The House resumed at 8 p.m.

RETAIL SALES TAX AMENDMENT ACT

Hon. Mr. McKeough moved second reading of Bill 170, An Act to amend the Retail Sales Tax Act.

Ms. Bryden: Mr. Speaker, this bill does one thing mainly. It repeals those parts of the amendment to The Retail Sales Tax Act which we passed last spring and which put the sales tax hack on to production machinery after the temporary lifting of it during the election campaign.

This was to go back into effect on January 1, 1977. This bill now wipes out that reinstatement of the tax. It also establishes a completely new section regarding the exemption of producers’ goods. It re-enacts some previous exemptions that were in the existing Retail Sales Tax Act and it provides a very broad exemption for machinery and equipment, including about eight or nine categories of machinery and equipment and including even parts which are added to machinery and equipment to increase the output or capacity of that equipment. So it is a very broad exemption that is being proposed in this bill, and it is being proposed as an indefinite exemption instead of any sort of temporary exemption.

I would like the minister, when he speaks, to clarify for us to what extent this new exemption for producers’ goods adds to the exemptions that were in the Act before the temporary suspension of the tax on machinery and equipment in April of 1975. What are the new categories that are being added? This bill also re-enacts some of the old categories. For example, we have always exempted the materials that went into the production of goods and the consumables such as the fuels that were used in the production of goods. But this exemption adds a good deal more -- mainly machinery and equipment in various categories, but also things such as trucks, which are used not on the highway but within the confines of the operation of the plant. So we’d like that clarified.

We’d also like the minister or the provincial Treasurer (Mr. McKeough) to clarify to what extent this goes beyond the exemption which the federal Excise Tax Act provides for producers’ goods, so that we can know how much we’re paralleling them and whether we are going beyond or whether we are less generous than they are.

There has been a lot of debate about whether producers’ goods should be taxed. There is the one extreme of saying there should be no exemptions to a retail sales tax on the grounds that the fewer the exemptions the easier it is to administer, the less likelihood there is for distortion in the allocation of resources, and arguments of that sort.

At the opposite extreme is the argument that all producers’ goods should be exempt on the grounds that they all become part of the finished product, and the finished products are finally taxed. But there one runs into problems of defining what goods actually are part of the production process. Is the paper that is used for inter-office memos part of the production process? Are the trucks that deliver the goods to your door part of the production process? And so on. If one went to the extreme of saying that all producers’ goods should be exempt and had a very broad definition of that, in effect business would pay no retail sales tax at all because one could argue that everything went into the production.

Between those two extremes, most jurisdictions have chosen to exempt some goods which go into production and to tax all others. For example, most jurisdictions exempt materials, exempt the consumables that are used up in the production process, and exempt the fuels. What we were talking about tonight is the question of whether machinery and equipment should be exempt.

We have conflicting views on that, even within this province. We started out in the initial Sales Tax Act in 1961 by exempting them. Then in 1969 they were brought under the tax. Then in 1975 they were exempt again on a temporary basis, as a so-called incentive to stimulate the economy at a cost of $410 million. We still have a sluggish economy and we’re still waiting to see any proof that that $410 million has created any jobs. Now we are proposing to go to an indefinite exemption for machinery and equipment. So we’ve had a flip-flop position in this province.

In the other provinces, three provinces now tax machinery and equipment. It’s interesting that they represent three different political philosophies, so I don’t know whether one can draw any conclusions from that. One is a Conservative province -- Nova Scotia; one is an NDP province -- Saskatchewan, and one is a Social Credit province -- British Columbia. The federal government exempts machinery and equipment. In the United States there is a diversity of practice among the states. More of the industrial states tend to exempt machinery and equipment than tax it, but there is quite a difference in practice across the country.

So we have to decide whether exempting machinery equipment from tax at this time is a desirable policy. We don’t have too much to go on as far as the philosophy goes because it seems that different jurisdictions have been able to justify taxing or exempting under various forms of tax philosophy. The justifications which the provincial Treasurer puts forth in his Ontario’s Economic Strategy for 1977, in which he announced this change, appear to be four-fold.

He says it will increase investment in the private sector and that means jobs. Secondly, he says it will increase productivity. Thirdly, he says it is necessary because profits are declining; and fourthly, he says it is necessary in order to increase the competitiveness of our manufacturing industry. I want to spend just a little time on each of these justifications.

With regard to investment, when the temporary exemption went into effect in 1975, the investment intentions for machinery and equipment in Ontario had been forecast as $2.3 billion. The final investment for 1975, the first year of the incentive, actually fell $300 million short of that figure. The trend for investment in manufacturing in Ontario in machinery and equipment has been going down steadily since 1974, so that it doesn’t seem as though this incentive has really stimulated investment very much.

Jobs: The provincial Treasurer always argues that if you put money in the hands of the private sector, there will be jobs created, but in fact our unemployment rate has been going up steadily. It now stands at 6.2 per cent and there were in November 227,000 people out of work in this province. The 6.2 per cent is the seasonally adjusted rate of unemployment for this province, and that is certainly not a figure to be proud of.

Employment in the manufacturing industry, which is what the incentive was mainly directed towards, actually went down in 1975 over 1974 by 6.5 per cent. Thus it would not appear as though the $410 million, which was given as a temporary incentive, has achieved very much in the way of either increased investment or increased jobs. In fact, the minister, in his economic strategy, looks at the outlook for the coming year and, in spite of his incentive, says: “No improvement is foreseen for unemployment in Canada and business investment is expected to remain sluggish. I anticipate broadly similar trends for the Ontario economy.” So, his gloom doesn’t seem to reflect very much confidence in the merits of his incentive.

Going to the second justification for the exemptions, the question of productivity, we naturally all agree that productivity in Ontario must be increased. The fact is that there is considerable underutilization of our capacity. It is running in the country as a whole at about 85 per cent. We need measures at the moment which will make that capacity be utilized rather than create new capacity.

[8:15]

However, on the question of productivity, the provincial Treasurer paints a rather gloomy picture stating that we are behind the US -- I shouldn’t say that he said we are slipping further behind. He recognizes in his statement that the picture he gave in the spring budget of the productivity trends has been invalidated by a revision of the US figures on which it was based.

The C. D. Howe Research Institute has documented this change in the comparison of our productivity with that of the United States. In effect, it shows there has been no deterioration in the relative position of the two countries on productivity but the provincial Treasurer simply says that Canada’s relative performance does not look quite so bad.

He doesn’t admit there has been no deterioration. He simply fudges it by saying that Canada’s relative performance does not look quite so bad. In effect he is using productivity warnings which are not true and our productivity has been maintained.

I think the change in the exchange rate itself would probably change those figures considerably and perhaps show that our productivity, if not keeping pace with the United States, was possibly improving.

Secondly, in his discussion of unit labour cost, he is relying on comparisons of US and Canadian wage rates which are really comparing apples and oranges but he doesn’t admit that. The US figures on average wage rates cover all employees in all establishments on a sample basis whereas ours cover only establishments with 20 Or more employees. That could make quite a significant difference in the comparison of wage costs.

The two countries also have different treatments dealing with fringe benefits and overtime. The figures which say that US wages are growing faster than Canadian wages are not necessarily true and do give a false picture of where the problem is.

Thirdly, the provincial Treasurer justifies his exemption on the grounds that profits are going down and he selects 30 companies to show us how their profits have dropped by 2.7 per cent in the first nine months of 1976 compared to the first nine months of 1975. As we know, one can prove anything if one carefully chooses the base period and what is put into the statistics -- that is, the selection of companies.

In these 30 companies, he has only seven manufacturing companies yet he is trying to justify the exemption of machinery and equipment which is mainly used by manufacturing companies. He has a distillery, a brewery, a publisher, a few other firms and a few banks.

Our research department has tabulated the 30 companies’ profits across the board since 1971 and from the nine months has forecast a figure for 1976. They show there has been a 15 per cent increase over that period -- an annual increase of 15 per cent for those 30 companies so the fact that they slipped in the last nine months is not really very significant.

They have been doing very well and they have substantially increased their profits since 1971. The fact that they have slipped simply shows they can’t go on forever getting percentage increases on percentage increases when their profits are already taking more out of the economy than it can afford and leaving very little purchasing power to buy the products.

If we take the seven manufacturing companies out of the 30 companies and add up their profits, even for the nine-month period the Treasurer took, they actually show a two per cent increase in profit. And they show, over the period from 1971 to 1976, an annual rate of increase of 16.7 per cent. They show that their total profits have more than doubled in that period from $135 million to $314 million estimated for 1976 -- two and half times or more.

The provincial Treasurer may say that the NDP is against profits, which is not true. We approve of reasonable profits; he approves of unreasonable profits.

Mr. Shore: Depends who gets them.

Mr. Hodgson: How much did the leader of the NDP make on his house? Do you remember?

Mr. Speaker: Order please. The hon. member for Beaches-Woodbine has the floor.

Mr. Peterson: Give us the magic number.

Ms. Bryden: The first justification which the provincial Treasurer has for his exemption is the question of competitiveness -- that we must give this concession in order to keep our industries competitive.

He hasn’t produced any comparative studies that show how competitive our industries are, except his study of the sales tax burden in other adjacent jurisdictions on our companies. But the whole exercise is really improper and rather typical of the provincial Treasurer’s proneness to choose selected statistics.

You can’t compare the tax burden on our companies and their competitiveness just by looking at one tax. You have to look at the whole tax burden:

Is their corporation tax higher or lower? The Canadian corporation tax is lower than in the US.

Are the capital cost allowances more generous in Canada than in the United States? I think they are.

Are property taxes higher or lower? Are gasoline taxes higher or lower? You have to look at the whole tax burden before you can say that our companies are less competitive or more competitive because of a certain tax. And, of course, the decline in the value of the dollar again has made a great change, and quite probably a very significant change, in our competitiveness which perhaps wipes out his whole argument that they are suffering from any competitive disadvantage at the moment.

The provincial Treasurer hasn’t done any studies of this, as I mentioned, but the federal government did do one study on the tax reduction that it gave to Canadian manufacturers in 1973. It attempted to find out whether that tax reduction had really affected competitiveness.

Its conclusion was that this tax concession had not improved Canada’s competitive position in world trade, because Canada is really at the mercy of her buyers and the world market. The trade deficit continued after the tax. In fact, there was nothing to indicate that the manufacturing sector was doing better than any other sector despite this federal tax concession, which is somewhat equivalent to the sales tax exemption because it puts more money into the profit of the companies.

