of foodstuffs.. .................................................. 2-The Incidence of the Depression on Canada..

Impact of World Depression-its full foroe falls upon Canada's staple exports; the drastic slump ................................................ in agricultural and raw material prices.. Effects of Severe Decline in Export Prices--sharp increase in burden of external interest payments, ............ increase in real cost of imports, and drastic curtailment of construction activity.. Great Disparities in Incidence of Depression-burden fell on unemployed, primary producers and

investors in equities; effects of immobility, specialized activity, rigidities of interest and wages, ....................................................... monopolistic conditions, tariffs.. Disparities in Incidence of Depression on Different Regions-loss of income most severe in Western

Canada, declines range from 72 per cent in Saskatchewan to 36 per cent in Nova Scotia.. .... -l*

CONTENTS-Continued PAGE

CHAPTER VI-Concluded 3-The National Economic Policies During the Depression .......................................... 151

Monetary Policy-difficulties and uncertainties of currency management in Canada. maintenance of equilibrium in balance of payments by tariff and orthodox monetary policies. failure to shield exporters against drop in external prices ........................................... 151

Tariff Policy--s harp tariff increases and other import restrictions to maintain employment in manufscturing intensified cost rigidities of primary producers and enhanced burden of depression falling on exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

..................................................................... &Public Finance. 1930.37 160 Severe Strain of Unequal Incidence of the Depression on the Decentralized System of Canadian

Public Finance-large inter-regional transfers of income by Federal Government ............. 160 Federal Assistance to Industry-the heavy burden of the overhead costs of the National Railways;

assistance to wheat and coal ........................................................... 160 Federal Assistance to provinces-municipai-provincial revenues hopclessly inadequate to finance

the whole cost of relief ................................................................ 162 Prince Edward Island . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Nova Scotia ..................................................................... 165 New Brunswick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 Quebec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 Ontario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Manitoba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Saskatchewan ................................................................... 169 Alberta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 Britieh Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

1.'. Results of Dominion Insistence on Primary Provincial-Municipal Responsibility for Relief-large - Dominion expenditures without adequate control, large deficit spending with wasteful results, n n ~ 7 . . creat-ion of unwieldy provincial and municipal debts, virtual breakdown of finances of several

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . <.? .. provinces 172

Current Ex enditures-rising debt charges, relief and other public welfare force contraction in other ........ L expenJtures; important services in some provinces reduced below desirable standards 174 Current Revenues-vulnerability of revenue structure, increases in revenue sought mainly by

imposts on consumption and costs; inadequate use of progressive taxes on net incomes and inheritances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 anada's Place in the World Economy 178 ........................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 anada as an Economic Unit 182

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-The Regional Economies 186 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Maritimes 187

Quebec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 Ontario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Prairies : 197 ..................................................................... British Columbia 199

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CHAPTER VIII-Canadian Public Finance To.day .................................................................... l-Government Expenditures

....................................................................... Primary Functions Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation and Development . . . . . . . . . . . . . . . . . . . ....................................................... Social Services I

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Public Welfare other than Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relief

CHAPTER V1II-C ondudcd ....................................................................... 2-4overnment Revenuw 210 ........................................................... Group 1.4 ns ption Taxes 212 ................................................................ Group 11-Busi l? em Taxes 218 ............................................................. Group 111-Progreeeive Taxes 218 ................................................. Charaoteristica of the Canadian Tax System 214

................................................ 8-Federal Division of Revenuee and Expendituree 216

........................................................................... &Provincial Finances 218 .................................................................... Prince Edward Idan4 219 ................................................................ .............. Nova Bootia ; 221 .......................................................................... New Brunswick 224 ................................................................................. Quebec 227 ................................................................................. Ontario 280 ............................................................................... Manitoba 283 ........................................................................... Saskatchewan W6 .................................................................................. Alberta 238 ........................................................................ British Columbia 241

............................ ..............<........ 6-The Contreet-Confederation and Today :c': 241

........................................................... CHAPTER IX-The Constitutiori To.day 247 ................................................. The Restrictive Interpretation of Seetion 91 247 .................................................. Interpretation of Provincial Taxing.Powers 262 ....................................................... Dieallowanoe of Provincial Legislation 268 .......................................................... Difficulties of Divided Jurisdiction 264 ......................................................... Limitations of Conditional Grants 267

TABLES . T A ~ L B No . Paan

..................................... 1 Occupations of the People, Perce~ltage Distribution. 1871 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Debts of the B.N.A. Provinces on the Eve of Confederation 38

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Expenditures on Current Account-Fiscal Years ended 1866 39 ........................................ 4 Revenue-Current Account-Fiscal Years ended 1866 40 ........................................ 5 Per Capita Current Revenues. Fiscal Years ended 1866 41

58 Provincial Assets and Liabilities Assumed by Dominion at Confederation ....................... 42

6 Percentage Distribution of Combined Provincial and Municipal Revenues-Fiscal Years ended 1866 44

7 Deficicncy of Provincial Revenues after Confederation as Estimated by Gnlt .................... 45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Canadian Price Indices, 1871-96 52

9 Government Aid to Railways to June 30. 1896 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9s Exports of Canadian Produce. 1868-1896 53

................................................. 10 Canadian Population Movements. 1871-1901 53 <- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Government Expenditures on Current Account. 1874 nnd 1896 63

12 Government Revenues on Current Account. 1874 and 1896 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 . .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Changes in Price and Cost Trenda. 1870-1913 67 .............................................. 14 Dominion Government Assistance to Railways 71

15 The Not Value of Production of Manufactures-Canada ...................................... 73 16 The Net Value of Manufacturing Production-Percentage of Total for Canada in Ontario and

................... ....... ............................................. Quebec .. .. 74 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Total Capital Investment in selected Industriee 76

