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Letter No. 10 of Joseph R. Smallwood on Confederation



Editor Daily News,

Dear Sir


All the benefits Newfoundland would get under Confederation that I have shown, in preceding articles, are benefits that we would get under the present Confederation set-up.


That is to say, these are benefits which would come to us under existing schemes and arrangements be­tween the Dominion and the Provinces.


But Confederation at this very moment is being revised and re-organized to such an extent as practically to make a new nation of Canada. The current Dominion Government proposals to the Provinces constitute a New Deal for all the people of Canada.


In August last, the Dominion Government called a great Dominion-Provincial Conference at Ottawa. All nine Provincial Premiers attended with their staffs, and the Dominion Government laid its proposals before them. The Dominion-Provincial Conference met again in December and again in early February of this year. The final meeting will be held in April, and at that time final action will be taken on the proposals. The chances are overwhelmingly in favour of the proposals being adopted, with possibly some minor changes.


Canada's New Deal


The Dominion Government proposes:


1. That the Provincial Governments give up the right to impose Income Tax, Corporation Tax, Business Profits and Excess Profits Tax on their peoples.


2. That the Provincial Governments give up the right to impose Succession or Death Duties on their peoples.


3. That the Dominion Government be the only Government in all Canada having the right to impose those particular taxes.


4. That in compensation for giving up those taxes the Provincial Governments shall receive each year from the Dominion Government a cash subsidy of $12 per capita of their Provincial populations - that is, $12 for each man, woman and child in the Province. This $12 would be an irreducible minimum, - it would never fall below that figure. But with the National Income of Canada increasing, the per capita subsidy would be increased; it might go up, but never would go down.


The reader must understand that under the Confederation, the Dominion Government already has the right to impose Income Taxes, but not the Death Duties. The Provincial Governments also have the right to impose Income Taxes if they wish to, and some of them have done so. The Provincial Governments have the sole right to impose Death Duties (that is, a tax on the estate of people after they die). What the Dominion Government now proposes is that they, and they alone, shall in future have the right to impose Income and Death Duty taxes.


In return for this the Dominion would give each Provincial Government each year at least $12 per capita of the Province's population.


This $12 per capita, which would go to the Provincial Governments, would replace the present Dominion Cash Subsidy Support of Government Grants and other similar cash amounts to the Provincial Government.


And this Dominion Government subsidy of $12 per capita is only the beginning of what the Dominion proposes to do for its Provincial Governments.


What Would Newfoundland Get?


If we entered Confederation, and our Provincial Government yielded up to the Dominion Government. the right to collect Income and Death Duty taxes, it would receive each year from the Dominion Government at least $12 per capita of Newfoundland's population, or not less than $3,840,000 a year. This would be to help the Provincial Government finance its Provincial functions.


This would be altogether apart from what our Provincial Government would get for turning over certain public buildings to the Dominion; apart from what it would get for Labrador; apart from what the children of Newfoundland would get in Family Allowances; apart from what the Dominion Government would spend in Newfoundland on Post-Telegraphs, Customs, Veterans, Railway, Defence and a host of other services.


Unemployment Relief


The new proposals of the Dominion Government include the magnificent proposal that the Dominion Government shall take over full and complete financial responsibility for taking care of the unemployed throughout the entire Dominion of Canada.


The Dominion Government wants to have an all-Canada-wide, uniform scheme of unemployment insurance and relief, to be paid for out of Dominion Government revenue and none of it being paid by the Provincial Governments.


If these Dominion Government proposals are accepted by the Provinces in April coming, and Newfoundland were in the Confederation, it would mean that in future our Newfoundland Provincial Government would have no responsibility whatever for taking care of any unemployment we might ever have in Newfoundland - the Dominion Government, out of its own revenue, would take care of them.




The Dominion Government also proposes that it shall take over full and complete financial responsibility for the Old Age Pension scheme. As I explained earlier, at present the Dominion Government pays 75-per-cent of the cost, and the Provincial Governments 25-per-cent of the cost. At present a Provincial Government can decide on any pension up to $30 a month - the more the monthly pension to a person of seventy or over, the more the Dominion Government has to pay but the more also the Provincial Government has to pay. I suggested that if our Provincial Government decided on a monthly pension of $12.50 a month to our 10,000 persons of seventy or over, it would cost $1,500,000 a year. Of this amount, the Dominion Government would pay $1,125,000 and our Provincial Government would pay $375,000 a year.


Under the new proposals, if the Provinces accept in April, the Dominion Government will pay the full cost, and the pension will be a uniform rate throughout the entire Dominion - no less and no more than a straight $360 a year, or $30 a month.


This would bring into Newfoundland each year $3,600,000 in Old Age Pensions from the Dominion Government, which the Dominion Government would pay out of its own revenue.


Still More


And that's not all.


The proposal calls for paying Old Age Pensions to every person in Canada over sixty-five and under seventy, and if Newfoundland went into Confederation this also would apply to us.


In this part of the scheme the Dominion pays fifty-per-cent of the cost, the Provincial Government paying the other fifty-per-cent.


We already pay, or our Government pays, $240,000 in old age pensions to persons over seventy.