Those were the four reasons which the provincial Treasurer used to justify his exemption. We feel that he has not in any way justified it. He has not produced a single study or a single shred of evidence that the past exemption has been effective, or that the new one will be effective in any way.

Mr. Speaker, I ask you, does a soundly managed and up-to-date government embark on an expenditure -- and it really is an expenditure -- of $160 million without studying the effects -- without a cost-benefit study, without studying what will be the effect on productivity, on investment, on allocation of resources, on development of Canadian secondary industry, on development of a machinery industry at home, on our balance of payments, and so on? Would any other expenditure of this size be embarked upon without a feasibility study?

Mr. Deans: With this government, yes.

Ms. Bryden: We have decided to oppose this bill. I’m sure this is a surprise to the provincial Treasurer. We’re opposing it for a considerable number of reasons, which I’m going to enumerate. There are about seven, and I think my colleagues have some additional ones as well.

We feel there are a lot of theories about the economic effect of an exemption of this sort, but it depends really on one’s theories of shifting and on one’s assessment of the state of the economy and what is needed at this time. Our first reason for opposing this tax is the one I’ve just given, that there have been no studies of the economic effects of it. Our second reason is the state of the economy. As for the unused capacity which I mentioned, steps must be taken to put that to work. The serious unemployment, which I’ve also just mentioned, with 227,000 people out of work, indicates that some very definite action is needed in this field. The government is really copping out from taking action in this field by saying this proposal is the answer.

The economy is facing other serious inflationary increases. Energy prices are just starting to work their way through the economy. Other inflationary factors are still operating. I think the state of the economy makes us consider what is the most appropriate kind of measure to meet that stagnation and the unemployment connected with it. Our third reason for opposing it is not the state of the economy but the state of the provincial finances, that overblown deficit which ran up to almost $2 billion last year and which is estimated at $1.238 billion this year.

The expenditure restraints have reduced services to the sick, the aged, the disadvantaged, to our cultural activities and even to the purchase of park land. This serious financial situation indicates the province can ill afford to pass up $160 million worth of potential revenue from a source of this nature, especially when there doesn’t seem to be any evidence that the exemption is going to stimulate the economy.

Our fourth reason is a matter of priorities. If the government has $160 million to play with, what does it do with it? It gives it as a tax concession to the corporations which are already enjoying a great many tax concessions and which are contributing less and less to the provincial revenues. It’s gone down from 17 per cent in 1965-66 to 10.4 per cent this year. Does the government use this $160 million to reduce the deficit and avoid the kind of cutbacks I mentioned, or does it use the $160 million to get some more direct fob creation programmes going, or a combination of those things? It seems to me those things have higher priority than a concession to the corporations for which there appears to be no evidence it will be effective.

Our fifth reason questions the whole extension of exemption. Most tax experts say there should be as few exemptions as possible from sales tax in order to reduce the administrative problem, the lack of neutrality of the tax and so on, and to reduce the effect it may have en investment decisions. They say a government should use other means if it wishes to offset any undesirable economic or social effect of the tax, as is done with the retail sales tax credit in The Income Tax Act, or as can be done through grants to specific industries where you might wish to promote Canadian development in a particular secondary industry.

[8:30]

I’d like to read one little paragraph of philosophy about exemptions under the Sales Tax Act. This comes out of Hansard, March 12, 1969, and was spoken by a former provincial Treasurer, John White. I commend it to the present provincial Treasurer. John said:

“Where the purpose of a particular exemption has a special merit, then it is appropriate that the subsidy being provided from public funds be by grant rather than by exemption from tax. Those members who were on the select committee will recognize this very important principle that special benefits be provided regularly, overtly, in full view of public scrutiny, by way of a grant rather than having a tax exemption, whether we talk about property tax exemption or some other tax exemption embedded in a statute or embedded in a practice beyond the view of the citizens and the taxpayers.”

We certainly think that all kinds of subsidies should be out in the open, and that they should be considered more as expenditures rather than reductions in revenue. Then we would be able to discuss their merits much more effectively, or their demerits as in this case.

The use of the exemption device has another disadvantage in that jurisdictions start bidding with each other as to whom can give the biggest exemption. That creates a very undesirable situation of competition between jurisdictions. I think the fact that Quebec adopted a temporary exemption for machinery and equipment, which was to expire in March 31, 1977, was an attempt to compete with our exemption. They have since extended and made permanent their exemption. So it looks like we are just trying to compete with them

-- it becomes a leap-frogging situation. You don’t know where it will end. If one exemption is considered desirable for a variety of reasons or for rewarding one’s political friends, then another exemption may come to fill the same role.

Mr. Roy: Those are serious allegations.

Ms. Bryden: The sixth reason why we are opposing this Act is that there is a rather sweeping amount of ministerial discretion in the Act. The minister is given power to remove the exemption for any type or class of machinery and equipment or from machinery and equipment used in any process or by any person. It seems to me that this gives the minister power to punish any person or company or activity that he decides he does not like. He can just remove the exemption and say, “Sorry, you pay the tax from now on.” It seems to me that this sort of thing should not be permitted. The Legislature should decide who is exempt and who is not exempt.

The minister has also been given power to prescribe the condition for the rebate for parts, which are to be used to increase output and rapacity, and for the method of calculating the increase in output or capacity, since you only get the exemption if you increase the output of capacity by 25 per cent. Once again it looks like a sort of half-thought-out idea. They didn’t know how to spell it out so they gave the minister the power to write the law in this case. It strikes me that this is a fairly new sort of exemption. I’d be interested to know whether other jurisdictions have it.

The seventh reason for opposing the exemption is that it is not tied to performance. It is not tied to any measure of job creation or increase in investment. It is simply paid for all purchases of machinery and equipment regardless of whether they were planned five years ago or are part of a normal replacement programme.

If we want to have an exemption which will have an incentive effect, it must be much less of a blunt instrument. It must be more finely tuned and possibly tied to investment in Canadian machinery or Canadian companies or the kind of secondary industries we are wishing to develop, such as secondary industry in machinery itself.

Because it’s such a blunt instrument it’s not very likely to reach its objective. It really simply means a transfer of funds from the public sector to the private sector with the rest of the taxpayers having to pick up the tab through increased taxes or increased borrowing or through a reduction in services. Somebody has to pay that $160 million which would have come in if this exemption was not passed.

At a time when business is doing very well we are really voting to transfer a large sum of money from the public sector to the private profit picture. Eric Kierans in a recent lecture -- the Walter L. Gordon lectures -- said that business had never had it so good at the moment. He cited profits of $7.7 billion in 1970 and of $17.8 billion in 1975 -- 131 per cent increase. How does it happen that this great increase in profits has not caused a great increase in investment and in new job creations? What’s happened to that profit? Probably a great amount of it has gone across the border.

A recent study by Statistics Canada of direct investment abroad by Canadian corporations showed that in 1974 it went up by $1.55 billion, which was a 20 per cent increase over the previous year. Of that outflow, 31 per cent went to mining and petroleum investments which we certainly could have used here. It produced a total of $9.7 billion of direct investment abroad by Canadian companies. This kind of undirected incentive often seems to end up being directed outside the country.

Our eighth reason really is a summary of what I’ve been saying: The corporations have had too many concessions in the past. It hasn’t stimulated the economy and the overburdened individual taxpayer has had very short shrift and no relief; there have been higher municipal taxes and reimposition of the sales tax for him. The election reduction of two per cent in the sales tax was very quickly put back on for him.

My ninth reason, and this is my final one, for opposing it is that what is needed really is not money for the private sector in the hope it will go out and create jobs, but money in the area which will create demand because no company is going to invest unless it can see a market for its product. The way to create demand is to put the unemployed to work and to use that $160 million for direct job-creating programmes; to put our unused capacity to work and to make sure that both our plants and our human resources are fully utilized. To make a commitment, in other words, to full employment. That is a much better way of using the $160 million.

Some of the areas in which it could be applied by a government committed to full employment would be, first of all, a winter works programme for the immediate situation.

Mr. Peterson: Like the LIP or what?

Ms. Bryden: On the contrary. Instant jobs can be most quickly provided by getting the municipal and provincial governments to take off the shelf the various projects they put there during the restraint programme, and get some of those building, repair and renovation projects going.

One can’t put off maintenance and repair forever. This would be the best time to do it when we’re facing serious unemployment. Another project that could be embarked on very quickly which would create jobs quickly is a repair and renovation programme for senior citizens, for disabled persons and for low-income families. That would put a lot of people to work this winter.

Then in the long term we must be developing programmes for housing, for recycling, for pollution control and for more insulation and energy conservation measures. The $160 million could be used in some of these programmes to get this kind of activity going. In other words, it could be pinpointed and fine-tuned into the economy instead of being scattered in this way where we have no guarantee what will happen to it or whether it will even stay in the country.

There also is the question of creating job opportunities for the handicapped and the disadvantaged. The provincial Treasurer might look at Manitoba’s provincial employment programme for groups which are the first ones to be hit by unemployment, the young, the unskilled, native peoples and women. Work activity projects to get people back to work off the welfare rolls, such as the manpower corps, are some programmes in Manitoba which have been very successful in reducing their unemployment rate.

In conclusion, I would say we feel that the present proposal is really a typical knee-jerk reaction by a very doctrinaire government which feels that the only answer to unemployment and to stimulation of the economy is to pour more money into the private sector. This has been used over and over again and proved ineffective. It shows hardening of the arteries in a government that it is still relying on this outdated programme and using it as an excuse to absolve itself from any real initiative in solving our economic problems.

Mr. Peterson: I rise to speak to this bill and I would like to speak to it in the same way that it was brought into this House. It was brought in in the context of a mini-budget, which is very much a misnomer in the circumstances, with a great deal of pomp. ceremony and publicity, and it really turned out in retrospect to be quite a disappointment to those of us who were looking for something with more creativity and imagination out of the government.

I will deal with some of the problems as I see them in a moment. I think the overwhelming reaction to this mini-budget. as it was so-called, is that after it is all cut apart it is just a compilation of a few odd studies, none of which are particularly relevant at this time. It had no original suggestions except the inflation accounting one which, in my mind, is probably going to be a waste of time and money, given the serious problems that we should be studying at this particular time. As I said, the overwhelming reaction to it was that it was just a resounding tinkle when we have some of these very serious economic problems.

