Econ f^^2'''m ■Wv^, V-ii i ' .r Finances of Canada. BUDGET SPEECH MKaMVBRMi' i-s I Mi.: HOUSE OF COMMONS OF CAN A DA, FRIDAY, 22nd FEBRUARY, 1878. * V TlIK H0N/RICH4RD J. CARTWRIGHT, • M MtniMcr ■■/' i OTT/^AVA 1878 I ■i " i"i'iiiii .: iii j i I ii>i>«»wii — iMia w i m . 1 ^ ^ THE FINANCES OF CANADA. BUDGET SPEECH DELIVERED IN THE HOUSE OF COMMONS OF CANADA On Friday, February 22nd, 1878, BY THE ffoN. Richard I. Cartwright, Minister of Finance. Mr. CARTWRIGHT :— Mr. Speaker : It is now almost five years since I took occasion, from my place as a private member of this House, to point out to the then House of Com- mons in the most emphatic language I could command, the inevitable consequences which must necessarily ensue from the adoption of certain proposals at that time submitted for the consideration of Parliament. It is nearly four years, since, as Minister of Finance, it became my un- pleasant duty to point out to the House the grave financial difficulties which beset our position, and the necessity of submitting to considerably increased taxation, if we desired to provide for the liabilities wd had incurred. Uiihappily, grave as were the forebodings I then expresse* the depression which actually took place has decidedly surpassed the extent of that upon which I had calculated. It is not often in the commercial history of any country that we are called upon to chronicle so great a reduction, not merely in the total volume of our trade, but also in the revftnue derired therefrom, as we have seen within the last two or three years. Making allowance for the admission of Prince Edward Island into the Union, the total volume of the trade and commGrce of 2 Canada liatl, iii tliat short interval, been reducetl by very nearly 5j5r)(),(M)(),()()(), while tlie revenue derived from Customs alone cxhibitH a decrease in that period of something' like $8,00().()()(), — the actual figures, in round nuniberH, hhowing that the volume of our trade and commerce collectively has been reduced from $218,000,OlK) to $108,000,000, while the duties derived from Customs alone have fallen off from $15,851,000 to $12,51(),0()0. Neither would this reduction, enormous as it doubtless is, , fairly represent the whole measure eitlier of the inflation which occurred at that time, or of tlie subsequent re-action. In a country like ours, which is steadily growing in population, and in which a large area of fertile soil is constantly being l)rouglit under cultivation, we may fairly calculate in any ordinary year that a considerable increase would always be made to the general volume of trade by the natural force of circumstances provided there has been no unreasonable inflation, and therefore, if the House wish to mcvsure the full extent of the inflation, or the subsequent seventy of the re-action, they must add to the $5(),0()(),00(), which have been definitely ascertained to have been lost,, a very considerable per ceiq^tage, probably varying from $80,000,000 to $40,000,000, for the natural growth which may be said to have been absorbed or anticipated, though this last computation is mainly valuable, as [affording an index of the extreme character of the inflation, and of the extreme violence of the subsequent re-actioru To jiut the matter before the House in another shape, — while during that interval the total volume of our imports has been absolutely reduced by fully one-third, it is probable that our population has increased at least one-ninth, and consequently, whereas a few years ago, with a total popu- lation of 8,000,000 souls, we imported something like $127,000,000 worth of goods, we found ourselves, last year, with a population of 4,000,000 importing a little over $94, 000,000 worth. In other words, the total imports have fallen from an average of $85.25 per head, to something like $28.50 per head. Had the imports continued stationary, as it was supposeciin 1878, they would, the revenue under our present tariff^ would, in all probability, have considerably exceeded $27,000,000, and, had the reduction which actually took place not exceeded the estimated amount, it would still have remained at about $24,000,000, while, as the House knows, the actual fact is, that the revenue has sunk to a hum very little exceeding $22,000,000. Now, I think it will be admitted that two facts may be looked upon as clearly established from these circumstances ; in the first place, the extreme character of the inflation which existed in 1878 ; and 8 lu tlie next plftoo, the fact that if, as I hate no douht is uiifortmmti'ly the caHO, the chtniand for liomo manufactures procluoiMl in this country, has consii(U'ral)ly (koreascd, it in not at all probahio that it has ilocreasotl in more than equal ratio to the diminished oousnmptiou of foroigu manu- factures. It is not my purpose at present to dwell on the groat longth of time that this depression has jn-evailed, nor to waste any luinecossary words in descanting on the unavoidable misfortunen which have exasperated the natural re-act'on that lias ensued. What I desire (wpecially to point out, at the present moment, is that the Btrain on oiu* resources has, of licoessity, been exceedingly great, and that, indeed, it could not have been otherwise, because these misfortunes — these com- mercial disasters — have not only visited us, but have also visited very heavily those nations who have always been our best customers, and with whom both then and now, the great bulk of our oommercial trans- actions take place. It is, however, viry satisfactory to find that at last the tide seems to have been turned in some degree, and to bo able to inform the House that the receipts from revenue during the last seven months show a very decided impronf^^ent, as compai-ed with the same period of the preceding year. Up to the lOth day of February instant, I find that our receipts from all quarters amounted to $13,434,235, as against receipts to the corresponding period of last year of .