October 21, 1919

L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE:

The mistake is very

slight, if any. I mean that my figuring was rather in favour of the company-not intentionally, but some of the debenture stock is at five per cent and some at four per cent, and by mistake I figured the whole of it at four per cent, thus giving the company the advantage of that difference.

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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UNION

John Dowsley Reid (Minister of Customs and Inland Revenue; Minister of Railways and Canals)

Unionist

Mr. J. D. REID:

I do not say that the hon. member is intentionally wrong, but I understood him to state that there was. $35,000,000 interest on equipment bonds, or rolling stock. -

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE:

December, 1918, of 116,831,862, which the Government had to provide for, and on-which the country had to pay interest to the extent of $841,000, making a total deficit of $17,672,862 for that year.

I have already referred to the result of operations on the Grand Trunk for that same year, and will not say anything further for the present.

For the same year, the Grand Trunk Pacific had a revenue of $11,888,808; the operating expenses were $13,687,681; fixed charges $9,398,438, leaving a deficit on that year's business of $10,263,281. On that deficit the interest amounted to $513,164, making a total1 deficit for that year of $10,777,445. In connection with the Grand Trunk Pacific, I have received further figures from the Minister of Railways and Canals. Up to August 31, 1919, the sum of $5,407,522.26 had been advanced to the road, and the net operating deficits are given as follows:

March 10 to 31, 1919 $185,447.66

April 458,286.61

May 586,434.45

June 518,816.56

July (estimated) 446,515.00

August (estimated) 505,247.00

A total deficit for March, April, May, June, July and August of $2,700,746.68. Those figures are for what may be regarded as the best part of the year, and are by no means encouraging.

The Transcontinental railway for the year ending 31st March, 1919, had total earnings of $10,412,407; operating expenses were $13,028,381; deficit $2,615,974. The capital invested in the Transcontinental railway is $173,000,000, interest on which amounts to $8,650,000 and interest on the deficit for one year $130,798, leaving a net deficit for the year's operations of $11,396,772.

The Intercolonial railway for the year ending 31st March, 1919, had total earnings of $26,435,343; operating expenses were $28,236,506, leaving a deficit of $1,801,163 for that year's operations. The capital invested in the Intercolonial is $125,000,000, interest on which amounts to $6,250,000; interest on deficit $90,058; total deficit, $8,141,221.

The total deficit for the last railway year of the three roads operated by the Government amounts to $47,988,300. If we add to this amount the deficit of the Grand Trunk $38,457,167, there is in prospect for government operation of railways an annual deficit of $86,445,467.

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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UNION

John Dowsley Reid (Minister of Customs and Inland Revenue; Minister of Railways and Canals)

Unionist

Mr. J. D. REID:

What did my 'hon. friend make the total deficit of the three roads?

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE:

I said $47,988,300.

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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UNION

John Dowsley Reid (Minister of Customs and Inland Revenue; Minister of Railways and Canals)

Unionist

Mr. J. D. REID:

The statement I submitted to the hon. member showed the deficits as follows: Canadian Northern $16,831,862, Grand Trunk Pacific i$10,263,28I, Transcontinental $2,615,974, Intercolonial $1,801,163, or a total of $31,512,280. Has the hon. gentleman added the interest on capitalization to those figures?

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE:

That Is true. Those

figures bear incomes and disbursements but do not include interest on the capital investment. The figures the minister handed me were $43,423,500, which included some interest. We are paying 5J per cent for money now and I have figured the interest only at 5 per cent. I did not make it 5J, but I am sure it would be no exaggeration to figure interest at that rate on any moneys the Government have to borrow to-day. I have calculated the interest on the capital investment, which in the case of the Transcontinental is $173,000,000. I have also calculated interest on the investment of $125,000,000 in the Intercolonial, because we are paying interest on that money. Of course, these moneys when not earned constitute a deficit and an 'obligation which must be paid out of other revenues.