What disturbed me as much as anything was the Treasurer’s great optimism surrounding this document. As members will recall, he was so happy and optimistic about how wonderful things were. The member for Beaches-Woodbine pointed out some of the problems. I want to discuss, as I see it and the party sees it, some of the very serious problems facing this province that aren’t being addressed and to put them in a context of the mini-budget and this particular piece of legislation.

[8:45]

We were experiencing a growth this year of around five per cent, which is down from the prediction of the budget last year of 5.3 per cent. Even though it’s down only 0.3 per cent, it is really very significant in terms of gross dollars in his predictions that traditionally have been off by the Treasurer have put great distortions into the year-end financing and have really thrown out both the revenue and expenditure figures that we have had. Even though he says five per cent growth isn’t bad, and historically that has been about our average for the last several years, really it’s been pretty dismal in the last three years. Last year there was virtually no growth whatsoever and the year before that had something like 2.8 per cent growth. So we are really not in a healthy time.

It is not as if we are coming out of a buoyant economy, it is not as if we had solved our problems. I think our opinion in this caucus is that the Treasurer really hasn’t addressed some of the very serious problems and really has just relied on the old standby of nothing new, just extension of the old exemptions to solve some of these problems.

If I can, I just want to discuss it too in terms of the way the Treasurer brought it in. He is projecting that his expenditures next year will increase some 9.6 per cent. What concerns us a great deal at this time is that he has not been frank with this House or the people of this province in terms of projecting his revenues. He is in just as good a position to project his revenues as he is to project his expenditures. I chide the Treasurer for that. I don’t think it’s fair to give us half a loaf at this particular time. That, of course, gives the Treasurer a great deal of latitude. If there is an election next spring he’ll pull some fancy deal as he did two years ago and give away another $400 million or $500 million.

Mr. Haggerty: Even last year he did it.

Mr. Peterson: I think in fairness to the people of this province he owes it to us to tell us his estimation of revenues and therefore what the deficit will be. My colleagues have talked for years about the very irresponsible financing in this province and we are seeing the figures today. I am going to discuss some of the figures that disturb us, and I am talking not in an absolute sense but in a relative sense -- relative to the other provinces, relative to Canada’s performance. We are seeing that Ontario, which used to be the privileged province, is increasingly becoming the disadvantaged one. In our opinion that’s through, in many respects, fiscal mismanagement. I just want to show the House the deterioration of our position in this province in terms of accumulation of debt and show how our accumulation of debt has far outstripped our growth in gross provincial products.

I would say most people that I know who are responsible in a financial way would say that what the government is doing is spending more than it is producing, and ultimately it will pay a price. There is evidence all around us that we are going to have to pay a price and I am frankly surprised that the Treasurer, who is billing himself as the man of great restraint, hasn’t addressed his mind to these problems sooner. All I can say is, it’s a good thing he won’t be Treasurer in about 1983 because somebody is going to have to deal far more seriously with some of these major problems at that stage.

Mr. Renwick: We will look after it.

Mr. Peterson: Our party will be very happy to deal with that when it comes along.

Mr. Hodgson: You will never have that problem.

Mr. Peterson: But let me just put on the record, Mr. Speaker, that the gross provincial direct and guaranteed debt was $5.19 billion in 1968 and by 1975 the debt was over $13 billion. This represents a compound annual growth rate of 14.5 per cent over that period of some seven years. To us, that is an alarming statistic. In 1968, Ontario had the second lowest provincial per capita debt in Canada -- $717. By 1975, Ontario ranked fifth with $1,631. The compound annual growth rate over the period was 12.5 per cent.

But then we come to this accumulating debt that is getting increasingly difficult for governments to deal with. Our gross debt charges as a percentage of gross general revenues are estimated about 7.8 per cent in Ontario for 1976. This compares with a Canadian average of 5.5 per cent and is the third highest ratio of any province -- the third worst performance is what I am saying. It comes after only Newfoundland and Nova Scotia, and Lord knows in many respects they have more difficult problems than we do.

Again, once the richest province, we are seeing growth and activity in a lot of the other provinces at a rate quite different from the rate of growth in our particular province. Being as we are the heartland of the manufacturing sector, we probably have more to lose than any other province in the way the current economy is being run.

I would like to just discuss for a moment, if I may, some alarming figures and put them on the record in terms of unemployment in this province at this particular time. As I’m sure you are aware, Mr. Speaker, the figures for unemployment in November were released yesterday. There is an increase in gross numbers of some 4,000 people. Our total unemployed in this province at this particular time is 227,000.

What’s disturbing is that the Conference Board is forecasting for 1977 a growth in the labour force of 2.7 per cent in Ontario and nationally 2.6 per cent. But they are forecasting a growth in employment of 2.1 per cent in Ontario and 2.3 per cent in Canada. What does that tell us? It tells us again, if the Conference Board predictions are correct -- and on balance they’ve been far more correct over the years than the Treasurer’s predictions -- that we are going to face a serious year in 1977 in terms of unemployment. That, to us, is very disturbing.

At this time our unemployment is running at 6.3 per cent, compared with 5.8 per cent a year ago. It is particularly alarming to see the growth of unemployment in the manufacturing sector; to give a little historical background on this, it was 3.6 per cent in 1972, 3.2 per cent in 1973, 3.6 per cent in 1974, 5.3 per cent in 1975, and six per cent in 1976. An alarming growth in unemployment in the manufacturing sector.

At the beginning of the year, the Treasurer promised 116,000 new jobs. He revised that just a couple of weeks ago to 100,000 new jobs. Again according to the Conference Board, the majority of those jobs were produced in the latter half of 1975; of course, he picked that date in mid-1975 when we were in the middle of a very bad slump. What these figures are saying is there are depressingly few jobs being created in the year 1976.

If I may, I would like to discuss the picture with respect to housing and how we see it, as well as some of the very alarming statistics as we see them. Again, if we compare Ontario’s performance to the performance of the rest of this country, we see that we’re not in good shape.

The Treasurer will argue it doesn’t matter, because we have 30,000 homes for sale on the market in Toronto and we’ve got lots of vacancies. But that, in our opinion, is not the real problem. What we have talked about, and will talk about more, is affordable housing that’s obtainable, and particularly when the government of this province let down the voting public so badly after reneging on several of their campaign promises in respect to subsidizing the mortgage interest rate. It would be interesting to find out from the Treasurer why they reneged on that promise, why they didn’t choose that particular method of stimulation and what his plans are for that in that area in the future. As my friend from Beaches-Woodbine has pointed out, it’s a very important area that the government can look at to stimulate the economy and to solve some of the unemployment, particularly in the construction sector, which is one of the most serious areas of unemployment in this province today.

Urban housing starts in Ontario were down three per cent in September, compared with September 1975. In the rest of Canada they were up five per cent. Another case where we are falling behind the national average. Our overall seasonally adjusted annual rate of housing starts in Ontario is --

Mr. Deputy Speaker: With all due respect to the member, the principle of this bill deals with The Retail Sales Tax Act.

Mr. Peterson: Mr. Speaker, it is the only time in my life that I wish the real Speaker was in the chair, rather than you.

Some hon. members: Oh, oh.

Mr. Peterson: I think these things are very important when we’re discussing the problems in the economy and the ways that one should attack some of those problems, and particularly when the Treasurer has chosen one way. Mr. Speaker, with respect, if you had listened to the member for Beaches-Woodbine discuss some of these things, I think you would have taken a very different --

Mr. Deputy Speaker: I was not in the chair at that time.

Mr. Peterson: That is the problem, Mr. Speaker. Why should I be saddled with your harshness at this time?

Mr. Shore: Cheap shot.

An hon. member: Good point.

Mr. Deans: Are you challenging the Speaker?

Mr. Peterson: No, I wouldn’t --

Mr. Kerrio: They went to the same school.

Mr. Peterson: I just want to give some of these statistics briefly, if I pay, Mr. Speaker. Overall housing starts in Canada have gone up 20 per cent, but in Ontario they have gone up only eight per cent. And in building permits we’re running dismally behind, particularly in Metro Toronto. All of these figures are alarms saying we’re running behind.

Let me talk about capital investment for a moment because this is very germane. The capital expenditure intentions for this year, nationally are 12.1 per cent; Ontario’s is 7.6 per cent. Let me put that in perspective with the rest of the provinces because this is what the Treasurer is talking about in this bill. Alberta’s expectations are 27.6 per cent; Saskatchewan, 20.8 per cent; Yukon and Northwest Territories, 19.9 per cent; Nova Scotia, 18.9 per cent; Manitoba, 11.2 per cent; Quebec, 10.7 per cent; end BC, 10.2 per cent.

The point is there are only three provinces running behind us: Newfoundland, New Brunswick and Prince Edward Island. This was not the case in this province five years ago for anything I’m talking about today. We were running first or second or close to the top. We didn’t have this kind of miserable record in most of these areas, in most of these important economic indicators.

Retail sales -- again, we’re running behind in national average. In Ontario, we’re up 10.1 per cent; nationally, we’re up 11.8 per cent.

It brings me to one of the things which worries me most about where we are going as a jurisdiction and it relates to the bill before us tonight. It is the accumulation of capital in this province and in this country. In fairness to the Treasurer and to the government, some of the problems we are talking about tonight are not restricted to this particular jurisdiction. There’s no question it’s going to take co-operation on a broad scale to solve some of these problems.

It is estimated that, in terms of capital expenditures in this country between now and 1985, we are going to need some $500 billion. In current dollars that’s close to $900 billion. The figures are absolutely staggering. In those figures I’m using a GNP deflater of six per cent over the next five years and five per cent over the following five years.

That means, in effect, that our capital accumulation in this province is going to have to increase from 22 to 26 per cent of the gross national product, an enormous share. We’re going to have to change everyone’s habits. I frankly don’t expect the NDP will understand it. Certainly the member for Beaches-Woodbine was a little more moderate tonight and she admitted there is some room for profit, for reasonable profit. I have yet to find the wizard who can tell me what reasonable profit is or is prepared to put a figure on that.

Mr. Deans: We can tell what is unreasonable.

Mr. Peterson: Usually they talk about profit in the same way as they talk about carcinoma of the liver or halitosis.