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Government Expenditures on Current Account. 1896 and 1913 82 ........................ 18s Per Capita Municipal Government Expenditures. Current Account. 1913 85

.................................... 19 Government Reven2:s on Current Account. 1896 and 1913 86 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Merchandise Exports 92

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Votes Cast in the 1917 Federal Gcneral Election 96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Government Debts. Direct and Xndirect-l913 and 1921 105

.................................. 23 Government Expenditures. Current Account, 1913 and 1921 106 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Government Revenues. Current Account. 1913 and 1921 107

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Indices of Prices and Exports 113 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Price Changes 114

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 World (Excluding China) Wheat Production 115 ............................................... 28 Net Exports and Inlports of Wheat and Flour 115

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Capital Investment 116 ............................................. 30 Indices of Canadian Economic Progress. 1920-20 117 ........................................... 31 The Economic Progress of the Maritimes. 1920-29 117

/ . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Indices of Prices and the Value of Fish Production in the Maritimes 118 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 The Price of Wheat as Percentages of Certain Farm Costs. 1913-25 120

. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 The Price of Wheat p Percentages of Certain Farm Costs. 1913.29 120 6

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35 ~~r icu l tu ra l ~ x ~ a n s j o n in Each of thehairie ~rovinces-, 1920-30.. ............................. 121 36 The Economic Progress of British Columbia, 1920-29.. .......................................

/ 37 The Economic Progress of Ontario and Quebec, 1920-29.. ..................................... 38 Percentages of the Net Value of Manufactures in Ontario and Quebec to the Canadian Totals, 1910-29 39 Government Expenditures, Current Account, 1921 and 1930.. ................................. 40 Government Revenues, Current qccount, 1921 and 1930.. .................................... 41 The Decline in Export Prices and Economic Activity, 1929-33.. ............................... 42 Canadian Export Prices, 1929-33.. ......................................... . a . . ............ 43 Canadian Paymenfs and Receipts from Abroad.. ............................................ 44 Fixed Interest Charges and the National Income, 1929-33.. ................................... 45 The Incidence of the Depressiop,.1929-33. ................................................... 46 Indices of Sheltered and Exposed Pricep.. ..................................................

....... 47 The Unequal Incidence of the Depresaian on the Exposed and Sheltered Groupa, 1929-33.. ...................... 48 Iedices of the Production of C~nsumers' andPrqducers' Goods, 1929-33..

.-/ 49 Depression Decreases in Net Mowy Income,. 6 . ............................................ 60 The Decline in Provincial per Capita Incopes, 1928-29 to 1933.. ..............................

.............................................. 61 The Canadian Balance of Payments, 1928-34..

52 Month1 Average Pcices of the United States Dollar and the Pound Sterling in Terms of Canadian DO& 1930-34.. ........... .,. ......................................................

................................................................... 53 Tariff Changes, 1928-36 I \

.. 64 Cost to Purchasers of Tariff Protected Manufgctured Goods in Terms of Export Commodities..

65 Expenditures on Tramportation by the Dominion-Surrent Account, 1928-37.. ................. . ..................................... 66 Total Relief and Other Public Welfare Expenditures. .:

....................... 67 The Burden of Relief on the Provinces and the Municipafties, 198037..

........................ 58 Disparities in the Burden of Relief on the various Provinces, 1930-37..

......... .4 68 Prince Edward Island-the Cost of ,Relief and Municipal-Provincial Finances, 1930-37.. - F! .................. - * 60 Nova Scotia-the Cost of Relief and Mvnicipal-Provinqird Finances, 193037.. ! ............... 61 New Brunswick-the Cost of Relief and Municipal-Provincial Finances, 1930-37..

...................... 62 Quebec-the Cost of Relief and Municipal-Provincial Finances, 1930-37..

...................... 63 Ontario-the Cost of Relief and Municipal-Provincial Finances, 1930-37..

.................... 64 Manitoba-the Cost of Relief and Municipal-Provincial Finances, 1930-37..

66 Saskatchewan-the Cost of Reliof and Municipal-Provincial Finances, 1930-37. ................. 66 Relief Expenditures in Saskatchewan and the Rest of Canada.. ............................... 67 Alberta-the Cost of ~ k ~ i e f and Municipal-Provincial Finances, 1930-37.. ...................... 68 British Columbia-the Cost of Relief and Municipal-Provincial Finances, 1930-37. .............. 69 Dominion Relief Expenditures in Each of the Provinces through Municipal-Provincial Agencies,

Per Capita and Portion of Total Funds Provided, 1930-37.. ............................... 70 The Effect of Relief in Municipal-Provincial Debts-1930-1937.. .............................. 71 Deficit Spending and the Increase in Government Debts, 1930-37.. ............................ 72 Government Expenditures on Current Account, 1930 and 1937-All Governments. ..............

#

8

TABLES-Concluded

TABLB NO . Pnam .................................... 73 ~ o v e k e n t ~evenues on Current Account. 1930 and 1937 177

...................... ......................................... .. .i 74 World Merchandise Trade ; 178 ............................................................. 76 Canada's Balance of Payments 178

....................................... 76 Income Per Farm ........................... : ..... : 194 I ..................................................... 77 Expenditures of all Governments-1937 203

78 Debts of all Governments which were not directly self.supporting. 1937 ......................... 203 . i . . .......................................... 79 Expenditures of all Governments-1937 ; .......... 204

80 Canadian Defefice Expenditures compared with those of other Countries, 1937 ................... 205 81 Provincial and Municipal Expenditure-Education .....:... : ... ; ......................... ; ..... 208

..................................................... 82 Division of Public Welfare Expenditures 208 83 Total Relief Expenditures (including relief works charged to Capital Account) ......... .'. ........ 209

