August 12, 1903

CON

John Graham Haggart

Conservative (1867-1942)

Hon. Mr. HAGGART.

Does that include the Yukon River Railway ?

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LIB

John Charlton

Liberal

Mr. CHARLTON.

No. The railway is somewhat south of the Yrukon. Our iron, friends opposite may claim all the credit they can extract from that policy. It has been a most wasteful one and I trust that the Liberal government will add the brilliancy of its record in this respect by continuing to enforce the old principle, which we advocated when we were in opposition, of the land for the settler and the settler for the land.

With regard to the question of subsidies, I do not know that I would take the position taken by many persons in Ontario. Subsidies, reasonably granted, are a proper thing. Railroads may be subsidized and their construction secured that could not otherwise be had, railroads that would be of great benefit to the country. And here again with regard to their system of subsidizing railroads, the government has adopted a principle which redounds greatly to their credit. They have adopted the principle that a railroad which is subsidized must carry the mails free, and, I believe,

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LIB

John Charlton

Liberal

Mr. CHARLTON.

they must provide a mail car and a mail clerk-the Postmaster General will correct me if I am wrong-they must carry military forces free, in fact, they must perform all government services free to the extent of three per cent interest upon the amount of subsidy granted. Under these conditions, and with these provisions, I believe that subsidies granted within the limit of reason, granted to meritorious enterprises, and in moderate amount may be reasonably granted, nowitlistanding the outcry that has been raised.

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CON

Frederick Debartzch Monk

Conservative (1867-1942)

Mr. MONK.

Are there any of these conditions in this contract ?

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LIB

John Charlton

Liberal

Mr. CHARLTON.

There is no subsidy in this contract. Now, Sir, I desire to refer to the wise provisions in the public interest contained in this agreement. Great care has been taken in this respect. We have not a Minister of Railways and Canals with carte blanche in the construction of a transcontinental line. This would be a very pleasant position, no doubt, for a public official to occupy ; but in the construction of the eastern section, we have a joint supervision provided for on the part of the company and on the part of the government. The company is interested in having the road constructed as cheaply as possible, as it has to pay three per cent interest on the cost. It has joint supervision with the government in the letting of contracts and the construction of the line. This provision will secure-perhaps such a provision would be unnecessary with a government like this-economy of construction to the utmost attainable extent. Then, we have a provision in the public interest that the standard of the road, west of Winnipeg shall be equal to the standard of the Grand Trunk between Toronto and Montreal. That is a much higher standard than that of any road that the west now possess.

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An hon. MEMBER.

No.

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LIB

John Charlton

Liberal

Mr. CHARLTON.

Yes. The Mackenzie & Mann road is laid with 60 pound rails. The Grand Trunk between Toronto and Montreal is laid with SO pound rails, and in some sections 90 pound rails. It is a first-class road, with the best bridges and with low grades. And, if this provision in the contract is complied with and the Grand Trunk builds a road in the west that shall not be inferior to the Grand Trunk between Montreal and Toronto, It will build a road thirty or forty per cent better than any road now in that western country. Compare these conditions with those that were imposed on the Canadian Pacific Railway when it was built. That company was under obligation to build a road equal to the standard of the Union Pacific when it was first constructed- a road whose rails were laid on cottonwood ties two feet apart, ballasted with frozen dirt in the winter, and with grades as high as 90, or even 100 feet

to the mile. There are other important conditions in this contract. We have a provision in section 16 that the government may improve the eastern section. So, if this road is not kept in condition to answer the purposes of the government, in a condition to secure the trade for the maritime ports and Quebec, the government may step in and put the road in condition necessary for this purpose, and charge the cost to the company.

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CON

John Graham Haggart

Conservative (1867-1942)

Hon. Mr. HAGGART.

No, no.

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CON
LIB

John Charlton

Liberal

Mr. CHARLTON.