Mr. Deans: That is probably familiar to you.

Mr. Warner: That’s why you’re down there and we’re over here.

Mr. Samis: No wonder the Speaker called you to order.

Mr. Peterson: We can let the back-bench make a few noises; then we’ll carry on.

Mr. Samis: He called you to order for a good reason.

Mr. Peterson: Finished?

Mr. Samis: Maybe not.

Mr. Peterson: These are the very serious problems people are worried about. How are we going to accumulate this capital? There are very many reasons for Canada uniquely and particularly having these very serious problems. We’ve had tremendous under-investment over the last few years.

I want to read into the record some figures from a major economic study done on capital investment in this country between 1967 and 1973. It’s estimated that the capital investment shortfall was some $6.9 billion and the conclusions were that had this shortfall not occurred the stock of business fixed capital would have been up 3.3 per cent; real output in 1973 at the end of the study period would have been four per cent higher; unemployment would have been at 4.5 per cent instead of 6.5 per cent; and productivity would have been higher.

There’s no question that I am sympathetic with the Treasurer’s view on developing productivity in this province. I don’t think he’s doing it the right way and frankly I don’t think he understands all of the ramifications. He’s admitted that in the House and I will get to that later. There’s no question that we have a very major challenge ahead of us to increase our productivity and increase our capital investment in this province particularly.

Our performance really has not improved since that study was filed or was tabled. Canada and Ontario happen to be among the most capital intensive jurisdictions in the entire world. Today it takes some $130,000 to create a job in large business. In small business, it’s more like $30,000 or $40,000. I think the Treasurer and the government are deficient in not having a small business strategy by which they would be developing and creating more jobs.

On the other hand, it’s not the small businesses which are going to compete for us internationally and earn the export dollars which are going to build the wealth which we can share fairly and redistribute on a fair basis in this province. I think we need more imagination than I have seen from my friends to the right for the creation of wealth.

Mr. Warner: You wouldn’t understand.

Mr. Peterson: The other problem, of course, is that we live in an internationally competitive world so the economic model which the member for Beaches-Woodbine was talking about would be wonderful if we didn’t trade or if we weren’t in competition with any other jurisdiction. That isn’t the case today.

[9:00]

We are a necessary integral part of a much larger unit and it doesn’t matter whether we like it or we don’t like it, we have to live with it. We have to adapt and we have to compete with it. We haven’t been good enough at it right now and we are seeing all the indications of that inability to compete -- the flight of capital; the flight of jobs, the flight of companies from this jurisdiction. They don’t have confidence in the government because they see government consuming capital at an unfair rate. They see government in competition for that capital and I want to talk about that government competition for capital, and for private capital.

The total capital available in this country last year vat some $19 billion-odd and we saw that governments consumed some $13 billion. How can it be said that private enterprise is completely responsible for this lack of capitalization when governments, really, are the chief offenders by being competitive in the capital market, by competing for that capital which is highly inflationary? It’s one of the results of the excesses of all levels of government which we have seen over a goodly number of years.

What is left is some $400 million only, a mere pittance, in the equity market to build new companies, to build productivity. We are in very sad shape and unless we do something, unless we have an investment strategy to encourage savings, to encourage investment and to get everyone participating in the creation of wealth, I can tell members that we will find there is no money available.

We will find there’s no equity and that the only people who will do it will have foreign money. We will be selling out to other people and we will be selling what little we have because it will be on a declining basis.

I think the real story is a sad story and I think the Treasurer was wrong when he came in here all optimistic -- or at least feigning optimism -- trying to tell the story. I would have had much more confidence in him, as a taxpayer, bad he come in and said, “We have problems and here’s what we are planning to do about them.”

We think there are a lot of areas to which he could address his mind and address the government policy to solve some of these problems. The only cause for optimism -- of course, he made a headline on this -- in his strategy statement was in terms of industrial production where we are running ahead of the national average, but in terms of real growth, we are running behind the national average.

I am really very pessimistic. We are going to support this bill but we are not happy about some aspects of it. Let me be frank with the members. We went to the legislative counsel because we wanted to propose an amendment to this bill. We wanted to say we want this bill for one year only. We wanted to extend it for one more year and we wanted a complete definitive study by the government on the effects of this bill on jobs creation, on the creation of investment and all the other factors, how big an effect it had on the economy and it really did do.

The legislative counsel advised us that we couldn’t move that amendment to have it for only one year and I am sorry about that. The reason we feel so strongly about this is that the Treasurer was asked in the House last week what his plans were for productivity goals and to encourage investment and jobs and to stimulate the economy.

He said this about the productivity question, “Without being specific this afternoon, I can only tell the member that the Premier, the Minister of Labour, the Minister of Industry and Tourism and the provincial secretaries and others have been giving this whole matter a great deal of thought. We have nothing definite to put in front of the House at this moment.” I think he should have something definite to put before this House at this moment and frankly I think he’s missing the issue when he appoints a commission on inflation accounting which is more of a detail.

He should be appointing a commission on productivity in this province and ways to encourage jobs. He should have a commission to encourage jobs and investment and the creation of wealth. That’s what he should have because, by his own admission, they don’t know the answers.

If they don’t know the answers, they should surely look outside this government and get some help with it. It’s a big issue. We are all involved in it, regardless of our political persuasion, but I wish the government would apply its mind to the real problems and not to the superficial problems. Even if he can solve his problems with respect to inflation accounting, it really doesn’t matter a tinker’s damn because most of these companies function in broader jurisdictions, in national jurisdictions. It is going to be pretty tough to have one set of bookkeeping in Ontario and another set in Manitoba. Probably the net result of that, like so many other commissions, will be zilch.

It will be filed, and he will stand up and say, “I have forced the federal government -- I am leading in this particular new view.” I am familiar with the arguments in favour of inflation accounting, I really am. But I will tell you he is wasting his time -- he is spinning his wheels when he should be addressing his mind to the very real problems of productivity.

We will be supporting this bill because we are afraid not to. We are afraid that there may be a further flight of capital from this province if we don’t support the bill at this time. But I will be moving an amendment in committee which will be asking for a complete study of the effects of this bill over the next calendar year on job creation, unemployment, investment and growth in the productive sector. That is the kind of definitive answer that the government should have before they come back to this House with this kind of a bill. They should have known. I am sorry they don’t know. We are going to move this amendment and we would ask for your support.

Mr. Reed: You missed a good speech, Bill.

Mr. Angus: That is okay. Odoardo is here.

Hon. Mr. Davis: I heard it.

Mr. Cunningham: Did you understand it?

Mr. di Santo: For the benefit of the House and the Premier who has just come in, I rise in opposition to this bill. Not only for the reasons expressed by my colleague the member for Beaches-Woodbine, but also because I think that this bill is unnecessary at this time. I think that the Treasurer of the province is consistent with his principles. When he announced this mini-budget or micro-budget -- whatever it is called --

Mr. Angus: Mishmash.

Mr. di Santo: -- he maintained a position that this government took last year immediately after the election. This is a position of imposing restraints on Ontario, no matter whether we are dealing with social services or with the economy of the province. While we see other parts of the world attempting to solve the problems of the economy, trying to put the economy in an expansionary position in order to create lobs and create new wealth, the Treasurer of Ontario insists on a position that will definitely keep our economy in a stagnant position for a while. In fact, it isn’t a surprise that the only bill that he introduced is this gift to the corporations -- $160 million.

We all know that in the United States the new president, immediately after being elected and in the last week, said quite clearly that there is a serious problem in getting that economy moving. One of the measures he will likely be taking will be to reduce income tax so that the economy will have more money available, Then there will be more demand and the economy will keep moving again.

In Ontario the Treasurer has taken the opposite position. The only decision made in his mini-budget is that he wants to keep our economy the way it is now. He wants to ensure that the corporations of this province will be able to save more money in terms of profit and in terms of tax exemptions indefinitely. I think his assumption is that the American economy will recover and then our economy will recover as a result of our having access to a revised American market.

Hon. Mr. Davis: What has happened to your economic nationalism?

Mr. Samis: Realism, realism.

Mr. di Santo: That is what I am saying. That is what the Treasurer said last week to the House. He thinks the American economy will recover and will be put in a position of growth. But if that doesn’t happen what will happen to Ontario? We have 262,000 unemployed people now and unless we put our economy in a position to create new jobs, next year we will be in a worse position and this government is not doing anything.

I think that by giving $160 million to the corporations we don’t solve any problems. All our problems stem from the fact that you are following the old strategy of selling raw materials, and that strategy doesn’t work anymore. It was proven three years ago by a person who is not a socialist -- he is a Liberal by the way -- Pierre Bourgault, in his book Innovation and the Structure of Canadian Industry --

Hon. Mr. Davis: I am glad to hear there is a distinction.

Mr. di Santo: -- published by the Science Council of Canada.

Mr. Roy: Leave the minorities alone.

Mr. Breithaupt: Don’t be too hard on this guy.

Mr. di Santo: He said quite clearly that tax incentives won’t work in an economy like ours.

We know that our economy is dominated by multinational corporations. In a semi-clandestine publication which came to our attention -- but I think not to the attention of all the members -- called Foreign Control of Ontario Industry, October, 1976 the Treasury quite explicitly says that in comparison with other provinces foreign-controlled corporations are over-represented in Ontario. In Ontario it’s quite a unique situation -- more than 50 per cent of the machinery industry is controlled by foreign corporations and 50 per cent is imported from the States.

If we follow what the Treasurer said in his speech, that we ought to encourage job creation and productivity, we know that it won’t work because the manufacturing industries we have in Ontario are foreign-owned. We know that the knowhow, the research, is done abroad, mainly in the States. In Ontario, we have assembly parts manufacturing industries, like in the automobile industry, or industries which are manufacturing on the basis of a licence from foreign-controlled industries. That means that most of the Canadian companies which are foreign-owned don’t even need investment at this point, because most of the American companies are trading between the head office and the branch plants.

This type of structure of our industry was based on two premises: The expansion of the American market and the availability of infinite resources. We know now that both these premises are untrue, because the American market is in trouble and we are running out of resources.

