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While stressing that Ontario's financial position was sound, the Premier's report of the current year's financing bore imprints of war expenditures, to which, in part, was attributed an interim deficit of $4,444,929 in place of his 1939 proph-- esy of a $150,872 surplus. In his Budget forecast to the As-- sembly, he declared he recognized "we are in the second phase of the Great War." Realizing the respon-- sibility that rested upon Canada, "a responsibility that must be shared largely by this Province," the Pre-- mier said it was the opinion of the Government that Ontario must give leadership to the rest of the Do-- minion. n "This richest, most prosperous and ' most progressive part of the Domin-- ion must not betray any faltering in this time of testing," he contin-- ued. "No greater disservice could be rendered to the Dominion or to the cause of the Allies than that this Province should forecast a deficit either in ordinary or capital accounts; and no _greater disservice could be rendered than by a Gov--) ernment attempting to deceive it-- self by allowing estimates of rev-- enue to be founded on optimism." Premier Hepburn, in his first wartime Budget and the sixth sue-- cessive accounting that he has given of his Government's fiscal opera-- tions, yesterday in the Legislature forecast a surplus of $356,000 for the coming year on top of an estimated reduction in the gross debt of The estimated surplus of $356,239.-- 16 is given as the difference be-- tween estimated ordinary revenue of $89,051,209.40 and estimated ordi-- nary expenditure of $88,694,970.24. Both figures are reduced respec-- tively from last year's estimates by $1,210,733 and $1,416,140. While the Government budgeted for a total gross ordinary expendi-- ture of $99,535,122.05 in the coming year, a $3,820,916.39 reduction from last year's first $100,000,000 Budget figure, it is noted in the statistical summary -- that estimated relief costs for the year of $5,950,000 were $3,870,000 under those esti-- mated for the year ending March 31. Hepburn Forecasts Surplus Next Year With Spending Cut "I will attempt to throw light on some of the dark corners passed over hurriedly today," he advised the Premier. Premier Hepburn completed his address in ons and three--quarter hours of rapid reading and towards the close bronchial trouble, from which he has been suffering severely in recent days, placed him under severe strain. Leopold Macaulay (South York) revealed himself as the Conservative financial critic and adjourned the debate until Mondav. (Text of Budget speech and tables are carried on Pages 8. 9.) Municipal Subsidy Reduced to | Mill; Deficit 4 Millions REVENUES DROP A forecast of $9,500,000 in revenue from the Liquor Control Board reveals that the Government is ex-- pecting a drop in consumption un-- der wartime taxation and conditions of one and onc--quarter millions. Higher Federal income tax levies are expected to lop another million from the 1939--40 $6,000,000 Provin-- clal income impost. Succession duties returns will drop, it is be-- lieved, by $5,000,000 from $17,000,000, but it is hoped by the Government that this amount will be offset by the new tax levies upon corpora-- tions. Expect Liquor Revenue Drop. posed tax change is in corporation taxes, Under the bill, introduced some time ago in the Legislature, it is proposed to increase the tax on corporation income from 2 per cent to 5 per cent and the tax on banks, insurance companies, rail-- ways, and on telephone, telegraph, express and car companies by 25 per cent. The increases, said the Pre-- mier, would not be retroactive with respoct to operations prior to Jan. 1, 1939 Of direct interest to municipali-- ties is the Government's intention to reduce its subsidy on general as-- sessment from the current one and onre--half mill rate to one mill. A one--mill rate, fixed when the sub-- sidy was first instituted, was in-- creased a half--mill last year as a "out" in the increased revenues de-- rived from the new gasoline tax. "May I remind you," said the Pre-- mier, in announcing the reduction, "that during the last war, instead ot a subsidy of one mill, there was a special war tax of one mill on each dollar of general assessment levied and collected by the Province of Ontario." Tourist Drive Planned. As announced by the Premier earlier, the Government plans an in-- tensive drive to attract tourists with the hope of boistering Provincial in-- come,. With that in mind, the Gov-- ernment has established a tourist bureau "which can effectively coun-- teract any unfortunate propaganda or misunderstanding of war condi-- tions in Canada." Ontario is to be advertised, he said, as a Province which levies no amusement tax, no tax on meals, no local sales tax, and one in which the American dollar will be accepted at the premium value. As an indication of the Govern-- ment's desire to bend every effort in the cause of winning the war, the Premier stressed that it would not embark upon any program of new capital expenditures. The bearing of the war upon Provincial financing was noted again when, in pledging that Ontario would meet its contractual obligations, notwith-- standing adverse exchange fluctu-- ations, the Premier estimated that the cost of foreign exchange for the ensuing fiscal year would be $1,842,. 913.88, of which $718,187.70 will be paid by the Hydro Commission as its share of the maturing deben-- tures and intecrest to be met. "This is a war expenditure, in that it is due to a condition arising out of the war and is inescapable," the Premier said. As reported earlier, the only pro-- FEBruary 16 A new departure in tinancing was announced in the declaration of the Government's intention to apply succession duties receipts over and above a normAl year's revenue, estimated at $12,000,000, to reduc-- tions of either capital expenditures or of the Provincial debt. Estates to Be Prossed. There will be no relaxing of the efforts of the Treasury Department to collect from some 3,000 old ¢es-- tatos to be investigated, where un-- derpayment is found to exist, said the Premicer. '"Having put my hand to the plow, I have no intention of abating my efforts to complete the task of investigating every estate where fraud or underpayment ob-- tains," he added. The Premier attributed the larg-- | est deficiency in the ordinary reve--| nue of the current fiscal year to the falling off of succession duties . by $3,600,000. "And this is duse," he told the House, "to the ditficultiesi placed in the way of the Govern--| ment arising out of the injunction | obtained in what is known as the | Kaufman case." | In the Premier's review of de-- partmental activities he reported that the Department of Education, by reason of changes and econo-- mies in administration, was assist-- ing the economy program by asking for approximately $1,000,000 less than it spent in the present fiscal year. It was possible to save this amount, said the Premier, without making any substantial reductions in the grants to either elementary or secondary schools. Death Rates Low. He reported with enthusiasm that the Province experienced the low-- est infant death rate as well as the lowest maternal death rate at child-- birth in its history. "This, together with a 50 per cent decrease in undu-- lant fever, and a new low in the tuberculosis death rate, would indi-- cate that the efforts of the Govern-- ment in the protection of the public health are meeting with success," he said. > The mining industry, he con-- tinued, established an all--time rec-- ord during 1939. The gold mines produced bullion valued at $109,508,-- 979 to establish a new record in this branch of the industry. More than 13,000 consumers were added to rural Hydro districts, necessitating the construction of 2,300 miles of primary lines. At present there are 18,000 miles of rural lines serving about 113,000 consumers. Net receipts for the T. & N.O. Railway wore estimated up to March 31 at $1,300,000, in what the Premier described as "one of the best years in its recent operat-- ing history."