Yes, to the company. It is capitalized at the cost of the company. The government is adopting provisions with regard to the eastern section, stringent provisions, that insure against the deterioration of the line, that insure its maintenance at the same standard of efficiency as the rest of the road. Then there is the provision I have already referred to with regard to the hauling rights, made in the interest of the shipper of the west and of the whole country, that will be vastly beneficial to the transportation interest of Canada. The government has a mortgage that covers the road-bed and the rolling stock and is ample security for all its advances by way of guarantee. Then there is a clause providing for the purchase of Canadian material. My hon. friends on the other side may say that this does not amount to anything, because the company is not obliged to purchase Canadian materials, unless it can get them advantageously as other materials. But I think this clause secures to us an important advantage. The time will come, and come very soon, unless we get advantageous trade conditions from the United States, when we shall have duties high enough to assure the purchase of materials in Canada ; and this condition that the company shall purchase its materials in Canada will prove a great boon to the manufacturing interest of this country. Then, the government has control of rates, which I have already alluded to. It has provision for, continuous and efficient operation of the road, and it has that condition secured by a provision in the agreement which says that when the lease is drawn the government shall have plenary powers and powers of imposing penalties in the event of this condition not being complied with. This agreement provides that the rates on export trade shall be no greater to Canadian ports than to American ports. The road must absolutely place Canadian seaports on the same basis with regard to advantage as it places other seaports. It was said last night that that company could evade this provision by sending its agents to the west to secure freight routed to American ports. If it did this, it would violate clause 43. which provides that there shall be no discrimination on the part of a railway company in favour of American routes. Then there is a con-267

dition that the company shall provide ample shipping accommodation at Port Simpson, Quebec, Halifax, St. John or any other ocean port that its business reaches. The attempt was made last night to convey the impression that of the $45,000,000 of stock which this company is to issue, $25,000,000 was to be treated in some way so that the manipulators of this contract could put it in their own pockets-confiscate it. Why, the $20,000,000 of preferred stock is Ito secure $20,000,000 of rolling stock for the road. That is the purpose to which it will be devoted. The $25,000,000 of common stock is to be laid aside and put upon the market for the purpose of constructing elevators and other shipping facilities at the end of the route that the government stipulates that it shall furnish and other such purposes. So that we have in this contract ample security for all the stipulations that the agreement contains.

Now, to sum up the matter : Under this arrangement we are about to secure a transcontinental line. We have granted no land for it. We pay interest for seven years on the cost of the eastern section, and upon the guaranteed portion of the mountain section not exceeding $14,500,000. And, at the expiration of fifty years, when the value of this property will be greatly enhanced, it comes back into our possession. That, broadly speaking is the outline of this arrangement. I wish to contrast this bargain with the first bargain for a transcontinental road made in this country. I think there will be food for reflection in this contrast; and while doing this, I wish distinctly to disclaim that I have any reflections to make upon the management of the Canadian Pacific Railway. I admire the courage, the grasp, the energy, the push that characterized that movement from the outset. I criticise, not the Canadian Pacific Railway syndicate, but the government of the day. In 1886 I had a letter from the now Lord Mount Stephen, complimenting me, thanking me, for a speech I made in that year attacking the policy of the government and showing what vast franchises the Canadian Pacific Railway Company had obtained, what an enormous bargain they had from the government. This letter complimented me for having tried to act justly, and I was informed that it had been used quite efficiently in promoting the credit of the company. So I say now, that while I point out the recklessness of the government of that day, I utterly disclaim any intention of casting reflections upon the people that took the government in.

When that contract was made with the syndicate in 1881, it provided for the construction of a line from Calender to Port Moody. Of that line, certain portions were to be built by the government. The ^ake Superior section from Lake Superior to Selkirk, 405 miles in length; the western section from Port Moody to Kamloops, up

through the canyons of the Thompson and the Fraser, 238 miles in length, a total of G43 miles that the government was to build and hand over free of cost or charge to the syndicate. The balance of the road was to be built by the syndicate. It was 1,906 miles long. Now, whatever subsidies, whatever grants of land, whatever gifts of completed railway the syndicate received were applicable to the construction of that 1,906 miles of road only. Let us see what they got. They got a cash bonus of $25,000,000; they got the 643 miles of completed road which cost, with the surveys, in round numbers, $35,000,000; they got 25,000,000 acres of land, worth at the least calculation $3 an acre, or $75,000,000. Their cash subsidy therefore for the 1,906 miles of road amounted to $13,100 a mile; their subsidy from the gift from the government of 643 miles, whicli had cost $35,000,000, amounted to $18,300 a mile; their subsidy from the 25,000,000 acres of land, worth $75,000,000 as the outcome proves, amounted to $38,300 a mile. So the syndicate, for the construction of 1,906 miles, the portion that was constructed by it between Calender and Port Moody, received in cash, in road completed and handed over, and in lands estimated to be worth $3 an acre, a total subsidy of $69,700 a mile. Now, I hope my hon. friends on the opposite side will make a note of that. That was a pretty reasonable subsidy-$13,100 a mile in cash, $18,500 a mile in the value of the road the government built for them, and handed over, and $38,300 in land worth $3 an acre.

