136. Full returns for the fishing season just closed are not yet available but, taking the Island as a whole, the prospects cannot be regarded as satisfactory. For while there has been an improvement both in the cure and in the price of fish, the virtual failure of the shore-fishery on the east and north-east coasts has left numbers of fishermen without means and in debt to the merchants. It seems probable that in other parts of the country the returns received by the fishermen will show a marked improvement on those of last year. In some, though not in all, localities these may be expected to be such as will enable them to maintain themselves and their families during the winter.

  137. We cannot indeed emphasize too strongly that recurring visitations of pauperism necessitating large payments for relief have always been a feature of the Island's economic history and must continue to be so, while the fishery is conducted on its present basis and remains the mainstay of the country. A further point which we wish to make here is that the expenditure incurred in relief during the present depression could hardly have been on a more modest scale. It is estimated that in the much less severe depression of 1921-22 no less than $2,000,000 was incurred in relief, which partly took the form of the cutting of pit props under Government supervision; while much of the expenditure undertaken in subsequent years for the construction of roads and public works may be regarded as in the nature of relief measures.

  138. The expenditure incurred in the payment of "able-bodied relief" during the last three years was as follows:--

  Payments are made in kind and mostly take the form of rations of tea, flour, pork and molasses. The grant is apportioned on a per capita basis, including wives and dependents. Generally speaking, it represents a maximum of $1.80 per month for each person, but a higher rate is granted in St. John's, where the people have less opportunity of raising vegetables and seeking fish or game. We are satisfied that, if the grant is to be made at all, it could not be made on a lower basis. It will, however, be appreciated how great must be the burden thrown upon a small and impoverished community when nearly 15 per cent. of available revenue is required for payments of this character.

  139. It will be realised from the foregoing summary of development in the post-war period that, when the first effects of the world depression began to manifest themselves in 1931, the country was in no condition to resist the tide of adversity. The Government had in fact succeeded in raising a loan of $5,000,000 in 1930, and that their credit stood high notwithstanding the financial policy of the previous decade is shown by the fact that the money was obtained in the form of a twenty-five year loan at 5 per cent. issued at 99. Indeed, Newfoundland since the War had had no difficulty in raising loans. In 1931, however, when the Government invited tenders for a further loan of $8,000,000 ($3,000,000 of which was to repay existing loans and $1,000,000 for the Municipality of St. John's*), the stream of lenders suddenly dried up and no tenders were received. A deficit of some $4,000,000 was anticipated on the budget and the Government were placed in a serious difficulty. In this crisis, they requested Your Majesty's Government in the United Kingdom to lend them the assistance of a Financial Adviser and Sir Percy Thompson, Deputy Secretary of the Board of Inland Revenue, was deputed for this purpose, with Mr. J.H. Penson, Deputy Minister of Finance and Controller of the Treasury.

  140. In the result, the deficit on the year was met in part by a loan of $2,200,000, from a syndicate of the four Canadian Banks operating in the Island, viz., the Bank of Montreal, Royal Bank of Canada, Canadian Bank of Commerce, and the Bank of Nova Scotia, and in part by the raising of an internal loan of $2,500,000 known as the Prosperity Loan, 1932. This internal loan of $2,500,000 was issued at 97 and carried interest at 5½ per cent., was specially secured on a newly created fund, known as the Petroleum Products Fund, which set apart from the general revenue the proceeds derivable by the Government under an agreement with Imperial Oil, Limited. Under this agreement the Company was given an exclusive right to import, manufacture and place on the market all petroleum products, including gasoline, kerosene and lubricating oils, in return for a minimum annual payment of $300,000. The Company further agreed to take bonds in the Prosperity Loan to the amount of $1,750,000. Bonds to the value of $250,000 were also taken by the Anglo-Newfoundland Development Company. These two contributions left only $500,000 to be subscribed by the public in Newfoundland, but in spite of urgent appeals it was found impossible to raise even this small sum. Further subscriptions amounting to less than $350,000 were received from mercantile and other firms in St. John's, but individual members of the public failed to respond and the loan only became fully subscribed by the investment therein of a sum of $152,581 by the Reparations Fund. The proceeds of the loan which could be counted as new money thus amounted to $2,272,419 less the costs of issue which amounted to some $10,000.

  141. There are two features of these transactions which should be noted. In the first place the loan made by the four Canadian Banks was subject to an agreement that the revenue received from customs duties (which are responsible for about 75 per cent. of the revenue of the country) should in future be paid into a special account at the Bank of Montreal.
 It was intended that this account should provide for payment in full of the interest on the public debt as it fell due, and that only such sums as might remain after these payments had been made should be available for the administration of the country. Even, however, after extreme economies in administration had been carried out, it was found that, owing to the decline in revenue and the continued requirements of able-bodied relief, the surplus available in the fund for the purposes of the Dominion was far from sufficient to meet its minimum needs; and it has been necessary, with the agreement of the Banks, to make periodical withdrawals from the fund; with the result that it has been impossible to provide from it for the payment in full of the interest on the public debt.

  142. The second feature to which we desire to draw attention is the granting to an outside company of the monopoly of importing a commodity such a gasoline, plentiful and cheap supplies of which are essential to the successful prosecution of the fishery. In return for this concession, Imperial Oil, Limited, agreed to pay to the Newfoundland Exchequer a minimum sum of $300,000 with a proviso that, if certain specified rates of royalties on actual sales in any year of petroleum products amounted to more than $300,000, such excess was also to be paid to the Newfoundland Exchequer. The specified rates of royalty were as follows:--

  It may be argued that the grant of a monopoly of the importation and sale of an article of universal consumption is by no means an ideal method of creating a fund in order to form the basis of the security for a loan, but it was felt by the Newfoundland Government that in the circumstances, if default in the service of the public debt was to be avoided, there was no alternative but to have recourse to such a device. To a large extent the actual grant of the monopoly merely recognised an existing state of affairs, and the expectation that Imperial Oil, Limited, would use the concession they had obtained with fairness and moderation has not proved unfounded. The concession was granted for a period equal to the currency of the loan and there is provision that it will cease to operate as soon as the loan is paid off. Provision is made both in the Loan Act and in the Agreement with Imperial Oil, Limited, that the loan may be paid off at any time, and, while we have heard no complaint as to the prices charges by the Company, we cannot doubt that it would be of benefit to the community if early advantage could be taken of this provision.

  * Newfoundland Statutes; Loan Act, 1931 (22 Geo. V. c.33)