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Letter No. 6 of Joseph R. Smallwood on Confederation



Editor Daily News,

Dear Sir,


The last installment ended with our Provincial Government having raised one-half of the total of $10,000,000 which it would need to perform its functions. In the present installment it is necessary to show where the other $5,000,000 would come from.


It would come from the Dominion Government of Canada, and it would take two forms.


I despair of succeeding in giving the reader a clear picture of the system of Dominion Government subsidies to the Provincial Governments.


It is so extraordinarily complicated, varies so much from Province to Province, falls under so many headings, and has so many complex historical backgrounds, that it would take three full installments to make it thoroughly clear.


It is enough here to say this: that these subsidies and grants of the Dominion are in theory laid down in the B.N.A. Act. But if the framers of that Act came back to life and saw what is actually happening today, they would be completely bewildered.


The Dominion Government tries carefully to keep within the spirit of the Act in making contributions to the Provinces and the Provinces try to do the same in seeking contributions; but some strange things have happened in the process. It is necessary here to remember the point I have explained in the second installment of this article, about the Dominion policy of using much of its revenue from the very wealthy Provinces to help the less wealthy ones. This Dominion policy is nowhere better illustrated than in this very matter of subsidies.


Roughly speaking, the B.N.A. Act requires the Dominion to give the Provinces cash subsidies and grants under these headings:


(a)             so much per capita of the Provincial popula­tion;


(b)             so much for the support of government;


(c)             so much for the loss of revenue through entering Confederation;


(d)             so much in lieu of special Provincial taxes yielded up to the Dominion, or                                else abolished;


(e)           so much as "payment" for certain classes of Provincial public buildings (post offices,                 customs buildings, lighthouses, etc.) "taken over" by the Dominion Government;


(f)            various other matters and fields.


Under one or more of these headings the Dominion Government has discovered all kinds of ways of making grants to the less wealthy Provinces.


In addition, throughout the war the Dominion Government, by arrangement with the Provinces, has taken over certain powers of taxation which are Provincial, and in return has made extra-special cash contributions to the Provincial Governments. There are Provinces in Canada today whose Governments receive nearly sixty-per-cent of their whole revenue from the Dominion Treasury. This is a war-time measure which expires one year after the war's end.


For instance, Prince Edward's Island in 1943 (the latest year for which at the moment I have official figures) received $1,335,000, or nearly 58-per-cent of her total revenue. Her population is 95,000. Nova Scotia received $5,863,000, or 30 1/2-per-cent of her whole revenue, New Brunswick received $5,064,000, or 35-per-cent.


If current proposals of the Dominion Government go through, these Provinces will receive even greater amounts; but as these proposals have not yet gone through (they probably will in April next) we shall base no estimates upon them here.


Newfoundland would be giving up to the Dominion the right to collect Customs duties, amounting now to $15,000,000 a year and more. Newfoundland 's Government now has the legal right to collect that and more from the Newfoundland people. By giving up this right, the Newfoundland Government loses that much income.


This one item will call for a very sizable cash subsidy in return from the Dominion Government.


We shall give to the Dominion title in certain public buildings, in the valuing of which the Dominion may be counted upon to treat us generously. That will call for so much more.


We shall in any case get our population per capita grant, and our grant for the support of government.


I do not see that our Provincial Government would receive less than $2,500,000 Dominion subsidy a year.


This leaves our Provincial Government $2,500,000 still to be raised to meet its total $10,000,000 expenditures on the basis of this current year's Estimates.




Thus we come to Labrador.


We once thought that we should like to sell Labrador to the Province of Quebec for $100,000,000. For that amount we should have been glad to sell Labrador , although of course we should have held on to our fishing rights.


Today we have other ideas about Labrador 's value - bigger ideas based upon more knowledge of values.


Today we feel that whoever buys Labrador for $200,000,000 would get a bargain.


But as we ourselves just do not have the capital to develop Labrador - for instance, our Government can't spend seventy or eighty million dollars to put a railway through part of it - we should, I think, be willing to sell it for two hundred millions.


As part of our deal with Canada we should offer to allow the Dominion to take over title to Labrador , always reserving our fishing rights. That is to say, instead of being Provincial it would become Federal or Dominion property.


The Dominion could not remove Labrador to some other part: but in parting with title to it, our Provin­cial Government would be giving up all rights of taxation there forever to the Dominion.


In compensation for this we should claim the value of Labrador to be paid over by the Dominion Govern­ment to the Provincial Government in say fifty annual installments.


This would be $4,000,000 a year.


It must not be overlooked that whoever owns Labrador - whoever has the right to tax its resources any development there will mean work and oppor­tunities for Newfoundlanders.


It is necessary here to remind the reader that it is one thing to try to sell Labrador out-right for cash, involving as it does such a large sum; and quite some­thing else to have the sale form part of a much greater and more significant deal.


As part of the terms of a Confederation deal, Canada would obviously be prepared to treat us with greater generosity than if we were merely trying to do a "trade" with them over Labrador .


Summing up, I have no doubt that the Provincial Government could by these various means suggested raise sufficient money each year to meet its necessary expenditures.


Source : Joseph R. SMALLWOOD, letter to the Editor, The Daily News , March 8, 1946.


© 2004 Claude Bélanger, Marianopolis College