Mr. MeCREAItY. What about the taxes V

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LIB
LIB
LIB

John Charlton

Liberal

Mr. CHARLTON.

Now, compare that with this scheme that our friends are denouncing to-day. Here is a scheme that will cost us, in interest in lieu of subsidy, $14,500,000, or $4,060 per mile for the entire line, against $69,700 per mile for 1,906 miles. Does not the contrast startle my friends V And can they, in view of their own record, rise in this House and condemn this moderate, judicious scheme, conceived in the interest of the people, and to be carried forward to its consummation at such a slight cost ?

Now, let us have a summary of these subsidies : Cash bonus to the Canadian

Pacific Railway on 1,906 miles, $25,000,000; cost of road and surveys handed over to the company, $35,000,000; total value of 25,000,000 acres of land-and I may say here that part of that land was bought back at $1.50 an acre, $10,000,000 worth, but the average of the whole may be computed at least at $3 an acre-25,000,000 acres of land at $3 an acre, would be worth $75,000,000; total subsidies applicable to the 1,906 miles built by the Canadian Pacific Railway, $135,000,000. Contrast that with this scheme that is going

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LIB

John Charlton

Liberal

Mr. CHARLTON.

to be denounced as extravagant and reckless. Aid to the Grand Trunk Pacific by way of interest, say $14,500,000; balance in favour of the Canadian Pacific Railway, $120,500,000. The statement seems incredible, but it is a cold hard fact, and I thought perhaps it would be well just to remind our friends opposite of what they have done in the past as an incentive to them to denounce what we are doing in future, granting about one-seventeenth as much to this line per mile as the Canadian Pacific Railway received from them.

At one o'clock, House took recess.

House resumed at three o'clock.

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LIB

John Charlton

Liberal

Mr. CHARLTON.

Mr. Speaker, at the hour of recess I had just completed a comparative statement of the aids granted by the government to the Canadian Pacific Railway Company and to the scheme at present under consideration. I had given the value of the investment of the government in the roads that were handed over to this company, the amount of the cash bonus, and the value of land grant of 25,000,000 acres. It may be argued in regard to the land grant that its value was created by the construction of the road, and that we are not entitled to count this as being in the shape of a bonus in regard to the aids rendered in this line. Leaving that question aside, I may say in this connection, at least, that we grant no land bonus to the present scheme and that the increase in the value of the land consequent upon the construction of the land will be ensured to ourselves as a government and to the country and not to a railway corporation.

I shall now enter into other conditions of contrast between these two schemes as relates to the government's position in the respective cases, and the first one I will refer to, Sir, will be the exemption of the Canadian Pacific Railway from taxation. That exemption is contained in section 16 of the agreement of the company, and is as follows :

The Canadian Pacific Railway, and all stations and station grounds, workshops, buildings, yards and other property, rolling stock and appurtenances required and used for the construction and working thereof, and the capital stock of the company, shall be for ever free from taxation by the Dominion, or by any province hereafter to be established, or by any municipal corporation therein.

That exemption, of course, is perpetual. I need not point out that no such condition applies to the Grand Trunk Pacific Railway scheme. There is no exemption of its property in this case, and whatever conditions a railway corporation may be liable to under the authority of the Dominion, or of provinces that corporation will be liable to. Then, the next provision that I would refer to in this contrast of conditions is the exemption of the land grant of the Can-nadian Pacific Railway from taxation, which

exemption is also contained in section 16, and is as follows :

And the lands of the company, in the Northwest Territories, until they are either sold or occupied, shall also he free from such taxation for twenty years after the grant thereof from the Crown.

These lands were granted more than 20 years ago, no taxes have yet been paid, and the lands still are practically exempt from taxation.