1 I ................................... .......................... 84 Revenues of all Governments : 211 . 86 Division of Government Expenditures between the Dominion. Provinces and Municipatiti'ea. 1937 . . 216

86 Division of Government Revenues between the Dominion. Provinces and Muni~ipafities. 1937 ... 216 ....................... : 87 Prince Edward Island-Revenues on Current Account-Per'Capita. 1937 219

.................... . 88 Prince Edward Island-Expenditures on Current AcdountPer Capita. 1937 220 ............................... . . . 89 Nova Scotia-Revenues bn Current AocountPer Capita. 1937 221

Nova Scotia-Expenditures on Current Account-Per Capita. 1937 ............................ 222 ............................ 91 New Brunswick-Revenues on Current Account-Per Capita. 1937 224

......................... . 92 New Brunswick-Expenditures on Current AccounGPer Capita. 1937 226 .................................... 93 Quebec-Revenues on Current Account-Per Capita. 1637 227

................................. 94 Quebec-Expenditures on Current ~ccound'ker Capita. 1937 228 . 95 Ontario-Revenues on Current Account-Per Caeita. 1937 ...................... , ............ 230

................................ 96 Ontario-ExpenditmPes on Current Account-Per Capita. 1937 231 . " " 97 Manitoba-Revenuw on Current Account-Per Capita. 1937 ......... : ........................ 233

.............................. Manitoba-Expenditures on Current Account-Per Capita. 1937 234 .............................. Saskatchewan-Revenues on Current AccountPer capita. 1937 236

'"l 100 Saskatchewan-Exbenditurea on Current ~ccount-~b;r Capita. 1937 ............................ 236 . 101 Alberta-Revenues on Current AccounGPer Capita. 1937 .................................... 238

................................ . - ' . 102 Alberta-Expenditures on Current AccountPer Capita. 1937 239 ........................... '- 103 British Columbia-Revenues on Current Account-Per Capita. 1937 241

........................ 104 British Columbia-Expenditures on Current ~ c c o u n L ~ e r Capita. 1937 242 106 The Growth of Government Expenditures since ~onfedeiation and the Incressing Share borne by ....................................................... the Provinces and Municipalities 244

........................................ 106 Growth of Government Revenues since Confederation 246

' . Nom.-The material oontsined in the researoh studies whioh have been published as Appandicy (sad which m listed on pwe %l)

has been exteoaiwly used by the Commission in the preparation of Book I . It has not been thought neeeasary. however. to giw exnct oitationa or darenoes to these studies except on camion of aotusl quotation or long pmpk&g .

I

ROYAL COMMISSION ON DOMINION-PROVINCIAL RELATIONS

TERMS OF REFERENCE

CERTIFIED to be a true copy of a Minute of a Meeting of the Committee of the Prjvy Council, approved by The Deputy of His Excellency the Governor General on the 14th August, 1937.

P.C. 1908

The Committee of the Privy Council have had before them a report, dated August 6th, 1937, from the Right Honourable W. L. Mackenzie King, the Prime Minister, submitting,-with the concurrence of the Minister of Finance and the Minister of Justice:-

1. That, as a result of economic and social developments since 1867, the Dominion and the provincial governments have found it necessary in the public interest to accept responsibilities of a character, and to extend governmental services to a degree, not fore- seen a t the time of Confederation;

2. That the discharge of these responsibilities involves expenditures of such a magnitude as to demand not only the most efficient administrative organization on the part of all governments but also the wisest possible division of powers and functions between governments. That particularly is this the case if the burden of public expenditures is to be kept to a minimum, and if the revenue- raising powers of the various governing bodies are to possess the adequacy and the elasticity required to meet the respective demands upon them;

3. That governmental expenditures are increased by overlapping and duplication of services as between the Dominion and provincial governments in certain fields of activity. That in other respects the public interest may be adversely affected by the lack of a clear delimitation of governmental powers and responsibilities;

4. That representations have been made on behalf of several provincial governments and by various public organizations that the revenue sources available to provincial governments are not in general adequate to enable them to discharge their constitutional responsibilities, including the cost of unemployment relief and other social services and the pay- ment of fixed charges on their outstanding debt; that, consequently, if they are to discharge their responsibilities, either new revenue sources must be allotted to them or their constitutional responsibilities and governmental burdens must be reduced or adjustment.gust be made by both methods;

6. That representations have been made by provincial governments that municipal governments which have been created by, and derive their powers and responsibilities from, the provinces, are confronted with similar problems; that, in particular, necessary municipal expenditures have placed an undue burden on real estate and are thereby retarding economic recovery; also that the relations between provinces and municipalities are an essential part of the problem of provincial finances;

6. That, finally, i t has been represented that unless appropriate action is taken the set-up of governmental powers and responsibilities devised a t the time of Confederation will not be adequate to meet the economic and social changes and the shifts in economic power which are in progress without subjecting Canada's governmental structure to undue strains and stresses.

The Prime Minister, therefore, with the concurrence of the Minister of Finance and the Minister of Justice, recommends:-

1. That i t is expedient to provide for a re-examination of the economic and financial basis of Confederation and of the distribution of legislative powers in the light of the economic and social developments of the Laat seventy years;

.'-l-

2, That for this purpose the following be I" ' . appointed Inquiries Act:- Commissioners under Part I of the

., - The Honourable Newton W. Rowell, LL.D., 7 8

- Chief Justice of Ontario; ' -L..- '- L :- .. The Honourable Thibaudeau Rinfret, 1 _-

n p& ,g Justice of the Supreme Court of Canada; 4&'3f,~ohn W. Dafoe, Esquire, LL.D., of the

City of Winnipeg, Man.; Robert Alexander MacKay, Esquire, Ph.D.,

Professor of Governmeht, Dalhousie University, Halifax, N.S.; and

Henry Forbes Angus, Esquire, M.A., B.C.L., Professor of Economics, University of British Columbia, Vancodver, B.C.