The minister and the House know that the Grand Trunk has obligated itself to a certain amount of bonds and other obligations which we will have to assume when we take over the road with its assets. These obligations, which appear on pages 51 and 52 of the blue-book, amount roughly speaking, to $198,389,720. Some of these we may not be called upon to pay; I do not know. All that I say is this, that those roads in connection with which we gave those guarantees went Pearly $2,000,000 behind last year. The Grand Trunk iwas called upon out of its Canadian earnings to send nearly $2,000,000 into the United States to pay for the operations of those roads. In connection with those roads, the Grand Trunk has given guarantees to the amount which I have mentioned, and when a man puts his name on the back of a note, he should always be prepared to pay it if called upon, and he must regard it as an obligation. He may not have to pay it, but he may; and when we find conditions of this kind confronting us, namely, that those railways do not pay-and that they do not pay their obligations, the strong probabilities are that we shall have to meet.

those obligations and to make good those guarantees. For those reasons we must take into account the guarantees of the Grand Trunk to the extent of $198,389,720 which appear on pages 51 and 52 of the Blue Book. That is the condition of affairs of public-owned railways of this country, and I submit to businessmen that that is not a very inviting proposition. We must suppose that the operations are carried on as reasonably and as cautiously as the operations of a Government road can be carried on, and yet we are confronted this 1 year with a deficit of something like $50,000,000. This House is deciding upon the question whether or not it is advisable to continue the undertaking and to continue adding to -a property which does not seem to promise anything better than, if as good as, the roads with which we have been already dealing.

I have here some authorities on the working of the road and on the policy of Government ownership. Having spoken now longer than I expected, I will not trouble the House with quoting these authorities, and indeed the House is familiar with them. I was going to quote the Montreal Daily Star of October 27, which speaks very strongly against Government-owned roads and the operation of railroads by a government. I was also, on the financial question, going to quote a paper friendly to the Government, the Ottawa Journal, of October 14, 1919, which strongly warns the Government to undertake no further obligations along the lines suggested by this legislation. I was going to make reference to an authority which has already been quoted, Lord Shaughnessy who is, of course, running a railroad that might be regarded as in opposition to Government railways. But when we have to deal with authorities and men who know business, we must not refuse to give credence to their judgment because they happen to be opponents in business. We have in this opinion expressed by Lord Shaughnessy the word and experience of a man who has made a -success of a great railway -system in this country, and we should not lightly throw aside any suggestions that he may make about public ownership. He asks us to be cautious on this subject and not to plunge headlong into undertakings that may prove fatal to the country. I have *also the authority of a certain Mr. Mitchell, president of the National City Company of New York, who, speaking before the Canadian Club in Montreal, gave that club the experience of the American people in con-

76i

nection with government-owned railways. He explains in his statement that the freights on the roads have been increased to the tune of something like $885,000,000 in the last year-that is, that much more money has been taken out of the American people than under private ownership of roads-and after paying this $885,000,000, they find that they have to put their hands into their pockets to the extent of $210,000,000 to square up the year's operation of the roads. The experience in England is not at all inviting, and I have given the House as carefully as I can the figures so far as I can get them in connection with the operation of our roads in Canada. With this evidence before the House, I think I have done all that can be expected of me, not all, perhaps, but at least a portion of what may be regarded as my duty as a representative of some of the Canadian people.

When the facts, the experience of operations of this road, are put before Parliament and the Government, it is then for the Government to decide, and df they make a mistake in the light of proper information and of the truth, the responsibility is entirely theirs. I trust that the Government will not plunge headlong into this undertaking without at least getting some more information about it, and at all events getting the information of which the Prime Minister speaks in his cablegram to the High Commisfcioner bearing date 10th September, 1918, and appearing on pages 14 and 15 of this Blue Book. In that cablegram he emphasizes the fact that there should be full information before the House before they would depart from their original undertaking or from the first offer that they made. I pointed out to the House that the offer we are making, the undertaking we are now willing to legislate upon and to pass into a bargain and obligation on the part of the Canadian people, is away and beyond and above the amount which was *first spoken of and which the Government, in the early days of negotiation, were willing to pay. *

As a last word, let me say to the Government that some days ago I pointed out that if this proposition must go through Parliament and we have to deal with it, we should take some precaution to protect the Canadian people against speculation regarding this stock. The negotiations commenced as far back as 24th -January, 1918, that-being the date when the Prime Minister (Sir Robert Borden) sent his cablegram to Sir George Perley asking him to open nego-

tiations for taking over this road. That became public at once on that date, and the whole world had an opportunity of speculating in that stock from that date forward. The value of that stock should be governed, not by any impetus which it might have received by the negotiations, but entirely by its value on the 23rd January, 1918, 'before the negotiations became known at all, because that is the real genuine value of that stock, and not the value that it might have obtained after the negotiations became known. We know that after the negotiations got abroad the stock increased in value, and any value that was given to it was given to it not because the property is any better, but because it was hoped that the Government would take it and render it more valuable, but we have no business to pay for that stock any more than it was worth when we commenced the negotiations.