- The next condition and contrast that I would refer to is the transportation monopoly granted to the Canadian Pacific Railway covering the entire North-west Territories. The clause granting that monopoly is No. 15 of the agreement or contract, and is as follows :

For twenty years from the date hereof, no line of railway shall be authorized by the Dominion parliament to be constructed south cf the Canadian Pacific Railway, from any point at or near the Canadian Pacific Railway, except such line as shall run south-west or to the westward and south-west ; nor to within fifteen miles of latitude 49. And in the establishment of any new province in the North-west Territories, provision shall be made for continuing such prohibition after such establishment until the expiration of the said period.

Here was a condition which gave the Canadian Pacific Railway an absolute monopoly of transportation in the entire North-west Territories. No line was to be built from the south of that road to within 15 miles of the American boundary line, no connection with any American road was possible under the provisions of this section. The Canadian Pacific Railway, by this provision of its agreement, enjoyed an absolute transportation monopoly in the North-west. Contrast that provision with the provision of the Grand Trunk Pacific Railway scheme and we find that no such monopoly is given, that no special privileges are given in regard to transportation, hut that this road has to enter into full and free competition with all other lines without any intervention on the part of any government to aid it in any way in securing business.

The next point of difference is in regard to the admission of material for the construction of the road contained in section 10 of this Act. By this provision it was agreed that the government:

Shall also permit the admission free of duty, of all steel rails, fish plates and other fastenings, spikes, bolts and nuts, wire, timber and all material for bridges, to be used in the original construction of the railway, and of a telegraph line in connection therewith, and all telegraph apparatus required for the first equipment of such telegraph line ; and will convey to the company, at cost price, with interest, all ratls and fastenings bought in or since the year 1879, and other materials for construction in the possession of or purchased by the government, at a valuation,-such rails, fastenings and materials not being required by it for the construction of the said Lake Superior and western sections.

267* \\ \ tV

Well, Sir, this exemption of material from duty was held later on to apply to the material used In the renewal of bridges years and years after the Canadian Pacific Railway had been constructed. The Grand Trunk Pacific has no such privileges, has no such exemption from the payment of duties ; it must pay duties upon all the materials it imports. That is another contrast between the conditions applicable to the roads.

Then the Canadian Pacific Railway was required to put up a deposit by way or security of $1,000,000. The Grand Trunk Pacific is required to put up a deposit by way of security of $5,000,000-five times as much as that required from the Canadian Pacific Railway.

Then, the Canadian Pacific Railway could not he touched in reference to the adjustment or handling of its freight rates until it was paying a dividend of 10 per cent. No interference on the part of the government could be made with the affairs of the company until it was paying al dividend of 10 per cent. That was provided in section 18 of this Act. The Grand Trunk Pacific Railway is liable to the intervention of the government in the regulation of its rates at any time at the pleasure and upon the judgment of the government without any reference to the maximum rate of dividends it may he earning.

Then, the Canadian Pacific Railway had three-quarters of the cost of the rails that it imported advanced by the government. This provision is contained in subsection (c) of section 9 of this Act, and it is as follows :

If at any time the company shall cause to be delivered on or near the line of the said railway, at a place satisfactory to the government, steel rails and fastenings to be used in the construction of the railway, but in advance of the requirements for such construction, the government. on the requisition of the company, shall, upon such terms and conditions as shall be determined by the government, advance thereon three-fourths of the value thereof at the place of delivery.

There is no such condition in reference to the Grand Trunk Pacific. All these conditions were peculiar in their application to the Canadian Pacific Railway-exemption from taxation, monopoly of transportation, exemption from duties, advances on the cost of rails, all these are special conditions granted to this company in addition to the enormous subventions I have referred to were peculiar to its case, and not applicable to the ease of the Grand Trunk Pacific. Then, we have another contrast of the conditions between the two_ roads. When the government had paid this $25,000,000 in money, when it had handed over roads costing $35,000,000, and when it had given these 25,000,000 acres of land for the purpose of aiding in the construction of 1,906 miles of road, the control of the government ceased. The road may at any time