Since we have a branch economy, I think we should try to devise a different way of restructuring our industry. The Treasurer made a serious effort last spring when presenting the budget, in reviewing the auto pact. We all know that in Ontario, where 90 per cent of the auto industry is based, we are in a chronic crisis in that industry. It employs directly 100,000 workers and indirectly 600,000, because there are six jobs attached to each job in the auto industry. I think the Treasurer is basing this bill on the false premise that we can still count on an expanding American market for resources that are running out and which we won’t have in a short term. Unless we reorient our industrial structure we will be in serious trouble in a short number of years.

[9:15]

Mr. Conway: Give it to them, Odoardo.

Mr. di Santo: I also should point out, Mr. Speaker, that in this mini-budget the Treasurer spoke, quite at length, about productivity, and of course one of the points he made was that we have at this time higher wages than our neighbouring market, the American market. I do not think that’s the reason we are in trouble, and that is why I think this bill won’t work; because even if it is true that we have higher wages, it isn’t because of that that our productivity is low. Our productivity is low because, as I said before, we have a branch-plant economy and there is no interest on the part of the head offices of our companies, the multinational parent companies, to invest money in Canada unless the returns are very high.

Apart from that, I think it has to be considered that that is one of the rationales for the imposition of wage controls. We are in a situation where when Canadian workers become more confident and start buying durable goods, what happens is we have to increase our imports, and for that reason our trades deficit is now $5 billion.

What we are doing now is servicing our investments with our foreign investment, and I think that’s quite clear. We are in a circle where we borrow money from New York, and as we know the interest is very high, so that then the Canadian companies cannot invest and as a result the productivity is very low.

We have to reorient, we have to change the structure of our industry, otherwise we will be continually going in a circle and in the long run we will be in serious trouble.

The Treasurer’s forecasts are pretty optimistic, and in the short term his forecasts could very well be justified, because if the American economy recovers we can be fooled by the performance of the American economy; but in the long range we will be in trouble because we will end up with a resource-based country without resources, and without independent secondary manufacturing industries.

For these reasons I think this bill is superfluous. It won’t help to solve the economic problems of our province. It will only give a gift to the corporations; and I think that’s something the people of Ontario, at this point, don’t need.

I think the Treasurer is consistent to his principles, and the Liberals are consistent in their inconsistence in supporting this bill --

Mr. Conway: Now, now.

Mr. Samis: Right on.

Mr. di Santo: It isn’t an accident that the only commission the Treasurer set up is a commission to study the effects of inflation on corporate profits. He didn’t set up a commission to study the effects of inflation en people on fixed income, on pensioners and on tenants. I think that is part of the philosophy of this government, but it’s a philosophy that we reject because we understand the reality of the industry in Ontario in 1976 and we know that we need a new strategy.

Mr. Conway: Do you think the member for Lake Nipigon agrees with you?

Mr. di Santo: Of course. We all know that he agrees.

We think this is only a small bandage that won’t do any good for the economy of Ontario.

Mr. Deputy Speaker: The hon. member for Perth.

[Applause.]

Mr. Edighoffer: Mr. Speaker --

Mr. Samis: You’ve now got John Lane applauding you.

Mr. Edighoffer: Really? Oh. Mr. Speaker, I’d like to --

Hon. Mr. Davis: Say, Hughie, this is the first time in a while.

Mr. Peterson: What are you doing here tonight, Bill?

Mr. Edighoffer: I find it pays not to say too much; that’s the way you get all the votes.

Mr. Speaker, I’d like to make a few comments on this bill --

Mr. Deputy Speaker: And I’d like to hear them too, if people would keep their voices down.

Mr. Edighoffer: I’d just like to make a few comments in regard to this Act amending The Retail Sales Tax Act. I’ve been sitting here listening carefully, particularly while the New Democratic members were speaking. I find it most interesting how they are trying to justify voting against this bill or, I suppose, voting in favour of a tax increase.

Mr. Laughren: That’s pretty convoluted.

Mr. Edighoffer: It is. I want to be brief, but I have two concerns regarding this legislation.

I looked back to the budget in 1975, when this particular sales tax exemption was taken off production machinery, and the Treasurer said then he would take selective action that would stimulate the economy immediately. Included in those stimulants was the elimination of this sales tax on production machinery; that is, where the value of machinery exceeded $15,000. At that time this party agreed, because the Treasurer believed that the economy needed only a temporary stimulation and hoped that it would recover to a higher level. I thought we might have had more figures placed before us by the Treasurer to show that it had worked, but to date we certainly haven’t seen those.

Many of the previous speakers have stated unemployment figures; I don’t wish to repeat those, but we know they’re not good, and particularly when in the mini-budget, which the Treasurer read on November 23, he said:

“No improvement is foreseen f or unemployment in Canada and business investment is expected to remain sluggish.” In this particularly pollution-conscious age, I think the section which adds to the definition encompassing pollution control equipment and equipment used to remove waste in noxious forms, is excellent.

Mr. Conway: Not including the NDP.

Mr. Samis: And the member for Renfrew North.

Mr. Edighoffer: I can’t argue against this, as I feel the Minister of the Environment (Mr. Kerr) has not been active enough and I hope that business takes up the tax exemption in this regard.

I believe one of the previous speakers just touched upon one of the areas in this legislation which bothered me to some extent, but I’d just like to put on the record the last part of section 3(1), which reads:

“But the exemption conferred by this paragraph does not apply to any type or class of machinery or equipment prescribed by the minister to be excluded from this paragraph, or to any machinery or equipment used in any manner, process, industry, enterprise or by any person prescribed by the minister as not entitled to the exemption conferred by this paragraph.”

When I went back to the minibudget statement I noticed that he stated very clearly that “this will exempt from tax all production machinery” -- and I underline all -- “all production machinery and equipment used by the private sector in the production of tangible personal property.” I would like to have a good, clear explanation by the minister of what will be exempt by this section.

The other concern which I have, and which the member for London Centre touched on, is the fact that I’ve dealt with human beings for some length of time --

Mr. Conway: Not including the NDP.

Mr. Edighoffer: Oh yes, quite a few; and in the great riding of Perth too.

Hon. Mr. Taylor: Some over there, Hughie.

Hon. Mr. Davis: Some of your own members.

Mr. Laughren: Don’t talk to us about humanity, you didn’t even give Marvin Shore a going-away party.

Mr. Edighoffer: He didn’t let us know.

Mr. Ruston: He just flew the coop.

Hon. Mr. Davis: There are a couple of others we’d welcome.

Mr. Roy: You are really hard up for members, aren’t you, Bill?

Mr. Edighoffer: I have to say, Mr. Speaker, that incentives are a great thing and hopefully this legislation will help. As the Treasurer says, it has to in some way help to promote the economy.

I agree with the comments made by the member for London Centre that this legislation should have an amendment which would make the Treasurer present information to this House within one year, that would be by the end of 1977, so that this programme could be reviewed to see just what it is doing for the economy.

I hope that this will go to the committee of the whole House, where I will certainly support, not only the legislation but the amendment.

Mr. Swart: I want to be one of the several from our caucus speaking on this bill, because I suggest it is a very fundamental issue. As has been said before, it is the centre-piece of the government’s proposed economic strategy for 1977 -- in fact it’s really their only piece of strategy -- and that strategy as stated is to sustain economic recovery without rekindling inflation.

This further $160 million gift to the corporations -- plus perhaps another $80 million, depending on what arrangement they can make with the federal government -- and cutbacks in social services and education, local government projects, that’s the total answer of the Treasurer to the economic problems facing the province.

I want to say immediately that it is immoral; it puts the burden on those least able to bear the load; and it won’t work. I think my colleague the member for Beaches-Woodbine has already documented that.

This government lays the blame for inflation -- and largely for the problems with our economy -- just on two things: One is escalating wages and the other is excessive government spending. I suggest to the Treasurer that he neglects the most important cause of all and that is unemployment, the massive underutilization of the talents and the skills and the labour of our people.

It’s really a major twofold cost to our society. One part of that is income maintenance; and in this nation at the present time for this year there will be something like $3.5 billion spent on unemployment insurance, paid out in unemployment insurance paid out to people who would like to be working. The other income maintenance programmes will bring that up to $5 billion that is going to be paid to people who would like to be working but are unable to find jobs -- and of course one third of that total is in this province.

[9:30]

The second cost of this unemployment is running at undercapacity. Statistics show we’re running at only about 85 per cent of capacity in this nation. If that is the case, we are losing something like $15 billion in production annually, of which a third would apply to this industrial province -- perhaps more than that because we are the major industrial province. There is something like $5 billion to $7 billion which has to come out of the economy from somewhere and be added to the price of the products we buy.

I say that in itself is the greatest cost of inflation in our society. If unemployment is the major cause of price escalation, the government restraint measures which put people out of work without a plan for alternative employment are meaningless in combating inflation and are counterproductive, even in the field of inflation.

In times of inflation, in times of economic problems, the need for full employment assumes a greater significance than it does at other times. Thus an economic plan for full employment must have the highest priority but it has very little presence at all in the plans of the government of this province.

For economic reasons and for human reasons, unemployment and social priorities cannot be subordinated to so-called fiscal restraint. Really, in a rational society the degree of government services should be determined only on their needs compared to the needs of private services, and be cut hack only when there is a shortage of manpower for the private services; and I say if that is the goal in fighting our economic problems there are measures available to accomplish it.

There have been figures thrown around here this evening about the various levels of unemployment in the provinces throughout the nation. I say that it is no accident Saskatchewan has the lowest unemployment rate in Canada. Its unemployment rate as a percentage of the work force is the lowest of any province in Canada; the actual is 3.2 per cent and the seasonally adjusted is 3.4 per cent. Manitoba, with the other NDP government, hasn’t had it quite as long yet and hasn’t been able to implement quite as many employment measures. It has the third lowest unemployment rate in this nation of 4.6 per cent, seasonally adjusted, compared to Ontario’s 6.2 per cent.

They are building houses in Saskatchewan. The member for London Centre, I think, mentioned house building and the increase this year of an average of five per cent. It’s up to a 10 per cent increase there this year --

Mr. Conway: The Greyhound express to Regina is just leaving.

Mr. Swart: -- largely because they have a high degree of public land development. The speculators haven’t been permitted to drive the price of houses out of the reach of so many people.

Mr. Speaker: Order, please. We are supposed to be discussing An Act to amend The Retail Sales Tax Act and not straying into general economic philosophies.

Mr. Peterson: That’s good -- I agree.