3. That, without limiting the general scope of their inquiry, the Commissioners be instructed in particular :- (a) to examine the constitutional 'allllcation

of revenue sources and goirerilmental burdens to the Dominion and provincial governments, the .past results of such allocation and its suitability to present conditions and the conditions that are likely to prevail in the future;

( b ) to investigate the character and amount of taxes collected from the people of Canada, to consider these in tlie light of legal and constitutional Witations, and of financial and economic cohditions, and to determine *hethey taxation as at present allocated and imposed is as equitable and as efficient as cAn be devised ;

(c) to examine public expenditures and public debts in general, in order to determine whether the present division of the burden of government is equitable, and conducive to efficient administration, and to determine the ability of the Dominion and prclvincial governments to discharge their governmental responsibilities within the framewprk of the present allocation of public functions and powers, or on the basis of some form of reallocation thereof;

d) to investigate Dominion subsidies and grants to provincial governments.

4. That the Commissioners be instructed to consider and report upon tlis"faots disclosed by their investigations; and to exprese what in their opinion, subject to the retention of

the distribution of legislative powers essential to E proper carrying out of the federal system in harmony with national needs and the promotion of national unity, will best effect a balanced relationship between the financial

' powers and the obligations and functions of each governing body, and conduce to a more efficient, independent and economical discharge of governmental responsibilities in Canada. .

The Prime Minigter, with the concurrence of the Minister of Finance and the Mipister of $u$tice, further reqomrnends that the Honourable Newton W. Rowell, LL.D., Chief Justice of Ontario, be Chairxhan of the said Commission.

The Committee concur in the foregoing recommendations and submit the same for approval.

I , 'E. J. LEMAIRI, Clerk of the Privy douhcil.

CERTIFIED to be a true copy' of a Minute of a Meeting of the Committee of tlie Privy .Council, approved by His Excellency the Governor General on the 18th Novembe~.,

G 1937.

P.C.'2880 ' !$e Committee of the Privy Council have had

before them a Report, dated 18th November, 1937, from the Right Honourable W, L, Mackenzie King, the Prime Minister, stating that the Honourable Thibaudeau dinfret, Juitiqe of the Supreme Court of Canada, has, owing to ill health, tendered his resignation a$ a Member of the Commission on Dominion-fiovincial Relatio~s, appointed by Order in Coupcil of '14th August, 1937-P.C. 1908.

The Prime Minister, with the conourrence of the Minister of Finance aqd the Minister of Justice, recornmen$,:-

1. That the resignation of the Honourable Mr. Ju~tice Rinfret be accepted; and

2. That Joseph Siroie, Esquire, LL.D., of the City of Quebec, Notary Public, Professor of Constitutional and Administrative Law a t Lava1 University, be appointed a Member of the said Commission, in the place of the Honourable Mr. Justice Rinfret.

he Cornittee conohr in the foregoing recom- 'mendation and sdbmit tbe same,for approval.

E. J. LIMAIRE, Clerk of the Privy Council.

CERTIFIED to be a true copy of a Minute of a Provincial Relations established by Order in Meeting of the Committee of the Privy Council P.C. 1908 of the 14th August, 1937, be

I

Council, approved by The Deputy of His appointed Chairman of the said Commission vice Excellency the Governor General on the 22nd the Honourable Newton Wesley Rowell, LL.D. November, 1938. resigned.

P.C. 2946 / E. J. LEMAIRE, The Committee of the Privy Council, on thy*. - 4 -*L - - Clerk of the Privy Council.

recommendation of the Right Honourable W. L,-?~,-'Y 7j i? 3 Mackenzie King, the Prime Minister, .advise that A. SK&TON, Xq., 4 ' - p --.

I Joseph Sirois, Esquire, LL.D., of the City of Secretary, - , - s 7 . # ' I

Q Quebec, a Member of the Commission on Dominion- Commission on Dominion-Provincial Relations.

I.. ; - ' -p , 'J'! - .. ' . m

- - 7 4 r#.

.y

HISTORY OF THE COMMISSION

The Commission was 'appointed by Order in social developments; the need for "the widest Council (P.C. 1908) dated 14th August, 1937, possible division of powers and functions between printed immediately preceding this section. governments"; the allegation that expenditures

On August 31, 1937 Mr. Alex Skelton, chief of were increased by overlapping and duplication of the research department of the Bank of Canada, services as between the Dominion and the prov- was appointed by Order in Council (P.C. 2113) inces; the complaint of the provinces that their as Secretary of the Commission and Director of revenue sources were inadequate to enable them to Research. Subsequently Miss M. K. Rowland was fulfil their constitutional responsibilities; the appointed as Assistant to the Secretary to aid in representations of the provinces that their muni- administration. Mr. Adjutor Savard was appointed cipalities were confronted with similar financial French Secretary with particular responsibility for difficulties and, particularly, that conditions were correspondence and relations with French-speaking such as to place an undue burden on real estate; Canadians. Mr. Savard acted as Secretary during and finally, the representation that unless appro- the hearings a t several provincial capitals and, priate action were taken, the governmental in the later stages of the Commission's work, structure would be subject to undue stresses and became responsible for the important task of strains in meeting the economic and social changes supervising translation of the Report, appendices and the shifts ificononiic power which are in and other published studies. Mr. Wilfrid Eggleston progress. was appointed Assistant to the Secretary with The operative clauses of the Order in Council particular responsibility for supervision of reporting more precisely instructed the Commission to make and travelling arrangements. After the public "a re-examination of the economic and financial hearings Mr. Eggleston was transferred to the basis of 'Confederation and of the distribution of research staff of the Commission. Mr. R. M. legislative powers in the light of the economic Fowler of Toronto was appointed Registrar and and social developments of the last seventy Legal Secretary to the Chairman, Chief Justice years." Without limiting the broad scope of such Rowell, alid after the retirement of the Chief an inquiry the Commission was instructed in Justice Mr. Fowler continued on the Commission's particular:- secretariat. Mr. Louis S. St. Laurent, K.C., of (,) "to examine the allocation of Quebec City and Mr. James McGregor Stewart, revenue sources and governmental burdens K.C., of Halifax, were appointed Counsel to assist to the Dominion and provincial govern- the Commission in its public hearings, but except ments, the past results of such allocation and during certain sittings in Ottawa only one counsel its suitability to present conditions and the was present a t each hearing of the Commission. conditions that are likely to prevail in the

