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Letter No. 3 of Joseph R. Smallwood on Confederation



Editor Daily News,

Dear Sir,


If we entered Confederation we should have some gains, and some losses. It is possible to assess some of these gains and losses in dollars and cents. Some of them cannot be so assessed.


In this installment I shall set forth some of the gains.


There would be an immediate reduction of the cost of living.


No Customs duties would be paid on anything brought into the Province of Newfoundland from the rest of Canada . No duty would be charged on Newfoundland goods entering the rest of Canada. All goods would flow freely back and forth across Provincial borders.


As goods from any part of Canada would come in duty-free, Newfoundland would of course have nearly all her imports from Canada. The only goods we would import from non-Canadian sources would be any that we needed that Canada could not supply. On these we would pay duty, not at our present Newfoundland rates, but at Dominion of Canada rates, which are considerably lower than ours.


It is not wise to exaggerate the extent by which the cost of living would be reduced by Confederation. Living would cost more here than in Central and Western Canada - transportation costs would make that certain: though to be sure certain Dominion arrangements and schemes by way of freight-rate equalization funds, subventions and subsidies go far to reduce the normal differential.


And it is likely that as against our saving through abolition of Customs duties, we should then have to pay excise or internal revenue taxes, which now are not charged on Canadian goods exported to Newfoundland, but might be if we were a Province. Such internal revenue taxes are paid on certain goods produced anywhere in Canada, yet we know how the cost of living (in spite of such taxes) compares with ours.


Furthermore, it is certain that our Provincial Government, as we shall see, would have to impose a retail sales tax as an important means of obtaining Provincial revenue. That local retail sales tax would probably have to be as high as five per-cent.


However, it is quite clear that if in 1945-46 we pay Customs duties of roughly $15,000,000 (as suggested in the Estimates) on our imports, and under Confederation our dutiable imports from non-Canadian sources took say half a million dollars in duty from us, we would be at least $14,500,000 better off-that is, the cost of living would have been that much less. Our saving would be even greater, for it is a well­known fact that we also pay a profit on the duty. Illustrate it this way: If an importer brings from outside an article for which he pays a dollar, and has to pay fifty cents duty on it, he computes his profit, not on the dollar, but on the $1.50. He collects his profit on all of this $15,000,000 paid in Customs duty, and the consumer is the one who actually pays it - it is all tacked onto the cost of living.


It is a fair and conservative statement to say that whatever the cost of living is in any year, it would be 33-per-cent. lower if we were in Confederation that year and could import practically everything duty-free.


Under Confederation the burden of assisting the unemployed would not fall entirely upon the Provincial Government of Newfoundland. The greater part of the burden would be carried by the Dominion Government.


This would not have been so before 1930, but it would be so now.


Up to 1930 that burden fell upon the Provinces, and quickly it proved to be more than they could carry. The Dominion Government stepped in as it had so often done in matters that proved too burdensome to the Provinces, and took a large part of the burden on its own shoulders. That part became greater, until at the height of the depression the Dominion's part was enormous.


The Dominion gave great sums of cash to the Provincial Governments to assist the unemployed, and in addition set up many varieties of Dominion public works projects for the same purpose. After 1930 the Dominion Government spent hundreds of millions of dollars in this way.


Present proposals of the Dominion Government include the scheme to have the Dominion assume all, or nearly all, the burden of caring for the unemployed throughout the entire Dominion.


Needless to say, Canadian rates of unemployment relief are not the six cents a day that Newfoundland found it so hard to pay.


If ever a great depression struck Newfoundland we should receive from the Dominion Government, if we were in Confederation, from one to two millions a year at least.


This scheme, after years of successful operation in Australia and New Zealand , began to operate in Canada on July 1, 1945. Since then the Dominion Government has been mailing monthly cheques to 1,500,000 family heads throughout Canada . The Dominion Government is distributing family allow­ances at the net rate of about two hundred million dollars a year. The rates are for each child:

(a) Less than six years of age, $5 per month.

(b) Six to nine, $6 per month.

(c) Ten to twelve, $7 per month.

(d) Thirteen to sixteen years, $8 per month.


