That would be better. Now, the capital account of the Canadian National Railways is rather a mixed affair. But, for the last three or four years, perhaps before that, we have been reducing the capital expenditure. I want to make it quite clear to hon. gentlemen that the Canadian National management was not handed a railway system; it was handed a conglomeration of various entities all over the Dominion of Canada, many of them having no connection with any other part of the system. The management was told: You take this mass and whip it into some kind of shape so that the various entities will work together. I do not believe any management in the world could have been found to excel the present one in the attempt to bring some kind of order out of the chaos that existed; in linking up the machinery that was handed to them. Do hon. gentlemen know that in this system there are more than one hundred different companies? Criticism has been made of the accounting department of the Canadian National; of the expense of it, and of the tardiness with which the annual report is brought down. But balance sheets have to be made out for eighty-seven different entities before a general balance sheet can be Struck off for the Canadian National Railways. It is a marvel to me that they are able to get out a balance sheet at all the same year, because no other company with a railway thait is a real railway, the different parts of which are built to work together, has anything of the kind to do. I want to say again that in trying to whip into shape these hundred different companies, keeping separate accounts, as must be done with regard to these entities in the matter of securities-the work done by the Canadian National accounting department is a marvel among railway men in this continent. Let me give you an illustration. Each one of these entities has its own financing. Suppose the Prime Minister represents railway A, and he wants to borrow. Railway B, in the person of the leader of the opposition, endorses the note. He in turn gets the leader of the Progressives to endorse his note. The leader of the Progressives, in turn, gets the whip of the Ginger group to endorse his note. Then, t.o make the circle complete, the whip of the Ginger group gets the Prime Minister to endorse his note. Now, the financing has not got out of the family, but the financial
transactions have been numerous and the amounts involved are considerable. If more money is wanted for one of these entities, the circle is again completed, but beginning, perhaps, with my hon. friend the leader of the opposition. Now, all these entities and the securities issued, the guarantees given, the relation of one security to the other-which is underlying and which is not-have to be taken into account before we really know what is involved in the whole system. The financing of the Canadian National system is the most intricate thing I have ever tried to study. Hon. gentlemen say we ought to reduce the capitalization. This is my view about the capitalization-
As I pointed out a moment ago, reorganization of the finances of this mass is a great task. But until a thorough investigation is made of every security, of the physical value of each line compared with the securities issued on it; of the practicability of each line as a going concern-until that is done, no question of capitalization can be properly considered, because no man in Canada-and I say it advisedly-now understands this system.
He understood the Canadian Northern, but he did not understand the Grand Trunk. I am not saying a word in criticism of the financing; it had to be done in that way. But at the present moment, with my concurrence, a thorough investigation is being made of the entire system, the securities on each line, the physical value of each line, and the practicability of its being a going concern, now or in the near future.
the report, I hope, will be on the table of the House at the next session; it will take months to do it. Then the people of Canada and the Parliament of Canada will know exactly what they have and what it is worth. Until that is done we cannot have any reorganization of capitalization, but the moment it is done, I
believe, some steps ought to be taken by parliament, in conjunction with the Canadian National, looking to the adoption of an altogether new system of financing in connection with the system.
Under present conditions-and I do not want any person to be disturbed about this-with all this mass of intricacies that nobody has been able to unravel, the Canadian National Railways cannot under any management pay carrying charges if we take into account the amounts advanced by the government. The people of Canada could not stand rates which would be sufficiently -high to carry all this under our present arrangement. But there is a note of encouragement: in a portion of these interlocking finances that I have tried to describe by using the leaders in the House as an illustration, there probably is a not inconsiderable amount that can be washed out. If the entities of the Canadian National system owe some of these amounts to each other and not to the public or to the government, intercorporate accounts, if that is the right term, may show that fact; and, as they are all under one system, such obligations could, under proper safeguards, be wiped out; and if any large amounts of that kind be found it will be encouraging to the Canadian National system. Until that is done we will have to go along as we are, but the investigation to which I have referred will enable the people to know what they have and what it is worth. Whether there is amalgamation or co-operation or individual operation this investigation is essential in the first place, so that we can arrive at a definite decision as to what Canadian National ownership means.
It will be seen from the accounts that there is an amount of something over two billion dollars of liabilities of the Canadian National system. But that is hardly a fair statement, though for bookkeeping purposes and in order to show all investments in the National railways in Canada it is essential. From that two billions should at once be taken nearly half a billion that is invested in Canadian government railways, that never paid and never were expected to pay any interest, and which investment is not an indebtedness of the Canadian National Railway system at all. It is true that the Canadian National does not pay interest, but it is nevertheless true that in the statement placed before parliament and the people of Canada, the cost of these government railways is put down as a liability of the Canadian National. To my mind that might well be deducted from the liability of the Canadian National railways.
Let me point out further, every improvement that is made on the Hudson Bay railway, every improvement that is made on the Intercolonial, every improvement that is made on the Prince Edward Island railway or on the Transcontinental, is placed in the estimates of the Canadian National railway; and, although these amounts do not go into the interest-bearing assets, year by year they are added to the capitalized indebtedness of the Canadian National railway. These amounts year by year ought, in the minds of the people at least, to be deducted from the amounts expended by the Canadian National railway.
Let me point out another phase of this question. A company owned line, if it is required by the Board of Railway Commissioners to build a viaduct, for example, has the question of the apportionment of the cost decided by the commission. Under an act passed some years ago-I think I was the author of it myself-the government sets aside a certain sum of money each year, under statute, to be applied to the construction of viaducts throughout the Dominion of Canada, and in that act it is provided that the Board of Railway Commissioners shall apportion the cost, a certain amount to the municipality, a certain amount to the railways, and a certain amount out of this government fund. Now the railways that are under private operation, and these include the company railways of the Canadian National as well, get money out of this fund to assist in the construction of viaducts; a certain contribution is made by the municipalities, and the company pays the balance; but the Canadian National, when it makes an improvement of that kind on the government railways, gets no such aid from any person, but has the cost of that entire improvement charged against the capital ac-
count of the Canadian National railway. I say that is another item which we ought to bear in mind when we are discussing the cost of the Canadian National railway.
Now take our United States lines. Hon. gentlemen have spoken in this House-and I am not criticizing them at all-of the expenditure on our United States lines and the service given by them, and some of them have asked that this service be discontinued. Let me point this out to hon. gentlemen: We have several thousand miles of railway in the United States. I pointed out a few moments ago that the duty of service to the community through which a railway runs rests on the railway, because they usually get some compensation for that. A railway company cannot, unless there be good reasons, rob any community of a reasonable service, and when hon. gentlemen opposite tell us that we ought to take up the rails on certain parts of our United States lines, let me point out that these United States lines are under the control oi the Interstate Commerce Commission and of various laws .and statutes of the United States, and this parliament itself would not have the power to interfere with a reasonable service on those lines or to take u,p one foot of rail unless the consent of the Interstate Commerce Commission was given. In Canada our own commission regulates these matters largely, but in the United States the Canadian National lines are subject to the Interstate Commerce Commission, and must be so; it would not be right if it were anything else.