Mr. Swart: May I say respectfully to the Speaker that The Retail Sales Tax Act we have before us is a matter to stimulate the economy. I want to point out that the way to stimulate the economy is to have full employment. There are other alternatives and I will get into the details of them.

Mr. Speaker: Order, please. I must point out that this bill has to do with amending The Retail Sales Tax Act and a general discussion of the economy is not part of the debate this evening. Some other time, yes, but not tonight.

Mr. Eakins: It was last week’s debate.

Mr. Ruston: Turn the page and use the other speech.

Mr. Swart: I’ll try to restrict my remarks to the bill, but I would point out that the debate has ranged rather wide on the economy to this point.

I would point out that the Saskatchewan Bureau of Statistics said: “A combination of international grain market strength and rapid expansion in both private and public investment allowed the province to insulate its economic position from the unfavourable events effecting the national economy.”

Mr. Speaker: Really, I must respectfully point out again that has nothing to do with this particular bill. If the hon. member would stick to the philosophy of this bill we would be in order and would much more expeditiously complete our work here.

Mr. Conway: You are being told you are irrelevant.

Mr. Swart: May I just say then, Mr. Speaker, that the alternative to the $160 million giveaway to the corporations is a programme to provide employment in which the government takes responsibility to provide direct employment for the unemployed; that will do more to stimulate the economy than giving away the $160 million.

Does anyone really believe that when we’re running at 85 per cent of capacity in the province the corporations I are going to invest in a lot of new machinery because the government has given them $160 million? They had that concession in 1975, and as the member for Beaches-Woodbine pointed out employment in industry at that time fell by 6.5 per cent. It’s the wrong approach. It just simply won’t work.

If it’s profits and financial concessions alone that provide economic buoyancy and minimize inflation, then Canada should be in a period of unprecedented prosperity instead of experiencing serious unemployment and economic recession. In 1972 net profits went up to 18.7 per cent after they paid taxes. I’m sure these figures are familiar to the Treasurer although of course he gives different ones in the statement because these wouldn’t prove his point. In 1973 profits went up by 43.2 per cent; 1974 by 24.1 per cent; last year by 5.2 per cent -- for a compound increase of approximately 135 per cent in net profits over those years.

Wages during that same period of time showed a compound increase of something like 65 per cent. May I suggest that perhaps it’s this imbalance that is causing our serious unemployment problems today rather than the shortage of money to buy new machinery? If there was more purchasing power in the hands of the people of this province so they could buy more of our goods, there would be more people put to work; and instead of running at 85 per cent of capacity we’d be running at 95 per cent.

Mr. Conway: You tell him, Mel.

Mr. Ruston: They’re going to save $300 million.

Mr. Swart: I suggest, Mr. Speaker, that all the evidence indicates it’s the wrong method, being used at the wrong time. It’s the same tactic used in the depression of 40 years ago

-- use restraints, reject planning, rely solely on the private enterprise system.

Mr. Peterson: Were you there, Mel?

Mr. Conway: I remember.

Mr. Swart: It didn’t work then and it’s not going to work now. We need conscious job creation and more purchasing power. It’s a fact that this is the only alleged job stimulation programme, there is no package whatsoever being presented to this House.

Mr. Kerrio: Put them all on the payroll.

Mr. Conway: Social Credit, Darcy.

Mr. Swart: I say that this bill, rather than being a method that will solve economic problems, is simply another step in the so -- called privatization of the economy, without any concern for the effect on the economy or the injustice created, or without being any help in solving unemployment.

The views expressed in the special programme review which was brought down a year ago, and I could quote them, are repeated almost word for word in Ontario Economic Strategy in 1977. That document proposed reprivatisation; cutting down on the amount of money spent in the public sector and providing more assistance to the private sector. This bill is simply part of that.

It’s part of the same proposal to transfer some of the Gray Coach Lines to Greyhound Lines; reprivatisation. It’s part of the same plan of turning over the operation of the campsites in the provincial parks to private operators; and it’s part of the same plan of cutting back in assistance to local governments. They cut the public services and they up the taxes.

Mr. Maeck: What has this got to do with the bill?

Mr. Swart: It’s all contained in this document; that’s the primary purpose of the bill we have before us.

Mr. Peterson: You can always put up your pup tent at Queen’s Park.

Mr. Conway: Like a Gatling gun now.

Mr. Swan: In addition --

Mr. Bounsall: You can’t find $8 million for campsites.

Mr. Swart: In addition to the items that I have mentioned --

Interjection.

Mr. Swart: -- I would say the bias against the public sector is shown in this bill by the fact that the tax exemption is not being given to local governments. Even if they have to buy the same equipment as an industry, they are going to have to pay the sales tax on it. The Treasurer of this province and the Minister of Revenue (Mr. Meen) have stated on many occasions that under the proposed tax reform they want to tax public buildings so that it is visible and there’s equality between the public and private sectors. I suggest that equality should be extended in this field as well.

Hon. Mr. McKeough: What tangible personal property is produced by the municipality?

Mr. Swart: The hydro commissions can be buying transformers. There’s all kinds of equipment they’ll be buying.

Hon. Mr. McKeough: No.

Mr. Swart: This bill is the result of some sort of a private enterprise obsession by the Treasurer to whom the panacea for all our economic ills lies in the profit system, and the more profit the better the system.

I suggest that the basic thrust of the SPR is wrong and this bill is wrong. The net result of this bill will be to give another $160 million out of the public purse to the corporations, with no improvement in the economy or in employment.

If my remarks perhaps don’t convince the Treasurer, as they surely won’t and neither will those of our party, I would like to quote from his own god and his own bible. In the Globe and Mail of November 29, I believe, the following comment was made by Mr. Dennis, the president-elect of the Canadian Chamber of Commerce, when he spoke about these proposals. He said -- and I quote him as he was quoted in the Globe and Mail -- “They do not represent a major step. I wouldn’t think it will stir it (the economy) up.”

Mr. Conway: Tomorrow starts today.

Mr. Swart: Finally, I would like to quote from the document prepared for the special programme review -- if I can find it -- which is the one I really want to refer to, in which Mr. Henderson states: It is recognized that this strategy will no longer be appropriate if rise economy weakens and the anti-recessionary measures have to be introduced.” I suggest we are at the time now where we have to look at some other proposals.

Hon. Mr. McKeough: We are not in a recession. Nonsense.

Mr. Shore: Give him a big hand.

Mr. Speaker: Does any other hon. member wish to speak to this bill? The hon. member for Ottawa East.

An hon. member: Sit down, Bill. Don’t go now. You’re going to hear the best --

Hon. Mr. Davis: I am coming back. I am coming back.

Mr. Roy: Mr. Speaker, I do enjoy that.

Hon. Mr. Davis: I just want to get this on my card.

Mr. Roy: I hope it is only a matter of coincidence.

An hon. member: Don’t go away, Bill.

Hon. Mr. Davis: I’m coming right back.

Mr. Roy: I appreciate, I say to the Premier, that it’s difficult to take the truth right between the eyes.

Hon. Mr. Davis: Mr. Speaker, on a point of order. At least there’s something between the eyes to take the truth, which the member for Ottawa East doesn’t understand. I’ll be back.

Mr. Cunningham: Is that an election promise?

Mr. Roy: Keep losing your money on the Toronto Argonauts.

Hon. Mr. Davis: You lost on Saskatchewan, in fact.

Mr. Speaker: How about Bill 170 now?

Mr. Roy: Mr. Speaker, I must say with all candour that I feel compelled to rise and participate in the debate en this bill. What I have to say is spontaneous; it’s not prepared, it’s just something that springs to mind from the failures of this particular legislation.

Mr. Speaker, my colleague the member for London Centre keeps pulling my jacket, saying that we’re supporting this legislation.

Interjections.

[9:45]

Mr. Roy: I keep telling him not to fear, that I’ll support it in my comments. Really, we are supporting the legislation because, as you know Mr. Speaker, we as a party, as much as we would like to present legislation which makes more economic sense than this legislation, are prohibited under the rules from doing so. Our options are somewhat limited and hopefully the amendment proposed by my colleague will be accepted.

It seems to me, looking at the economic future of this province that the predictions are not all that enlightening; they are not all that favourable. I am concerned, basically, that among the people in charge of the economy of this province the Treasurer, and even at the federal level, there seems to be a lack of imagination in looking at the economic future.

It seems we go back to the same old policies all the time. The only way we seem to generate economic activity is through some form of tax concession which we promulgate from year to year.

An hon. member: No imagination.

Ms. Roy: Yes. It seems to us that the Treasurer and all the experts he has around him -- and having spent three or four days in Ottawa with all the experts there -- could have come up with something with more imagination.

It seems to us, looking at the problems in this province -- we know we have unemployment problems; we know there are problems in the investment community; we know we must ensure that the manufacturing community is competitive -- when we look at all these factors and look at the deficiencies -- for instance, in the area of housing -- surely there’s something which could have been done in this area to increase economic activity and at the same time create jobs? It seems to us that the mini-budget, so called, presented by the Treasurer two weeks ago, lacked that type of imagination.

Politicians in this government -- I suppose it’s normal for a government which has been around so long -- seem to lack this type of imagination. It seems to us that, considering they had apparently learned their lesson in 1975 to look at some new economic approaches, there could have been something with a bit more imagination than this legislation.

That’s what concerns us about this type of legislation. For instance, when we consider the lack of housing accommodation in this province, especially the lack of rental accommodation, what is wrong with somehow stimulating that area of the economy?

The Treasurer’s colleague, the Minister of Consumer and Commercial Relations (Mr. Handleman), keeps talking about removing rent controls and says he is not going to suck around if rent controls are carried on for a period of time after the law expires. He knows full well and the Treasurer knows full well that with the pressure of the lack of rental accommodation in this province it would be disastrous to do this.

Instead of looking at the same old type of approach, why is there not some stimulation in that area? Why aren’t we looking at this and, at the same time as we are creating accommodation which is much needed in the province, hopefully we can create jobs for people. In the process of reducing unemployment and creating accommodation, we would at the same time take away some of the government bureaucracy. The sooner we get adequate rental accommodation, the sooner we can take off such measures as rent control; but we can’t do it as long as the government is not prepared to look at that field of activity. I reiterate that it seems to us that with a government which prides itself on being made up of business managers and having experts around them, with the Treasurer who has been at this job for some time, there would be more imagination in approaching this type of problem. I have made one suggestion; there possibly could be others.