Terms of Reference.-The Order in Council future; appointing the Commission imposed upon it a ta& (b) to investi~ate the character and amount of of great complexity and magnitude. But wide and taxes collected from the people of Canada, comprehensive as the terms of reference were, they to consider these in the light of legal and were primarily concerned with one great problem, constitutional limitations, and of financial viz., the relations between the Dominion and the and economic conditions, and to determine provinces. The Commission accordingly directed whether taxation as at present allocated and its inquiry strictly to this main problem. Many imposed is as equitable and as eflicient as representations made Oo the Commission were can be devised; concerned with other matters and, therefore, fell (c) to examine public expenditures and public outside the scope of the inquiry. debts in general, in order to determine

The recital in the terms of reference set out whether the present division of the burden certain conditions on which presumably the Com- of government is equitable, and conducive mission was expected to report: the . enlarged to efficient administration, and to determine responsUoi1ities of government due to economic and the ability of the Dominion and provincial

13

C - & ' - '

governments to discharge their governmental responsibilities within the framework of the present allocation of public functions and powers, or on the basis of some form of reallocation thereof;

(d) to investigate Dominion subsidies and grants to provincial govem~nts."

The Order in Council appointing the Commis- sion clearly indicated that its task was two-fold: the Commissioners were instructed to consider and report upon the facts disclosed by their investigations; and "to express what in their opinion, subject to the retention of the distribution of legislative powers essential to a proper carrying out of the federal system in harmony with national needs and the promotion of national unity, will best effect a balanced relationship between the financial powers and the obligations and functions of each governing body, and conduce to a more efficient, independent and economical discharge of governmental responsibilities in Canada." In short, the Coxbiasion was intended to be both a fact-finding body, and a body to make recommenduti011s.~

I Research Program.-In view of the many highly technical problems posed by the terms of reference the Commission decided in its f is t private meetings in September 1937, that it was impossible to f u w its obligations by publio hearings alone and that an extensive program of independent research should be carried on contemporaneously with the public hearings. Thia decieion to engage -oh assistants was authorized by Order in Council (P.C. 2281) dated 16th September, 1937.

A comprehensive research Trogram wira accordingly organized and placed under the direction of Mr. Skelton, with Mr. J. J. Deutsch ss Asaietsnt Director. Broadly speaking, the program WM grouped about three general heads: economics, constitutional matters, and public accounts.

The economic inquiry included such subjects of research as the economio background of Dominion- provincial relations, the national income, the financial history of Canadian governments, the

l economic effects of the Canadian taxation system, the role of municipalities and their relations to provincial governments, transportation, developments in Canada of services for eooial welfare, labour legislation. The following participated in research in economic mettwo:-

Stewart Bates, formerly Secretary of the Economic Council of Nova Scotia; Prof. George Britnell, Dept. of Political Science, University of

Italics in above paragraph added.

Saskatchewan; J. J. Deutech, Research Depart- ment, Bank of Canada; H. Car1 Goldenberg, Economist, Canadian Federation of Mayors and Municipalities, Montreal; Prof. A. E. Grauer, Director, Dept. of Social Science, University of Toronto; Prof. Paul-Henri Guimont, Dept. of Social Science, Lava1 University; R. A. C. Henry, formerly Deputy Minister of Railways and Canals; Joseph Howes, Aeaistant Director, Citizens' Research Institute of Canada, Toronto; Lawrence B. Jack, M.A.; Prof. F. A. Knox, Dept. of Political and Economic Science, Queen's University; C. T. Kraft, Ph.D.; Henry Laureys, formerly Director. Ecole des Hautea Etudes Commerciales, Montreal: Prof. Paul LeBel, Ecole Superieure du Commerce, Quebec; J. C. Lesstlrd, Economics Branch, Cana- dian National Railways, Montreal; Prof. W. A. Mackintosh, Head of Dept. of Political and Economio Science, Queen's University; Prof, Esdraa Minville, Director, Ecole des Hautes Etudea Com- merciales, Montreal; Prof. D. C. MacGregor, Dept. of Political Science, University of Toronto; Prof. Robert McQueen, Head of Dept. of Political Economy, University of Manitoba; Prof. J. L. McDougall, Dept. of Political and Economic Scienoe, Queen's University; Stanley Nixon, specialist in public finance, Montreal; J. B. Rutherford, Dominion Bureau of Statktics; S. A. Saunders, Ph.D., author of several studies on the economic problem of the Maritime Provinces; J. C. Thompaon, formerly Provincial Auditor of Alberta; Prof. Fren~ois V6zinal Bole des Hautes Etudes Commercialea, Montreal; Prof. W. J. Waines, Dept. of Political Economy, University of Msnitoba; J. A. Walker, economist, Toronto; W. H. Wynne, Ph.D., formerly engaged by the Citizens' Research Institub in s apecial inqui on taxation. ,%.m 2J

LW, - Research in constitutional and historical matters

included studies in the legal interpretation of the British North America Act, certain aspects of other federal sy&ms, the historical background of Confederation, the growth of governmental functions since federation, eto. The following participated in research in constitutional and legal matters:-

W. A. I. Anglin, K.C., Saint John, N.B.; Prof. D. G. Creighton, Dept. of History, University of Toronto; Prof. J. A. Cprry, Dept. of Political and Economic Science, Queen's University; Harold E. Crowle, LL.B., Calgary, Alta.; Brooke Claxton, Montreal; L. M. Gouin, K.C., Montreal; M i ~ s Kathleen Kearnq Ottawa; Prof. W. P. M. ~ennedy,

' Head of Dept. of Law, Univers~ty d Toronto; and Vincent C. MacDonald, Dean of Law, Dnlhousie University.