That is the date at which we should consider what this stock was worth.

Now, Mr. Speaker, I would move this amendment:

That the Bill be not read a second time but that the House do come to the following resolution :

That the Bill proposes an uncertain but very large addition to the debt of the Dominion at a time when existing obligations, arising out of the War and from other causes, are so vastly in excess of all previous obligations as to give much cause for anxiety on the part of all who are concerned in the financial position of Canada and the maintenance of the public credit.

That a measure of such wide-reaching character and large importance requires a study by the House and the people that cannot possibly be given in the-closing days of the session.

That the present session of Parliament was called for a special purpose which has already been accomplished.

That on Wednesday October 8th the Honourable the Minister of Trade and Commerce, acting as leader of the House in the absence of the Prime Minister; stated that the Government's expectation was that the session would close within the then current week.

That under such circumstances the introduction by the Government of a measure of such great importance as the acquisition of the railway and property of the Grand Trunk Company of Canada is improvident and inexpedient.

That for these reasons the further consideration of the Bill be deferred until a future session of this Parliament.

I move this amendment, seconded by the hon. member for Shelburne and Queens (Mr. Fielding).

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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UNION

John Dowsley Reid (Minister of Customs and Inland Revenue; Minister of Railways and Canals)

Unionist

Mr. J. D. REID:

Mr. Speaker

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
Permalink
UNION

Newton Wesley Rowell (Minister presiding over the Department of Health; President of the Privy Council)

Unionist

Mr. ROWELL:

Mr. Speaker

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
Permalink
?

Some hon. MEMBERS:

Who has the

floor?

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
Permalink
?

Some hon. MEMBERS:

Order.

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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UNION

Edgar Nelson Rhodes (Speaker of the House of Commons)

Unionist

Mr. SPEAKER:

Order.

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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UNION

Newton Wesley Rowell (Minister presiding over the Department of Health; President of the Privy Council)

Unionist

Mr. ROWELL:

My hon. friends will

have ample opportunity to cast their vote against public ownership when the time comes.

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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?

An hon. MEMBER:

How soon?

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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UNION

Edgar Nelson Rhodes (Speaker of the House of Commons)

Unionist

Mr. SPEAKER:

Order.

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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UNION

Newton Wesley Rowell (Minister presiding over the Department of Health; President of the Privy Council)

Unionist

Mr. ROWELL:

The argument advanced

by the leader of the Opposition (Mr. McKenzie) against the second reading of the Bill and in support of the amendment for the six months' hoist was based principally on four grounds. First, my hon. friend clearly stated his position as being opposed to public ownership of railways or utilities of this kind under any' conditions which he conceived possible in Canada. Secondly, he took the ground that this proposal was not in the public interest, so far as the merits of the proposal itself were concerned; thirdly, if 1 understood him aright, he thought that the financial position of Canada was not such that the country should undertake the purchase at the present time; and lastly, my hon. friend expressed the view that it was inopportune at this session to bring forward the present Bill. I think I have fairly summarized the grounds upon which my hon. friend is opposed to the second reading of the Bill and moves the amendment for the six months' hoist.

Mr. Speaker, I desire to deal with these questions briefly and in the order mentioned. The hon. gentleman states his opposition to the principle of public ownership. Suppose we concede, for the sake of argument, that it is a debatable proposition. Then I submit my hon. friend has not made out a case, because in Canada we have public ownership of railways on a very large scale and must continue to have it for many years to come.

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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L LIB

Samuel William Jacobs

Laurier Liberal

Mr. JACOBS:

Has it been a success?