Our concern and the purpose of our amendment is to get some sort of accounting of what is happening when we are giving out these presents. It seems to us that makes sense and it seems to us as well that the Treasurer, who never thought of this possibly, will accept our amendment and will support it as well, hopefully. This is going to prove or disprove what we are doing here this evening by giving these presents.

The point I want emphasized and when I said it before it was said very spontaneously, Mr. Speaker, I would hope that when you look at the poor economic forecast, not only in this province, but right across the country -- in fact right across the whole world -- that the economic managers in this country would have more imagination in planning our future. Surely when we consider some of the problems that we have today, not only in this country but across the world, where you have at the same time inflationary pressures and unemployment, that it requires this type of imaginative economic approach. I would hope to see this government take that position.

Mr. Deans: I have been thinking a great deal about this bill since the Treasurer introduced it, wondering just what can be said that might be new.

Mr. Shore: If you can’t say anything new, don’t say anything.

Mr. Deans: The fad of it is that from the very day the bill was introduced it was evident that it wasn’t going to be satisfactory in terms of the production of the jobs. It was also evident that it was going to work an additional hardship as far as consumer prices were concerned. One became caught in between on this bill.

Let me go back, for a moment, to 1969 with the Treasurer. When the then Treasurer introduced the bill to impose tax on production machinery, we said to him we thought that probably that was not a good idea. All that would happen would be that the manufacturer would pass that tax on to the user, the user would then pass that tax on to the consumer and it would add to the cost of the finished product. That happened. The bill was introduced, the bill was passed, the bill became law and the consumer ultimately paid the additional sums.

Then the government decided to lift the tax. But when the government decided to lift the tax it didn’t suggest for one moment there ought to be some guarantees that the consumer would benefit from the removal of that tax, even though it was being removed on the basis that somehow or other this was going to produce employment in the province. I can well remember the long debates on the evening of the introduction of the bill for removal of the tax and how I asked the Premier and the Treasurer if they were prepared to show by statistical information how this bill would produce new jobs in the province.

I pointed out then, and I point out again today, that the production machinery that is purchased by the producers in Ontario is to the greatest extent manufactured outside of the province, in fact the largest proportion of it is manufactured outside of the country. Therefore whatever number of jobs may be produced by the production of the machinery, those jobs are produced either in other jurisdictions or in other countries.

The second important point is that production machinery, by its very nature, is more automated than the machinery that it rep I aces. The more automated machinery, again by its very nature, eliminates jobs, it doesn’t create new jobs. So I fail to see the reasoning of the government in this particular area other than that they want to give a tax break to those people who support them.

I don’t understand how any thinking person could reasonably put forward an argument that would show either statistically, or even by some conjecture, that the removal of this tax, which would encourage the further production of more machinery, could in any way create a substantial number of new jobs in the province. In fact if one were to take a look at the productive capacity of the province today based on the machinery that is currently in place, one would find that Ontario is not yet at its maximum in terms of productive capacity. Even the machinery currently being used you have to continue to replace because it wears nut, and we all understand that, but the machinery currently being used is not being used to 100 per cent of its productive capacity today. So to make an argument in this Legislature that the elimination of this tax on production machinery will somehow or other create either a great deal more in production or more in the way of jobs in the province of Ontario is absolutely wrong. If the government wants to tell me it’s the purpose of the government of Ontario to improve the profit margins of the various industries across the province and that’s the reason it’s removing the tax, so be it. If that’s what it wants to tell the public, if that’s what it wants to tell the Legislature -- that it wants to remove this tax because it wants to create a better profit picture for the companies of the province of Ontario who are in the manufacturing of products -- then let it say so and be honest about it. If that’s what it is then let the government be honest about it and say that’s why it’s doing it.

Mr. Conway: Such passion.

Mr. Mancini: Don’t get carried away now. You’re doing a good job.

Mr. Deans: But for heaven’s sake, let no one attempt -- not even as Liberals -- to justify support of this bill by somehow or other claiming that this will create jobs.

Mr. Conway: You tell us, Santa Claus.

Mr. Roy: Don’t attack us too hard -- it hurts.

Mr. Deans: I admit -- in fact I don’t admit, I argue quite continuously -- that there is a need for job creation in the province of Ontario. But this government has no manpower policy and no policy for employment creation that one could reasonably put before the Legislature and claim that this was the policy of the government of Ontario.

Mr. Conway: Name a few of yours, Ian.

Mr. Deans: The second point, and I think it’s important, is that if we are about to embark on a programme of alleviating the tax burden in the province of Ontario, then I think the government could reasonably begin at the lower income level. It’s more likely that the removal of a tax or the reduction of a tax on low-income earners would be more of a stimulation to the overall economy than the removal of a tax on production machinery would be

If you were to use the moneys that you apparently don’t need to reduce taxes in the province of Ontario, albeit by a small amount, that would be more likely to create more employment and that would be more likely to create more productivity and more production in the province of Ontario than the elimination of the machinery sales tax; the reason being that the majority of people, if they were to be given additional money in their pocket, would spend it. The very fact that they would spend it would in itself create an economic stimulus which would be beneficial in the overall to the province and to the tax picture of the government of Ontario.

The third point I want to make is that if the government felt there’s $160 million in the coffers of the province of Ontario that it doesn’t need, that it can do without, then let it reduce the deficit by that amount. If it feels that it can get by without that $160 million, let the government use it to pay off some of the deficit that it’s built up, thereby relieving some of the burden that people in this province, working every day for a living, punching in and out, are required to pay in order to pay the total tax burden of the province; or let me suggest to the government that it might be, at least from our point of view, more advantageous to take this money and use it for actual production of jobs.

We could in fact have used this money in the housing market. We could have gone into the housing field and we could have created jobs at a far greater rate and in a greater proportion in ratio than can be created through the elimination of this machinery tax.

If the government has $160 million that it doesn’t need, that it thinks it might be able to use to stimulate the economy, as it says it thinks it wants to, then for heaven’s sake let it use it for two purposes’: Let it use it not only to provide the necessary housing but to stimulate the economy at the same time.

It would seem to me that the way this government has gone about this is exactly the wrong way. It has simply added to the profit pictures of a number of corporations which, because of the corporate planning that goes on, had planned some many years ago to replace or to purchase machinery they will need for future production purposes. Let me tell you further, Mr. Speaker, that in the area of production machinery, once one eliminates the tax all that’s been done is to make for a faster write-off, because there are already write-off provisions within The Income Tax Act which allow each and every one of these companies to write off their production machinery in any event.

So this in itself proves to be of little benefit --

Hon. Mr. Snow: Just part of it.

[10:00]

Mr. Deans: Or most of it. All of the cost is added to the consumer price and most of the cost is written off. All of it is added to the price and most of it is written off.

Mr. Shore: I don’t think you really understand it.

Mr. Deans: I think I do and I’m on the same side I was on the last time.

The interesting thing about it is this: If the Tories really want to create jobs, if that’s their objective in life, for heaven’s sake let them spend the money wisely and not only produce those jobs but do something socially useful at the same time.

The corporate profit picture at the moment in the areas where this is most likely to be used is, to say the least, healthy. I’m not going to suggest it is over or under what might be expected because each company has its own particular profit picture. Overall, it’s healthy and at this point in time this is not needed in the province of Ontario. If the government has $160 million to spare they could be used much more wisely.

For those reasons we simply oppose what the Treasurer is doing. He shouldn’t be doing it now. He should not be going ahead with the elimination of this tax. At least, if he insists on doing it, he should be trying to bring in some guarantees that this will be beneficial to the people of the province of Ontario and not simply beneficial to the corporate profit pictures as they are currently set out, which are adequate if not over-inflated.

Mr. Deputy Speaker: Does any other member wish to participate in this debate? If not, the hon. minister.

Hon. Mr. McKeough: Mr. Speaker, I will be relatively brief in what I have to say. There are several questions which I think I might answer first.

One of the first suggestions had to do with what additional exemptions there were for the 1975 bill; what deletions and what differences there were with the federal bill

There are no additions; I think that’s a safe statement. Some of the deletions are closed circuit television and smokestacks. The difference in what we’ve attempted to do is to align it as closely as we could with the federal Act.

There are some differences from the federal Act. Perhaps the largest one is that the federal definition really gets into repair parts in the maintenance. Members are aware of the 25 per cent figure which we used, and that’s a very large difference in terms of dollars and cents. I think the figure I saw was about $160 million to include repair parts. Although we have many requests to carry that exemption further, that’s the large difference with the federal definition.

There are some others -- geophysical surveying equipment; plans and drawings. I think that’s the basic difference. The very large difference is in the repair area. I think perhaps that was the only serious question which was asked at this time.

Mr. Speaker, you’ve been in the chair for part of the time and it has been a rather wide-ranging debate. It was an interesting debate but little said tonight has surprised me, particularly from my friends in the third party --

Mr. Kerrio: The Liberal Party.

Mr. Roy: Say the Liberal Party for a change.

Hon. Mr. McKeough: No, the third party. Some people refer to it as the odd party. I would say the third party.

Mr. Kerrio: Takes one to know one.

Mr. Cunningham: Tell us about budget paper E?

Hon. Mr. McKeough: Perhaps I might deal with the request by the third party and the amendment which it has tabled and which I seem to have lost but which I will look at.

Mr. Roy: When we get in first place it will look like a real upset, won’t it?

Hon. Mr. McKeough: A full and complete study of the kind the official opposition would like to see can’t be accomplished before 1978. There is a carry-over provision, as the members well know, from the present bill, for the present exemption of goods which are delivered by December 31, 1977. There is evidence available, however, as we pointed out in the statement when the bill was introduced, which clearly demonstrates the relatively high level of the sales tax burden in Ontario vis-à-vis our neighbouring jurisdictions.

In addition the investment -- the member for Beaches-Woodbine pointed this out and perhaps ifs a good point to comment on now -- s I he n-jade some statement about the total tax burden and I really can’t agree. It’s hard to generalize but in the US the combination of federal taxes, state taxes and, in some instances, local corporate taxes, given their investment tax credit -- which, by the way, was something promoted in the United States largely by organized labour which is more enlightened than the party which claims to represent organized labour in this province at any rate -- the investment tax credit, by and large, gives a lower rate of corporate tax in the United States than here.

