Tuesday, May 16, 1967

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Speaker, this means that we are paying four and one half million dollars out of the provincial revenue for a provincial "dead horse”, and I say at this time that it

s more than time that we take note of the direction in which we are travelling with our fiscal policies.

For a moment, let us reflect on our past financial history. Once upon a time, in the year 1873, it was necessary to literally sell this province into the Canadian onfederation to pay off our railway debt. It was indeed an 11 op ular move at that ime, and it had injurious effects on the economy of Prince Igdward Island for at ast half a century. Things have changed today, of course, since we have entered e era of the welfare state and we go to Ottawa periodically with our hats in our and to beg for more money. But at least for half a century this Confederation, our ntry into Confederation, worked against the interests of the province as can readily ascertained from the decrease in population of the rovince. I hope that it will t be necessary to sell this province again to pay its de ts.

Following our entry into Confederation our parliamentarians were very care- ul with our finances, with our provincial finances. In the year 1927 the provincial ebt was just slightly over $2,000,000.00, and our total expenditures in that year ere $954,000.00, capital and extraordinary. 1928 was the first year that our bud- etary figures came to the million dollar line. In 1949, a year or two after I entered his House, our debt was only $12,873,000.00, and our expenditures in 1949 were lightly over $7,000,000. This year our expenditure will be in the vicinity of $49,- ,000.00, or seven times the 1949 figure. And this in only eighteen years. We , ave certainly travelled the long, long way from the million dollar figure in 1928 to e present time, and what of the future? If we assume that there will be a degree f stability in the future of the Canadian dollar, even the mild creeping inflation, hich is a popular prescription with some economic physicians, then we are entirely n the wrong road. If we enter a period of deflation our course would be a disaster. nly Mr. Speaker, if the Canadian dollar goes down the same trail as is customary the Latin American countries and in the “Banana Republics” are we on the right ad. Our immediate problem is the limitation of the sale of Prince Edward Island vernment securities. Bond dealers are a selective group of business men, they re the “top brass” of the business community, and they will recommend our bonds nly if they think the government is stable and willing to control our expenditures. ey will not recommend our bonds to their clients without limit.

Our current financial position being heavy on short-term borrowing has left s in an extremely weak financial position. In this regard the past government’s licy of heavy short-term financing left this province in a position not unlike the sition of the Atlantic Acceptance Corporation before the great crash. This has proved somewhat under the present government and we are attempting to con- lidate our loans and to convert our short-term paper into long-term bonds. but e are greatly limited by the amount the market will absorb from time to time, articularly from our position of weakness.

Now I would like to refer to the physical agencies. The former Treasurer made ference to this the other day and he quoted some figures and I agree completely th the former Treasurer’s figures that it is cheaper to operate our own borrow- ngs if we are able to do so. But the financial mess which this government inherited as made it necessary for this government to engage a physical agency in order to ead us out of the financial chaos. We are at the extreme limit of our borrowing on rdinary expenditure and other non~productive capital expenditures. There is an pper borrowing limit before the provincial credit reaches zero and we must now stop and recognize this point of no return. Credit confidence, once shattered, is lost. The Honourable Member from Fifth Queens, who is not in his seat at the moment, told this House the other day that the government was scared of the banks and the bond dealers and that we should tell them where togo go. Sixth Queens, pardon me. Now, Mr. Speaker, this man's diagnosis is completely wrong .I have no doubt that he personally can tell the banks where to go any day of the week, but this govern- ment cannot. We are speaking not from a position of strength but as I mentioned before, from a position of weakness. Our per capita debt when compared with our provincial valuations, and our general provmcial economic stagnation has left us in a mosthhuanble position. We must approach our financiers with our provincial hats in our an a.

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