The Commission was foktunate in securing Mr. J. C. Thompson, F.C.Ad formerly Provincid Auditor of Alberta, aa Director of the Publia Accounts Inquiry. Under Mr. Thompson's direction a financial questionnaire was prepared and aent to the treasury department of the Dominion and of each province. In general the Commission received whole-hearted co-operation from these departments, and comprehensive reports on comparable basis of public finance for each province and the Dominion over the past twenty-five years were compiled. The Commission wishes to emphasize that this is the first occasion on which the statistics of, public finance of all the provinces ahd the Dominion have been compiled on a comparative basis. These statements accompany the Report as Appendix 1.

Certain research studies which the Commission considered to be of permanent value and general interest have been printed as appendices to the Report. Other studies which were of leaa general interest have been published in mimeographed form. A number of special studies, many of them dealing with constitutional and legal matters, were prepared for the assistance of the Commissioners and not for publication. Copies of these will, however, be filed with the records of the Commis- sion. I t must, however, be understood that for facts or opinions stated in these reports, whether these reports are published or unpubBshixl, the authors and not the Commission, assume full responsibility. A list of the printed and mimeo- grsphed studies appended to our Report is set out a t the end of Book I.

Public Hearing8.-With regmd to the public hearings, i t was decided at the organization meet- ihgs of the Commission that public hearings should be held at Ottawa and at the provincial capital in each province unless some other city were desig- nated by the province concerned. Public repre- . sentations were to be limited to Provincial and Dominion Governments and* to recognised public organizations, but the Commission reserved discre- tion to call any individual witness, if it saw fit. If municipalities desired to present submissions to the Commission it was stipulated that they should make arrangements through their provincial governments which would decide whether the muni- ,&pal representations should be made by the government of the province or by the municipalities themselves. Conditions were laid down as to the form in which briefs were to be prepared and as to the time within which they should be filed. A general announcement in the press concerning the procedure a t public hearings was made. '

I t decided 'Mat before holding any publia hearings the Chairman (Chief Juetice Rowell), accompanied by the resident Commissioner wher- ever possible, and by the Secretary, should visit each provincial Premier and explain the general. program 'and methods of procedure planned by. the Commission. These vidte were made in September and October, 1937, and all provincial Premiers without exception agreed to give to the Commission their full co-operation.

Public hearing were opened a t Winnipeg on the 29th November, 1937. Between this date and the 1st December, 1938, hearings were held a t all provincial cspitals and st O h w a , as follows:-

, l

Place of Henring I Data I No. of Days

Retirement of Mr. Justice Rinfret.-Unfor- winnipeg. ......S. N ~ ~ . 29, 1937-JJec. 8 9 tunately, before the first public session of the Regina ........... Dec. 9 -Dec. 17 8 Commson, the m. MF. Justice Rinfret W- Ottawa.. ........ Jan. 17,1938- Jan. 31 10

Halifax.. ........ Feb. 3 -Feb. 8 4 mmpelled to resign from the Commission on ~ ~ ~ ~ l ~ ~ ~ ~ ~ ~ ~ ~ . ... ~ ~ b , 10 b. 12 3

. account of illness. The Commission desires to Ot-a. ......... Feb. 15 -Feb. 16 2 express its great sense of obligation to Mr. Justice Victoria.. Mar. 16 -Mar- 25 ........ 8 ...... Edmonton.. Mar. 28 -Apr. 2 Rinfret for his valuable advice and assistance in Ottawd.. ........ 2l 1

6

organizing the work of the Commission and in Toronto.. ........ Apr. 25 -May 9 11 aiding in the selection of members of the research Quebeq.. . . . . .me. . . M ~ Y 12 -May 16 4 . ..... Freder~cton.. May 18 -May 23 , 6 t d . His retiremexit from the Commission waa a , . . 25 - J~~~ 2

5 7

eource of deep regret to his fellow Commissioners. Ottawa** ......... Aug. 8 1 Mr. Justice Rinfretfs place on the Commission wss Ottawa.. Nov. 24 -Dec. 1 ........ 6 . taken by Dr. Jos. Sirois of the City of Quebec, Total. ............. 85 Notary and Profewor of Constitutional Law in

, Lava1 University, Quebea. *Evidence DC I Jennin a

** Evidence ~ r o f . 'L. F. ~Pbiiri.

I n the course of its public hearings the Com- mission recorded over ten thousand mirneographed pages of evidence, and 427 exhibits were filed. The Commission arranged for duplication and distribution of the evidence by its own staff in co-operation with the reporting staff, and by this means made its evidenoe available to the public a t a lower cost than has hitherto prevailed, nnd succeeded (after supplying all the governments concerned with copies free of charge) in covering the total cost of reporting.