$12,494,279 ; that is to say, Mr. Speaker, that the augmentation, in these seven months, reached to the sum of nearly $1,000,000. Noav, although it is true, that a certain proportion of this increase mayperhapsbe attributed to the necessity of replacing the mass of goods that were unhappily destroyed in the great tire that desolated the City of St. John, I am glad to be able to tell the House that the increase from that source is not by any means the largest part of the increase I have mentioned ; but that every Province, without exception, I believe, shows a large and cheering increase, and as the question has been raised, how far tlie general increase is due to this merely accidental cause, I think it is not unreasonable to point out to the House, that the very remarkable character of the present winter has most assuredly diminished to a considerable extent, the consumption of many classes of goods from which we would, ordinarily, have received a good deal of revenue, and that in all probability the $200,000 or there- abouts, which may have been derived from the misfortune tliat Z have alluded to, are balanced, and, I dare say, more than balanced, by the diminution ot consumption arising from that cause. Proceeding now, Mr. Speaker, to the consideration of the general statement for the year which expired on the first of July, 1877, it will be my duty, before making any general obHcrvations, to invito the attention of the House to certain special items, particularly in the list known as •' Ordinary Expenditure." The House will observe that for that year our total expenditure for Civil Government reached tlie sum of !S)812,000 j being, I may remark, about $71,000 less than the sum which was ex- pended lor that purpose in the year 1873-4, and representing simply the regular statutory increases, which, under the ordinary operation of law, would have been made to the expenditure of 1872-8. On the item for Superannuation tlie House will see that the charge is $104,000 as against $101,000. Now, Sir, I may state, as some questions seem to have arisen as to the mode in which that act vras administered, that the total superannuations granted during that year were $12,005, against which are to be set off reduction* by death to the extent of $11,711. The increased receipts on account of that fund, as the House will see by a comparison with the previous year were $2,414, and the net addition to our annual expenditure $294, without taking into account the fact • hat several of those super- annuations were caujgLby the abolition of offices by which a consider- able saving was effected to the couutiy, (Hear, hear.) Under the head of Immigration, the House will observe that a considerable amount has been paid out in the shape of loans to tlie Mennonites and Icelandic settlers, which I have every reason to believe will be returned to us at a comparatively early day. This expenditure amounted in all to $79,000, and the sum expended in suppressing a violent outbreak of small-pox in the Icelandic settlement, $21,000. Under the head of Railway Expend- iture, the sum of $90,000 has been expended (more than was estimated for) ; but on the other hand, I am happy to be able to state that the receipts show an equal augmentation, being very nearly $90,000 more tlian was expected. Of course the House will know that estimates can- not always be exact m regard to such matters ; if the traffic increases,, the expenditure must necessarily bo expected to increase also. The House will further observe that, under the head of Sinking Fund, a certain cross entry has been struck out on both sides of the account. It has been held to be desirable, in the public interest, to devote the whole Sinking Fund to the purchase of the securities known as the 4 per cents, and the rough and ready system of bookkeeping which has heretofore prevailed, and under which the nominal value, and not the sum actually paid, was usually entered, has been discontinued. A small excess on our gross estimates has been caused by reason of the negotiation of the loan of 1876, some considerable time before the period at which I had originally designed to negotiate it. I am happy to be in a position to state to the House that the wisdom of the course adopted by tlie Government on that occa- sion has been amply justified by the results. I have obtained a statement of all the loans negotiated in the calendar year 1877 on the London market, which, with your permission, I will briefly read to the House. In the month of April, the corporation of Birmingham attempted to negotiate a loan of i'l, 500,000 bearing 8^ per cent, interest, which loan, I am advised proved a total failure. In the same month the Metropohtan Board of Works put a loan of £1,250,000 at 8^ per cent, on the market, and of this only one half was subscribed. The Government of Natal, in the month of June, endeavored to negotiate a loan of a similar amount, which, I understand, was very tardily subscribed for. An hon. meJnber — What date was that ? Mr. CARTWlilGHT— In June. The hon. member — What was the rate ? A Mr. CARTWRIGHT— 4i per cent. The Government of Portugal issued a loan of £6,500,000 at 3 per cent., which was offered on the market at £50 — that is to say a rate of interest of 6 per cent., and this also was tardily subscribed. I find also that in the month of April, which would havebeenthe period — other things being equal — Ishouldhave desired to place our own loan on the market, the price of our securities, de- ducting accrued interest, as shown by the Stock Exchange hst, was £90. 16s, 8d. This priee ruled, (or rather it was a few shillings less), from May, with slight fluctuations down to December, at which time it was £91 3s. 4d.