The member for Beaches-Woodbine mentioned other taxes. She mentioned municipal taxes which are generally lower in the United States; gasoline taxes she mentioned -- they’re lower in the United States. The one possible difference is the capital cost allowances which in this country are higher than they are in the states in the depreciation schedules. Taking the lower tax rates in the states on the corporation side, even with our more beneficial capital cost allowances, the end result is that the corporation taxes in most jurisdictions in the states are lower than ours.

As she has pointed out, the sales tax burden in neighbouring jurisdictions, particularly in this area, is nil. It is also nil in the province of Quebec. It is also nil in several other provinces in the country. I would have to say, however, that our main concern about the reason for the exemption is competition from the south rather than competition from the rest of Canada. That’s where a great deal of our competition comes from.

Going on, as I said, the investment statistics show that since 1975 the gains made by the private sector in Ontario in terms of investment in machinery and equipment have been substantial. These facts, together with our assessment that the investment climate in this province must be improved, supports the course of action which we have proposed.

Governments in other countries -- the United States, France, Germany, the United Kingdom -- have used the same approach in their taxation decisions. Subsequent studies have proved the value of such investment incentives.

I particularly want to draw to the members’ attention the federal decision to extend indefinitely the manufacturing and processing fast write-off incentive beyond 1974. That’s a decision which we’ve paralleled but only to the end of 1977 and we will have to make up our mind whether we will continue to parallel that particular decision of the federal government which we enacted here for a five-year period.

That measure was originally introduced in 1972. Ottawa was concerned, and properly so, with the competitive threat of the United States’ DISC programme and had to act swiftly to counter it. A detailed review of the impact of that tax measure was not available at the time the decision was taken to extend the incentive. However, a review was subsequently undertaken by five federal government departments and the result, based on a survey of about 1,000 corporations, supported the original decision.

The implementation of taxation with fiscal incentives to stimulate the economy should ideally, of course, be based on complete and detailed statistics and information. We seldom find ourselves in such a fortunate situation and our decisions must often be based on whatever information is available at the time. Sound judgement based on the facts at hand is the basic ingredient of economic policy decisions. Failure to act until detailed information is available, given the long lag in statistical reporting and analysis, would be a serious mistake.

Mr. Peterson: But you have had time, Darcy. You have had time.

Hon. Mr. McKeough: Let me say, we have not had time. The exemption is still running obviously, and would run through to the end of 1977, if the member had listened to what I just said.

The fact is our economy is reasonably healthy. It is going to have to be healthier. Today we’re operating at about 85 per cent of capacity, but if there is a continuing upturn in the United States and a continuing upturn in this country, then that excess capacity is going to be used up.

And it is today -- not two years from now, not three years from now -- that plans should be made and decisions should be taken to replace that capacity where it is necessary and to build it up. We need excess capacity. One of the factors that set off the inflationary pressures in 1973 and 1974 was a shortage of capacity. We don’t want to get back into that position again. That’s what set off high prices, both in terms of domestic consumption and in terms of our competitive position in the world. That was one of the factors.

I’m really a little surprised. My friend from Wentworth argued this business about productivity, and that a better machine and a more modern machine in the short run may mean a reduction in the labour force. I would say to my friend from Wentworth that when hooks and ladders drawn by horses came in, the horses lost their jobs and the guys who cleaned up the stables lost their jobs. That was one of the inevitable results. And I’ll tell him somebody else who went right out of business -- the buggy whip manufacturer.

That is the philosophy of that party over there -- make work, make work no matter how you do it. I’ll tell them that’s not going to work in today’s world. Let them go out and talk to the people, the steelworkers. Let them stop listening to the dogma that they preach to each other and which nobody listens to but themselves. Let them go out and talk to the steelworkers. The steelworkers are proud of what we’ve been able to achieve in Canada. They’re proud of the productivity of our plants, of our workers, of our investment in that industry. We produce steel as well as anybody in the world, if not better, and we’re producing it at a lower price. There’s just one reason for that. It’s because we haven’t been held back by shibboleths on the part of dogmatic socialists who say, “The answer is to keep everybody busy and governments spending more.” People have been spending and investing money in steel-making facilities and that’s one of the reasons.

Interjections.

Hon. Mr. McKeough: We’re proud on this side of the House. I listen to what those over there would do, and no matter how you slice it, it adds up to just what is the typical socialist answer: To stimulate the economy, more government spending. That’s what they’ve asked for again tonight; that’s their platform, more government spending, make-work jobs, LIP jobs, that’s --

Mr. Swart: In Saskatchewan, they --

Hon. Mr. McKeough: Yes, and Saskatchewan raised their income taxes three points today. That’s a great move, that’s a great move. Sure, that’s a socialist government for you. That’s right. Raise the income tax; highest rate of income tax in this country.

Interjections.

Mr. Deputy Speaker: That’s enough; order.

Hon. Mr. McKeough: Manitoba and Saskatchewan; the two red provinces, the two red socialist provinces. Members opposite are worried about consumption; in Manitoba and Saskatchewan, after those two socialist governments are through, the people have nothing to spend on consumption.

I agree that what we have to do, if this country is going to move ahead and is going to maintain the standard of living and the quality of life, is we have to spend more on investment. I don’t disagree with the figures used by my friend. We’re going to have to increase savings and investments from 22 per Cent of GNP to 26 per cent; that’s going to have to happen. That’s going to take profits, that’s going to take increased savings; and it doesn’t mean more government spending, which is their answer to everything over there. I really thought, with the enlightened member for Beaches-Woodbine in that caucus, that the hon. member might have got a little less pink and a little more sensible, but it hasn’t happened.

[10: 15]

Mr. Mackenzie: Thank God it hasn’t happened.

Hon. Mr. McKeough: It hasn’t happened.

Mr. Conway: You are insulting the Chair, Darcy.

Hon. Mr. McKeough: The hon. member’s friend sitting over there has converted him to a socialist like he is --

Mr. Mackenzie: Which we are proud of.

Hon. Mr. McKeough: -- and which the NDP’s greatest supporters, the labour unions of this province, aren’t. Go out and ask them what they think about inducements for better machinery, for new machinery, for replacement machinery. Ask them about it.

Mr. Swart: You ask them and they’ll talk you down.

Hon. Mr. McKeough: The members opposite are living in the dark ages. They’ve got a pink cloud; they think they’ve got it made and they haven’t. You just haven’t.

Mr. MacDonald: You are pre-Keynesian. That’s the trouble.

Hon. Mr. Kerr: He’s good old Adam Smith and we love him.

Interjections.

Mr. Deputy Speaker: Order.

Hon. Mr. McKeough: Mr. Speaker, I guess we line up in this House. Those of us here and those of us over there who don’t want bigger and bigger government, who don’t want more and more intrusion into the private sector by the government sector --

Mr. Swart: But do want more unemployment.

Hon. Mr. McKeough: -- support this bill. And those members opposite who want more bureaucracy, more intrusion into people’s lives --

Interjections.

Hon. Mr. McKeough: -- can vote against the bill. They can vote against it and go to bed happy tonight saying that they helped to fight for the socialist Valhalla, which is never going to come; they are never going to have to worry about governing in this province, because they are tearing the province down daily.

They tear it down. We are trying to create a climate for investment.

Mr. di Santo: For unemployment.

Hon. Mr. McKeough: We are trying to encourage people to put something back into this province. We are not going to do it by the kind of socialist dogma that the hon. members opposite have espoused again tonight, and they have espoused it in spades. it.

Mr. MacDonald: Go on. You don’t believe it.

Mr. Grande: If that is not dogmatic, what is?

Interjections.

Mr. Deputy Speaker: Order. Can we have some order?

Hon. Mr. Snow: Bring those socialists to order.

Mr. Deputy Speaker: The motion is for second reading of Bill 170. Shall the motion carry?

Motion agreed to.

Mr. Deputy Speaker: Shall the bill be ordered for third reading?

Some hon. members: No.

Mr. Makarchuk: No. It didn’t carry.

Mr. Deputy Speaker: It carried.

An hon. member: You didn’t ask --

Mr. Deputy Speaker: Yes, I did.

Mr. MacDonald: No, no. You have to read it.

Mr. Deputy Speaker: I don’t have to.

Mr. MacDonald: Yes, you have to.

Mr. Deputy Speaker: No, I don’t.

Mr. MacDonald: Yes, you do.

Mr. Deputy Speaker: I don’t have to.

Interjections.

Mr. Deputy Speaker: The procedure in this House is that you remind the House that the Treasurer has moved second reading of Bill 170. I asked for that. There were no dissenting voices.

Mr. di Santo: Yes, I dissented.

Mr. Deputy Speaker: I heard no dissenting voices.

Mr. di Santo: Yes, I dissented.

Hon. Mr. Kerr: You did not.

Mr. Deputy Speaker: I heard no dissenting voices.

Mr. di Santo: Point of order--

Interjection.

Mr. Deputy Speaker: Shall the bill be ordered for third reading?

Interjections.

Mr. Peterson: That was a very compelling speech, Darcy. You converted them all.

Mr. Deputy Speaker: I heard no dissenting voice, and I paid particular attention because I anticipated it.

Mr. di Santo: Yes, I did dissent.

Mr. Deputy Speaker: I heard no dissenting voice. Shall it go to committee of the whole House?

Mr. Good: Record their votes and say that we heard a dissenting voice?

Mr. di Santo: On a point of order.

Mr. Deputy Speaker: What is your point of order?

Mr. di Santo: I did dissent. It isn’t my fault if you didn’t hear.

Mr. Deputy Speaker: If you dissented--

Mr. di Santo: I did dissent.

Mr. Deputy Speaker: I paid particular attention, and I didn’t hear it.

Hon. Mr. Kerr: He was looking right at you.

Mr. Deputy Speaker: If I didn’t hear it, it was because of the rollicking of your colleagues.

Interjections.

Mr. Deputy Speaker: Shall the bill be ordered for third reading?

Some hon. members: No.

Mr. Deputy Speaker: Committee of the whole House?

Ordered for committee of the whole House.

Hon. Mr. McKeough: Bearing in mind the festivities upstairs, and bearing in mind the great defeat of the official opposition and the great triumph for democracy here in this House tonight under your inspired leadership, sir, I think this would be an appropriate time to move the adjournment of the House.

On motion by Hon. Mr. McKeough, the House adjourned at 10:20 p.m.