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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UNION

Newton Wesley Rowell (Minister presiding over the Department of Health; President of the Privy Council)

Unionist

Mr. ROWELL:

That depends entirely on the standpoint from which you view it. The Intercolonial was built as a political railway to serve political considerations of very great national moment. It was not built originally as a paying transportation proposition ; it was intended to serve great national ends. During the long period of the existence of that road it was operated as a political railway, in the sense that business and transportation considerations were not the dominating motive in its management, and every hon. member on both

sides of the House knows that to be the *case. Under these conditions, you cannot test the question of public ownership of railways by the Intercolonial, and there is not an hon. member in this House who will say that the experience with the Intercolonial is a fair criterion as to the success or failure of the public ownership of a great system of railway transportation. We now have that added to by many thousands of miles of railway,-added to not primarily because the Government of Canada wanted to embark on the purchase of railways but because of the colossal failure of the private ownership and operation of railways in this country. The whole railway situation, which is calling for the most earnest consideration of the members

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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?

An hon. MEMBER:

What about the Canadian Pacific railway?

Mr. ROW'ELL: My hon. friend asks what about the Canadian Pacific railway. Well, it is a magnificently operated railway and has been a great success. But it has been subsidized by public moneys and lands as few railways in existence have been subsidized, and I doubt very much if it could have been the success it is had it not been for the great assistance which it received at the hands of the Government of Canada. But to come back to the other railways. They are in the hands of the Government not because of ai^y failure of Government ownership hut because of the failure of private ownership and operation of railways in Canada. Tens of millions of dollars have been invested in railways in Canada for which the public will receive no adequate return, because of the duplication of lines over stretches of territory where that duplication is wholly unnecessary, and the people of Canada for a generation must bear the burden. The transportation of the people must suffer by reason of this enormous and wasteful expenditure of public money under private ownership, and as a result of the action of both political parties in handling the railway problem in Canada. We are faced with a railway situation to-day where millions of money have been invested in sections of railways which are not needed in the pub-

lie interest and for which the investors will never get an adequate return, for the traffic along these lines will not provide sufficient freight to enable them to earn a return. This condition of things is due not to public ownership but to private ownership of railways in this country.

Although public ownership and operation may not be as great a success as some of us hoped and believed it might be, or as some of my hon. friends feared, I venture to think it could not very well be worse than the experience we have had' in Canada in connection with the private ownership of railways. I mention that because my hon. friend asked a question.

We have public ownership of railways in Canada whether we wish it or not, and the taking over of the Grand Trunk is not embarking upon a new venture. It is the endeavour to make more safe and secure our existing investment in these railways. Do hon. members say that this is not a wise and prudent thing in the national interest? Concede all my hon. friend says about the cost of operating our present railways, concede all my hon. friend says about the shortage, the difference between revenue and expenditure in operating these railways, concede all that my hon. friend has claimed about the deficits-although I was quite'unable to follow his figures on many points-what does it mean? It means that we have this liability on our shoulders and unless we adopt some such expedient as securing this additional piece of railway, Canada will have to continue to bear that burden, will have to continue to meet these deficits, will have to continue to carry that huge liability without any immediate prospect of being relieved of the burden or of its being substantially reduced.

My hon. friend's whole argument absolutely lacks any business or common sense basis. We have got these railways, they are not paying at the present time and one reason why they are not paying is because we have not got a system which is complete in itself, we have not got the connections in the East for the important lines operated in the West. We want feeders in the East as we have them in the West, and one way to save the country from this annual expenditure which it must make in connection with its transportation system is to link up with this great system of railways in the East, the Grand Trunk railway with all its lines through the provinces of Ontario and Quebec, its great opportunities for gathering up freight to send out over our transcontinental railway and its great opportunities for

distributing freight from the West throughout the provinces of Ontario and Quebec. With such connections it should be possible to reduce these great annual deficits which we must continue to pay if we do not link up with this system in the East. Without that, as my hon. friend the Minister of Railways and Canals (iMr. Reid) in introducing the resolution pointed out, we must pay out millions of dollars to establish connections in the East. I appeal to my hon. friends opposite, I appeal, to any man of business common sense, looking at the _ matter quite apart from any question of public or private ownership, what would a business man do if he 'had a system of transportation such as the Government of Canada has, which could never be made to pay under existing conditions, and in which not millions but hundreds of millions of dollars are invested? What I ask would a common sense business man do? .

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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L LIB

Lucien Cannon

Laurier Liberal

Mr. CANNON:

Throw some more good money after bad.

Topic:   GRAND TRUNK RAILWAY 'SYSTEM.
Subtopic:   BILL, PROVIDING FOR THE ACQUISITION OF THE SYSTEM BY THE GOVERNMENT.
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October 21, 1919