The cheques are mailed from Ottawa each month direct to the family heads, in most cases to the mother. Family allowances are not taxable, and they cannot be assigned, charged or attached or given as security. Neither can they be reduced because of a pension. And they are paid to every family, with children under sixteen, regardless of their income.

In Newfoundland, by the census of 1935, there were 101,484 children under fourteen. Between fourteen and sixteen there were, I estimate, at least, 2,000 more - a total of 103,000. Our population increases at the rate of ten-per-cent. each ten years, so today we have at least 113,000 children under sixteen.


At an average of $6.50 (which would be the average) per month, that would mean $784,500 coming into Newfoundland every month, or $8,814,000 a year.


The distribution of nearly nine million dollars a year amongst our families would mean a purchasing power that would benefit them, benefit the general commerce and industry of the country, and benefit the Provincial Government.


The Dominion Government has the Department of Veterans' Affairs, with a Minister of the Cabinet at the head of it.


This Department has all to do with the Veterans' affairs, including all the famous Canadian rehabilita­tion schemes that have made the mouths of so many of our Newfoundland veterans water. If we had been a Province during the late war this Dominion Depart­ment would automatically have taken over complete responsibility for our veterans' affairs.


The moment we become a Province of Canada this Department takes over all Newfoundland veterans' affairs. The only point upon which there is room for doubt at present is as to whether in doing so that Dominion Department would thenceforth meet the full financial burden, or whether they would expect the Provincial Government to contribute to the cost.


This would certainly form one of the points in any negotiations we conducted with Canada before joining Confederation. We may certainly expect generosity from the Dominion Government in such a matter as this, and it is a fairly safe assumption that under this heading Newfoundland will derive very considerable benefits.


Confederation will be a great step forward for our veterans of both wars, whether the Dominion met the cost in full or only in part.


Under the Dominion-Provincial old-age pension scheme, people of seventy or over receive a maximum pension of $300 a year, or $25 a month.


Since 1931 the Dominion Government has con­tributed 75-per-cent. of the cost of these pensions­ prior to that they paid fifty-per-cent. Before 1944 an old-age pensioner could receive an income of $365 a year including the pension itself - that is, he could have his own private income from any source up to $65 a year, and still get the pension. Since 1944 he is allowed to have his own income up to $125 a year - that is, under the scheme his total income, including the pension itself, may rise to $425 a year. If his private income is over $125 a year, his pension of $300 a year will be reduced by the amount by which his private income exceeds $125.


And nine Provinces of Canada have entered the scheme; Quebec the last of them to enter, doing so in 1936.


The amount of Dominion Government old-age pension money coming into Newfoundland each year would depend upon the total amount which the Provincial Government of Newfoundland was prepared to spend on the scheme. Whatever it was, the Dominion Government would contribute $3 of every $4 spent.


We have approximately 10,000 people of seventy and over who would come under the scheme. This year our Government is spending $240,000 on our present old-age pension scheme - the whole country knows what the quarterly rate is.


If our Provincial Government decided on giving these 10,000 old-age pensioners say $150 a year, or $12.50 a month, each, it would cost $1,500,000 a year. Of this the Dominion Government would pay $1,125,­000 a year, and the Provincial Government of New­foundland $375,000 a year. Placing $1,500,000 of purchasing power into the hands of these 10,000 elderly persons each year would, of course, be a sig­nificant lift to them, and to the commerce and industry of the country.


Incidentally, in determining whether an elderly person is entitled to old-age pension, no attempt is made to determine the income of his or her relatives. The only means test applied is as to their own private income, if over $125 a year.


This is the scheme that is now in operation; but if the present proposals of the Dominion Government are accepted by the Provinces, the scheme will be carried much further. The Dominion will then carry the whole burden of pensions for those of seventy or over, and will contribute one-half the cost of similar pensions for those over sixty-five and under seventy.


In the next installment I shall enumerate other benefits which Newfoundland would derive if she entered the Confederation.


Source : Joseph R. SMALLWOOD, Letter to the Editor, The Daily News, March 4, 1946.




© 2004 Claude Bélanger, Marianopolis College