In addition to the briefs prepiwed by provincial governments, evidence of many departmental officials was taken for the DurDose of investiuatina the alleged exietencepf o ~ e i l @ ~ ~ i n ~ and dupliiatioi between the services of the Dominion and provincial governments. One hundred and fifty- four briefs were received from municipal bodies and from public organizations. A list of exhibits indicating all governments and organizations which appeared before us is printed elsewhere.1 The Commission also called a number of witnesses to deal with special phases of the inquiry. These witnesses include Dr. Heindch Briining, formerly Chancellor of Germany; Dr. Ivor Jennings, Reader in Law in the University of London, England; Dr. Gunnar Myrdall, Professor of Politiaal Economy, Stockholm University, Sweden, and member of the Senate of Sweden; Graham Towers, Esq., Governor of the Bank of Canada; Dr. Roswell Magill, Under- secretary of the United States Treasury; D. W. Bell, Esq., Acting Director, Bureau of the Budget, United States Government; Prof. L. F. Giblin, Professor of ~conomics, U n b r s i t y of Melbourne. formerly of the Australian Granta Comtniseion; and Bryce M. Stewart, Esq., Director of Research, Industrial Relations Counselors, Inc., New York City. Some of these witnesses were heard privately for the purpose of presenting confidential information. The Commission also consulted privately a number of other private individuals and officials.

Although in the preliminary visit made by the Chairman and the Secretary in September and October, 1937, the Premiers of all provinces expressed their willingness to co-operate in the work of the Commission, it was found that full participation by all provincial governments was not forthcoming. The Government of Alberta subsequently declined to appear before the Com- mission or to participate in its activitiee. The position of the Government waa set forth in a letter from Premier Aberhart to the Chairman in reply to a request for the Government's views on various questions:- -

ALBEBT A EDMONTON, March 30, 1938.

DEAR Sm, Owing to the fact that the legislature has decided

agsinet preeenting a brief to the Commission on the grounds already outlined to the Federal Government, we would respectfully suggest to you that it would be inconsistent and contrary to the decree of the legislature to answer the questions you have directed to us.

It is our intention to present a comprehensive brief directly to the Federal Government, a copy of which will be sent to each of the provinces.

Yours truly,

(Sgd.) WILLJAM ABEBHART, Premier.

Hon. NEWTON W. ROWELL, Chairman, Royal Commission on Dominion-Provincial Relations, Edmonton, Alberta.

The Commission also inquired if the Government had any objection to its summoning various officials to appear before it to give evidenoe on the matter of overlapping, but the Premier objected in view of the resolutions of the Legislature.2 At the hearings in Edmonton the Edmonton Chamber of Commerce, however, presented a comprehensive survey of the position of the Province within federation, and thereby a serious gap in information wae avoided.

The Province of Quebec was represented a t the opening sedon of the hearings in Quebec City by counsel who welcomed the Commission and presented a memorandum setting forth ita reasons for not partioipating. The memorandum declared in part:- ". . . nous devons declarer que le gouvernement de la province de Qubbec ne compardt devant cette Com- mission, ni en qualitb de demandeur, ni en qualit4 de d6fendeur; et qu'il n'entend &re lib en aucune fapon par les conclusions de votre rapport.

Si le gouvernement de Quebec a cru devoir se faire repreeenter B oette eeance initiale, c'est qu'il n'a pas voulu ,manquer de courtoisie envers la Commission; c'est aussi parce que son silence aurait pu &re consider& c o m e un acquiescement au principe qu'a poak le gouvernement federal, en confiant B une Commis- sion nommee par lui seul la mission de faire enqu6te en w e d'amender I'acte fedhatif de 1867."8

Ev. on. 8826.28. 8 Ev. pp, 813631. Provin ial translation.-" . . . we beg to

state that we ere not ap sari$ before your Commission either as an applicnnt, nor as a dejendant, and that we shall pot feel bound, in any wa whatsoever, by the:opin~ons oontained In your report.

The dovernment of this Province 18 appearing before you because, in the first place, i t did not wish to be lacking in courtesy tnwnrds thia Carnmiesion. and nlso because its silence might have 6e i -Gnstr iea -& an acquiescence in ths principle laid aown by the Federal Government in appointing of its own accord and without consultin the ~rovinces a ~amdiaaion whose report might form tho basis of possible arneddwents to the Constitution. . . ."

The Government of Ontario co-operated fully in supplyihg the Commission with statistical information, and in public hearings a t Toronto, with the exception of answering a number of questions addressed to the Government by the Commission, but later declined to co-operate further, alleging that there had been a breach of faith on the part of the Dominion Government which had changed the gift tax section of the Income War Tax Act prior to the Report of this Commission.4

Retirement of the Chairman, Chief Justice Rowel1.-To the great regret of his fellow Commis- sioners, the Chairman of the Commission, Chief Justice Rowell, became seriously ill in the early part of May, 1938, and was unable to attend the public hearings in Quebec and Fredericton. For a time it was hoped that the Chief Justice would recover sufficiently from his illness to permit him to resume his work with the Commission. When it was found that this was impossible the Chief Justice's resignation as Chairman was tendered to the Dominion Government. After a lapse of several months the Dominion Government felt compelled to accept Chief Justice Rowell's resignation and Dr. Jos. Sirois was appointed Chairman, but no new member was added to the Commission.

The illness and retirement of the Chief Justice was to each of us a great personal loss, and we bear tribute here to his fineness of mind and character, his courtesy, patience, and consideration, which made working with him a pleasure and a privilege. As Chairman he guided the planning of the research program and arrangements for &a1 hearings, and he took an active part in the supervision of the research program up to the time of his illness. He presided a t the public hearings in seven of the nine provinces. His great knowledge of Canadian affairs and of constitutional law, his long experience in public life and private business, his courtesy, tact and precision of mind, were of inestimable value both in the conduct of the public hearings and in the private deliberations of the Commission. We deeply regret that it was impossible for Chief Justice Rowell to participate in the Preparation of our Report, and he is not in any way responsible for the conclusions which we have reached.

