² Ordinary Dominion and provincial expenditures were as follows:

The rates of growth of these expenditures can be more easily seen from the following table of relative numbers (1881=100) derived from the above figures:

In the decade 1901-11 provincial expenditures were outstripping those of the Dominion and this was indicative of impending problems.

³ On a per capita basis the figures are as follows:

⁴ Figures showing the growth in debt for highways 1919-29 are not available, but highways debt was about one-third of gross provincial debt in 1929.

⁵ Net interest payments are obtained by deducting receipts of interest from gross interest payments. The figures are as follows:

The warning should be given that these and other figures of provincial finance probably contain some error, but the broad conclusions drawn in this paper will not thereby be affected.

⁶ The gasoline tax, levied at an average level of less than five cents per gallon in 1929, was at a rate of about seven cents in 1933. The increased rates of other taxes cannot be briefly summarized. It should be obvious also that the general statements made in this paper about all the provinces fail to take account of differences from province to province. Such an omission might be thought to be serious in any examination of provincial revenues, but in no province did revenue in any depression year fall oft as much as 20 per cent from 1929. Quebec and Saskatchewan are extreme cases and, if revenue in 1929 is made the base, the variation in their revenues was as follows:

⁷ Expenditure here classified as public welfare (old age pensions, mothers' allowances, hospitals, etc.) does not include expenditure for unemployment. This latter was not put by the provinces in their ordinary budgets.

⁸ The deficit on ordinary account, as the following table shows, amounted to $41,145,700 in the four years 1930-3:

⁹ Federal loans outstanding to certain provincial governments, March 31, 1936.

¹⁰ A comparison of the growth of interest payments and of debt indicates the weakness of provincial credit during the depression. From 1929 to 1933 provincial debt grew by 48 per cent., while interest payments grew by 52 per cent. In the same period federal debt grew by 25 per cent., and federal interest payments by 14 per cent.

¹¹ The method which holds most promise is probably the conversion, through Dominion assistance, of some portion of provincial debt to a lower interest rate. This scheme would naturally be tied up to a Loan Council.

¹² British Columbia, Manitoba, and Prince Edward Island had an income tax before the depression, although only in British Columbia did it bring in a significant revenue. Saskatchewan and Alberta imposed income taxes in 1932, and Ontario in 1936.

¹³ It is to be hoped that the recent arrangement between Ontario and the Dominion will succeed and be extended. But the Maritimes and the Western Provinces could not expect much revenue from a levy which accepts the exemption of the Dominion tax. The experience of some of the Australian states, especially South Australia, in taxation of low incomes, might well be utilized.

¹⁴ Here also some scheme of federal-provincial co-operation might well be devised.

¹⁵ “Thus the basic principle of practical public finance that, as far as practicable, the responsibility of raising revenue and the freedom of spending it ought to go hand in hand, must be granted as more or less fundamental to federal, as to other, financial systems” ( Adarkar, B. P., The Principles and Problems of Federal Finance, London, 1933, p. 219).Google Scholar

“A State which claims to be sovereign should accept the financial consequences of the policy it determines to pursue, and, if it is entitled to call upon another State to assist in bearing those consequences, its responsibility is weakened” ( Commonwealth Grants Commission, Report on the Applications Made in 1933 by the States of South Australia, Western Australia, and Tasmania, for Financial Assistance from the Commonwealth under Section 96 of the Constitution, Canberra, 1933, p. 15).Google Scholar

¹⁶ “The principle of the financial responsibility of governments is such an important factor in keeping politics healthy that we are reluctant to suggest that there is any qualification to it” ( Commonwealth Grants Commission, Second Report, Canberra, 1935, p. 86).Google Scholar

¹⁷ Ibid., p. 36: “The only ground for this assistance [federal grants] is the inability of the State to carry on without it. It follows, then, that the adverse effects of federal policy—even the net effects—are not in themselves ground for assistance to the Government any more than they are to the people of a State. If in spite of the effects of federation the State can continue to function at what has been decided on as the minimum standard, there is no ground for assistance. It is only where the effect of the net disabilities is to impair the necessary efficiency of the Government that the case for assistance stands.” The Commission puts aside the idea of compensation as a basis for grants not only upon this general ground, but also on the practical ground that “no measure of net disabilities is possible” (p. 35). This does not deter it from making an examination of disabilities due to federal policy, especially the tariff. Against these it places numerous offsetting advantages and concludes that in no case is the position of relative financial inferiority “due to any appreciable extent to federal policy” (p. 94).

¹⁸ Ibid., p. 37. It should, perhaps, be stated that the corollaries drawn below are not affirmed explicitly by the Commission.

¹⁹ “There is very little indirect taxation in any of them [the Australian states]; income tax predominates in them all, with graduated scales having a general similarity. Though the differences are sufficient to prevent a perfect measure of rates of taxation, the differences are not essential but rather accidental” (ibid., p. 69).

²⁰ Ibid., pp. 73, 79.

²¹ Ibid., p. 88.

²² Ibid., p. 51. The Commission lets drop an aside which may be a forecast of future policy. If the weak fiscal position of a claimant state is attributable appreciably to its own mistakes, then “it might be necessary to recommend that a grant should be given only under specified conditions” (p. 52).

²³ Some decision must be reached about the method of amendment before any progress can be made with specific amendments.

²⁴ Ibid., p. 43. See also pp. 44 and 47.

²⁵ Those who advocate amendment of the British North America Act to increase the powers of the Dominion can regard conditional subsidies as introductory steps in the right direction. But they ought to regard any increases of unconditional subsidies as barriers in their path. Such subsidies enable a province to entrench itself against any change in the constitutional status quo.