— for retail transactions it is to be understood. Now, Sir, I think this will satisfy all reasonable men that, not only was the price obtained for those securities the highest which reasonably couldhavebeonexpected, but that the parties who purchased them could by no possibility have gained any undue or unfair profit out of the transaction, if indeed, (which in many cases I much doubt,) they succeeded in securing themselves from loss at all. But, what is of most moment, and the point I chiefly desire to press upon the attention of this House, is that it is also perfectly clear that the Government of the Dominion would have incurred extreme danger if they had neglected to avail themselves of the opportunity which presented itself in November, 1876, to negotiate that loan. It is very r»irc'ly, indecil, that hucIi dilVioulty Liuh been oxporioncod iu pliicin;,' loans of any kind on tlia T^ondon uiurkct as occurred duriu<^ the yoar 1H77, nud tlioao who are aequaiutod with the very lii<»li poHitiou which is liold by several of tlio corporations who.Hvi socurities I have quoted, and more particularly with the position hold by consols of tho Metropolitan Jioard of Works, will know that it is morally irapossiblo that the Governniout of Canadu could, under such circumstances, ha\e aucccssfully lloatod a loan, had it been d'.'layed till that period. Tiiniinj,' to Ih-j (iencnil Stateuiont, if the House ^\ill deduct tho int'.'r .st on pornmnent invcstnionts, which did not exist in the yoar 1H7.'^7•1, the^ will porccive that tho total «,n'oss expenditure for the year wliipli has just closed, exceeded tho gross expiMiditurc for the yoar 187;M, by barely a few thousand dollars; while if they turn to that portion of the statoniont which is headed " Ordinary Expftnditure," they will tind that, whereas in 187.'3-0 our expenditure for ordinary purposes amounted to $8,509,774, our expenditure in tho last year amounted to $0.885,078, — in otl^aKords, that the ordinary expenditure was reduced in that yoar by the sumw$1,734,6*.)0. L" they prosecute this comparison to 1873-4, they will find that in that year the ordinary expenditure amounted to $8,324,070, and'that our ordinary expenditure, as compared withl873-4^ was loss by $1,488,098. Should they prefer to take the year 1872-8, they will find that the ordinary expenditure in that year amounted to $7,002,095 ; showing that our expenditure for 1870-7 was less than tlie ordinary expenditure for 1872-8 by $227,017 ; — and that, it is well to remember, in spite of the fact that we have had to provide very large iimounts for treaties with the Indian tribes, — for the maintenance of the North-West police, — and of law and order in that extensive territory, for the expenditures necessarily involved iu the admission of Prince Edward Island, — in tlio creation of the Supreme Court, and also, to some extent, by tlie increased population of the Dominion. tSir, I think that the House will agree with mo that that side of the statement, at least, may fairly be looked upon as reasonably satis- factory ; and although it is unhappily true, that in spite of these reduc- tions the very serious shrinkage which took place in our Customs and Excise revenue, amounting, altogether, to very nearly $1,000,000, — although, I say, it is unhappily true, that that has caused a considerable deficit, amounting to no less than ^1,400,000, still — Several hon. members — Hear, hear. f Mr. CART WRIGHT— Do lion, jjentlemen consider it a subject of raerrimont, a aubject of rojoicing, that a detioit of $1,500,000 has been incurred ? Mr. MITCHELL— Of regret. Mr. CARTWRIGHT— My ear may l»o in fault, but T detected no tones of regret in the expressions emtnating from the opposite side. An hon. member — '* Too thin I" Mr. CARTWRIGHT— I am willing to bsliovo that my hon. friend from Northumberland (Mr. Mitchell) expressed correctly the feeling of the House on that side, and that the cheers they have just uttered are an indication that they do deeply and sincerely regret that this deficit has not been extinguished ; a thing in which I most heartily concur with him. Sir, I need not say that although it is probable that one cause of the deficiency has been the continual shrinkage in the introduction of imported goods still, ^|^^^in cause is ne- cessarily due to the very bad harvest of 1876, Tm^Hho have studied the position of this country arc well aware that, li^ever important other interests may be, now and for a long time to conife, the agricultu- ral interest will necessarily continue to be the predominating interest in Canada ; and therefore, that anything which strikes at the prosperity of the agricultural population, strikes necessarily at all those classes, those very numerous classes, which are dependent upon them, — strikes, I may say, at the foundation of our national prosjjerity ; and therefore that it is no cause of wonder that an exceptionally bad harvest should pro- duce such a reduction, or even a larger reduction in the revenue than that which has actually occurred. » Proceedmg now. Sir, as perhaps the most convenient place, to lay before the House the Estimates which I have prepared of the probable receipts for 1878-79, I may take this opportunity of saying, that these l^^stimates, as all estimates prepared so many months in advance of the time of expenditure necessarily must be, are, as a matter of course, based on the supposition that we shall enjoy, I do not say an unusual, imt at any rate a moderately good harvest. Should we be favoured vith such an one, I think, mider the present tariff, we may reasonably ixpect, judging from our returns, to receive from Customs a revenue of ibout $13,750,000; from Excise, $5,250,000; from Stamps, about ^:f;250,000 ; while from the Post Office, which, I am glad to say, shows 8