We could then continue to pay this $240,000 a year, but we would pay it to persons of sixty-five and under seventy, and the Dominion Government would pay an equal amount, which would bring a total of $480,000 to persons between sixty-five and seventy, and bring $240,000 more of Dominion Government money into Newfoundland each year.


And More Again


But thoughtful Newfoundlanders will be more struck by the next proposal than perhaps by anything else - namely, the Dominion Government's utterly magnificent proposals to have a vast new national, all-Canada-wide National Health Programme.


If ever a country needed anything in particular, Newfoundland needs some help in a great national health scheme.


The one great accomplishment of the Commission of Government - and it is a great one - is their Public Health programme.


It has grown tremendously, and it is costing a tremendous amount of money, and thoughtful people are wondering whether this rate of expenditure can be kept up out of our own resources in the years ahead.


If this magnificent proposal of the Dominion Government is accepted next April, and Newfoundland goes into Confederation, it will bring a vast new accession of help and strength for our national health programme. Our programme will become part of Canada 's programme, and the health of our people will improve greatly.


The Dominion Government proposes to spend hundreds of millions of dollars a year on this great nation-wide health programme. It will not bear the whole cost of it - each Provincial Government will have to contribute - but the scheme is being so arranged that each Province can adopt the part or parts of it that its own peculiar situation needs most. Each Province can go into the scheme in a small way or a big way, or anything in between. The scheme is not rigid and unalterable, but flexible enough to enable each Province to decide for itself, according to its own needs and its own financial resources, to what extent and in what particular directions, it will participate in the scheme.


First of all, according to the scheme, each Province must plan a general campaign of action. To help pay the cost of this planning, the Dominion Government contributes $5,000 to each Province, plus five cents per capita of its population - to Newfoundland this would be $21,000.


Then the great Health Insurance Scheme would be introduced. The Dominion Government will grant to the Provincial Government a limit of $12.96 per person in the Province: that is, up to $12.96 per man, woman and child, depending on how much the Provincial Government is prepared to spend on the scheme.


Then, in addition to these cash grants, the Dominion would make the following cash grants to the Provincial Government:


General Health Grant - Thirty-five cents per capita - Newfoundland would get $112,000 per year.


Tuberculosis Grant - The Dominion will divide $3,000,000 amongst the Provinces. Half the amount granted will be on a straight per capita basis, and the remaining half will be apportioned amongst the Provinces according to the average number of deaths from T.B. during the five years preceding.


Mental Health Grant - $5,000,000 will be divided amongst the Provinces according to the same arrangements as the preceding.


Crippled Children Grant - $500,000 will be divided amongst the Provinces according to the same arrangement.


Professional Training - $250,000 will be divided amongst the Provinces on the same arrangement.


Venereal Disease Grant - $500,000 will be divided amongst the Provinces on the same terms.


Civilian Blind Persons Grant - Pensions are already paid to blind persons, the Dominion and Provinces sharing the cost. The age-limit is now forty years of age -under the new scheme any blind person of twenty-one or over will receive it.


Financial Assistance in Construction of Hospitals - The Dominion Government will assist Provinces to build hospitals, but names no actual amount of cash assistance.


Finally, the whole Federal health scheme will be particularly extended to Federal employees throughout the Provinces; which means that all postal, telegraph, Customs, defence, railway, coastal and other Federal employees in Newfoundland would come under the benefits of all these schemes at no cost at all to the Provincial Government.


These are in brief the main points of the Dominion Government's great new National Health Programme.


We may now add up the cash benefits which Confederation would give us if and when these far-reaching Dominion Government proposals go into effect:




Dominion Cash Subsidy


Unemployment Relief, Whatever it costs to relieve our unemployed: not at six cents per day, but on the Canadian



Old Age Pensions



National Health Programme. At least






And now in the light of what we know, let us total up the cash benefits of Confederation. To do this we shall include what we know we would get under existing arrangements; and also this $9,565,000 that we would get if the Dominion Government proposals are accepted by the Provincial Governments in April of this year, as they are practically certain to do.


What Canada Would Give Us



Amount shown above


Family Allowances


Dominion Government Performance of

Various Functions at Present Performed by Our Own Government


Labrador Award


Veterans' Benefits Say at least


Unemployment Relief Say at least







But what cash would Canada get out of Newfoundland under Confederation?


This has already been shown, and not a dollar needs to be added to the figure already given.


What the Dominion Government would get from Newfoundland would be the taxes it collected from the Newfoundland people. These are Income Tax on individuals, companies, profits tax, and excess profits tax, and Death Duties; and miscellaneous internal revenue or excise taxes, sales tax, luxury tax, etc.


The total the Dominion Government would take from us in cash would be of the following order:


What Canada Would Take From Us


Income tax on individuals and companies


Customs Duty


Other taxes






Summing it up, Canada would get back one dollar out of every two dollars she gave us. Our cost of living would be much lower, and our standard of living much higher.


For the first time in Newfoundland 's history, New­foundland 's people would get a chance to live.


Source : Joseph R. Smallwood, Letter to the Editor, The Daily News, March 13, 1946.


© 2004 Claude Bélanger, Marianopolis College