Final Hearings.-During our hearings in provincial capitals it had been indicated to the provinces that an opportunity would be given to them to make supplementary representations replying to -

'Letter, dated July 13, 1038, from Hon, M. B. Hepburn, Premier of Ontario t o the Secrets enclosing correspondence between Mr. FfeeebuA and tbe ~rime%nister of Canada.

the contentions of other provinces and of reviewing the research studies. Arrangements were made for final hearings in Ottawa after the provinces had time to consider each other's evidence and the research material prepared for the Commission. With regard to the research studies the Commis- sion wished to give the provinces and the Dominion full opportunity to examine and criticize them before they were put in final form or used for purposes of the Report. Accordingly, draft copies of the research material as completed were sent to the Dominion and all provincial governments which signified their desire for them (among them Alberta). Final hearings were held in Ottawa from November 24th to December lst, 1938. The Governments of British Columbia, Manitoba, New Brunswick and Prince Edward Island were represented, and various supplementary representations were made on their behalf. (The representations of Manitoba were supported by Saskatchewan, while Nova Sootia made certain comments to the Commission in w&ing.) I n addition, some of the research material was discussed a t length. Com- ments on the research material, whether during the4e hearings or by correspondence later, were given careful consideration.

The fact that bhe Dominion Government and several provincial governments did not appear a t our final hearings somewhat altered the character of our inquiry. Our task was, however, to some extent simplified though not abbreviated. We were obliged to continue with our inquiry without having to consider how far our proposals would be acceptable to any of the ten governments.

Form of the Report.-The form of the Report was naturally of much concern to the Commission, but after due consideration i t has arranged its Report to correspond roughly to the nature of its task. As already pointed out, the Commission was both a fact-finding body, and a body to make recommendations. For convenience it has accordingly kept its recommendations separate in the main from the detailed data on which they are based. Book I of the Report represents a "pooling" of the research work of the Commission's expert staff into the economic and social developments of the past seventy years and their bearing on the working of the federal system. Book I1 consists of recommendations based upon the evidence submitted in public hearings and the facts disclosed in Books I and I11 and in special research studies. Book I11 conists largely of relevant statistical data including summary statements of the Commission's exhaustive inquiry into Dominion and provincial

public accounts, summary statamenta of municipel finances, and statistical statements illustrating in detail the Commissions's financial proposals wn- tained in Book 11. It should be fully understood, however, that all three Books are part of a single report which pas been bound in separate volumes merely for convenience. In addition to the Report proper, for which the Commission must take full responsibility, it may be noted again that the Commission has published in addition a number of its special research studies which it believes to be of general interest and relevant to the Report.

. For these research studies the Commission, of course, does not assume responsibility.

Although the Commission did not have the benefit of any representations from the Dominion Government it received full co-operation and assistance from every official of the Dominion services from whom it requested information. At the request of tlie Commission a number of deputy ministers, assisted by members of their staffs, appeared at public hearings in Ottawa and gave valuable information concerning the work of their departments. In addition, much ihformation, statistical and otherwise, was prepared for ua by these and other officiab in answer to private inquiries. To all them officials we expreee our appreciation for their patience and co-operation, and it will not be inappropriate to mention the following who gave us special assistance: Dr. R. H. Coats, Dominion Statistician; Mr. C. Fraeer Elliott, K.C., Commissioner of Income Tax; Mr. H. Marshall, Dominion Bureau of Statistk; Miss Margaret Mackintosh, Department of Labour; Dr. A. K. Eaton, Department of Finance; Mr. V. C. Phelan, Department of Labour; Mr. J. R. Beattie and Mr. J. E. Coyne of the Research Department of the Bank of Canada.

Particular mention must be made of the able and willing co-operation which the Commis8ion received from the staffs of the Bureau of Trans- lation and the King's Printer, who fvere required to work under great pressure and for long periods of overtime in the final stages of the preparation of the Report.

We desire to express our appreciation aa Commission and as individuals for the courtesy end hospitality whiah we have received in all parts

of Canada. We thank apecidy those organizations which submitted briefe, and those officials and individuals who gave generously of their time and abiity to provide information which the C o b sion required from them. The arrangements made by all provinces for the conduct of the hearinge left nothing to be desired, and the general spirit of co-operation shown by provincial governments, municipalities and organhations which appeared before us was of great help to us in our difEcult task.

The Cammission also wishes to record its appreciation of the services and the h e spirit of co-operation of its secretariat, its r d , reporting and clerical staffs. In particular it would mention the work of Mr. Skelton, who carried the 'dual load of administration and direction of research; of its other secretaries, Mr. Savard, Mr. Eggleston and Mr. Fowler; of Mr. J. C. Thompson who directed the Public Accounts Inquiry and Mr. J. A. Brennan, C.A., his principal assistant; of Miss Rowlhd and Mr. Deutsch who ~ t e d aa Mr. Skelton's principal assistants in administration and the direction of researoh respectively; and of Professor Cony and Professor Creighton who assisted in co-ordinating research material. The research prograni of the Commission waa the most comprehensive ever undertaken in Canada in a public inquiry. The Commission hereby records its appreciation of the excellent work done by it9 research staff, many of whom served at personal +convenience and sacrifice. To its official reporters, Messrs. Oliver and Hubbard, the Commission's thanks are due both for the consistently high quality of their work and for their co-operation in making possible the very economical reporting. To the clerical staff, who were prepared to work at all hours and often under material conditions far from ideal, the Commission is deeply grateful. I n this connection it wishes to mention the work of Mr. W. J. McHugh who was in charge of the enormous task of mimeographing the evidence and the studies; and Miss Mary White and Miss Rachel Fortin who acted aa personal secretaries to the Commissioners.

Finally, we thank the press of Canada for their full and careful reporting of our proceedings; and for the informed, constructive comment and criti- cisms which they offered aa the work of the Com- mission prooeeded. /

of the RbYAL COMMISSIO'N - Solon

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