pass beyond tbe control of the government altogether. It may pass into the hands of foreign owners. It may be gathered in by a Morgan syndicate. There is nothing to ensure to this country the possession of the road as a Canadian highway. It may be secured by foreign companies at any time and there is no guarantee to prevent such a consummation. Such is not the case with the Grand Trunk Pacific. The control of the government over the Grand Trunk Pacific is continuous. The Grand Trunk Pacific is bound to remain a Canadian road. It can never be made anything else. It must continue under Canadian control and we ensure to ourselves the control of one transcontinental line at least, which is our line, controlled by ourselves, and which can never pass from our possession. Then, the Canadian Pacific Railway gave no running rights to anybody over any portions of its line-the Grand Trunk Pacific Railway must share its line from ocean to ocean at the dictation of the government, and under the direction of the government with other lines.

I repeat that in all this, no odium attaches to the Canadian Pacific Railway officials. They simply made the best bargain with the government they could. They made a good bargain, they displayed their astuteness in doing it. They have created a property of enormous value; it is the grandest railway speculation that was ever entered into; it is the most brilliant of successes ln_. the railway history of the world. The Canadian Pacific Railway magnates, if I may term them so, the Canadian Pacific Railway managers, were not to blame; the odium, if any, attaches to the government that granted these conditions and failed to safeguard tbe interests of the people in granting them.

Of course, at the time the Canadian Pacific Railway syndicate bargain went through, the conditions were different from what they are to-day. The North-west was then largely a wilderness ; the success of a transcontinental road was problematical, and it was useless to suppose that we could then secure terms as favourable as we can to-day when that country is better known, and after the fact has been demonstrated that a transcontinental line can secure business, and business adequate to the payment of dividends upon the cost of construction. Still, it was quite evident at that time, and it was maintained by the then opposition, that the terms which were given to the Canadian Pacific Railway were extravagant. It was pointed out then that we were practically building a road for the Canadian Pacific Railway and handing it over to them, and more than that, in point of fact that we might as well build the road ourselves and own it, and then sell it if necessary. The Mackenzie scheme was to build a road from Lake Superior to Selkirk on the Red river. They

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LIB

John Charlton

Liberal

Mr. CHARLTON.

had that road nearly completed when this contract was made. They were proceeding to extend that road to the Yellow Head pass and 100 miles were under construction; they were building a branch line from Selkirk to Pembina to connect with the American lines. We held, in discussing the terms of this contract, that if the Mackenzie road were pushed vigorously to Yellow Head pass we would then be in a position to secure the construction of the entire line, and be able to pass over to the company as a bonus the portion of the road constructed. No doubt this could have been done. If it had been done the cost to the country would not have been one-third what it proved to be under the scheme that was adopted by the Conservative government.

Now, these are contrasts between the policies of the two governments with reference to a transcontinental line, contrasts as to the difference that exists between the subvention granted in the one case and in the other. In the one case $135,000,000, counting the land at less than its market value to-day-in the other case, $14,500,000 in round numbers; the excess in favour of the promoters of the Canadian Pacific Railway being $120,500,000.

Now, it was not necessary to have granted these conditions to the Canadian Pacific Railway. It was not necessary for the reason that we received a better offer. We received an offer at the time this contract was under consideration to build this road for 3,000,000 acres of land less, for $3,000,000 less subsidy, the road to be the standard of the Union Pacific as it then existed, instead of the standard of the Union Pacific as at first constructed, and the difference was very great. That offer asked no exemption from taxation; that offer asked no exemption from duty on materials; that offer left the road subject to the government control of its rates ; that offer left the road subject to the purchase by the' government on conditions favourable to the government. All these conditions in the second offer made it infinitely better for the country than the first offer.

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CON

James Clancy

Conservative (1867-1942)

Mr. CLANCY.

That was a bluff offer made by the hon. gentleman's friends at the last moment.

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LIB

John Charlton

Liberal

Mr. CHARLTON.

This bogus offer from a bogus syndicate was accompanied by a cash deposit of $1,395,000.

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Some hon. MEMBERS

Hear, hear.

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LIB

John Charlton

Liberal

Mr. CHARLTON.

It was $395,000 more than was required of the Canadian Pacific Railway, and the best way to have demonstrated that this was a bogus offer was to have accepted it and swiped in the money if it was bogus.

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August 12, 1903