March 8, 1928

CON

Hugh Guthrie

Conservative (1867-1942)

Hon. HUGH GUTHRIE (South Wellington) :

Mr. Speaker, in the first place may I be permitted to congratulate the house on the fact that the new forty minute rule is in operation for the first time during the course of a budget debate. I am one of those who had an opportunity of listening to a great many budget debates in this house, and I express it as my opinion that the new rule is working well, and that taking the general average, the quality of the speeches delivered since this debate began has been higher than that observable in previous debates. There has been more of concentration on the part of hon. members; they have been far more concise in their remarks, and I think the speeches which have been delivered from every quarter of the house have produced a better effect generally than those which we have been accustomed to hear in former sessions. I heartily support the new rule in every respect, Sir.

Since time is limited one cannot attempt to do more than touch lightly upon some of the many aspects of the budget as presented to parliament this session. I think in some ways the method of presenting the budget in this house is open to objection; there is room for a good deal of improvement. The nop-disclosure of so many important matters by the Minister of Finance may lead, in many instances, and does lead, to improper conclusions being drawn in regard to the actual financial position of the Dominion of Canada at present. No one could gather from the budget speech or from the public accounts which have been laid on

the table that the most important financial commitment of this country to-day is in respect of the Canadian National Railways. It far transcends in magnitude and importance all other conditions or circumstances in connection with our national finances. Yet in the budget speech offered by my hon. friend the Minister of Finance a few days ago, only one brief paragraph is devoted to matters pertaining to the finances of the Canadian National Railways. It is true that in a single sentence the minister announced that during the past year there had been an issue of guaranteed bonds by the railway company to the amount of $65,000,000. Apart from that brief announcement there is nothing to lead either the members of this house or the people of Canada to realize that the most important financial commitments of Canada to-day are in respect to the railway system owned by the Dominion. Now my suggestion is that a financial statement of Canada should furnish fuller information in regard to the financial position of the national railway system than anything we have before us at the present time. The Minister of Finance contents himself with producing a general balance sheet of the Dominion, but that is only one page of the ledger. Side by side with that general annual balance sheet should be a balance sheet, in concise form if necessary, of the Canadian National railway system; and if both pages of the ledger were produced side by side the people of Canada, as well as the members of this house, could form a better conclusion as to the real condition of our finances than is to be derived either from the budget speech or the public accounts which was laid on the table a few days ago. I do not suggest that the Minister of Finance is either the author or the originator of the present system. My suggestion to my hon. friend the minister is simply that on the next occasion on which he is called upon to make a financial statement in this house he will see to it that the most important financial commitments of this country be not disregarded, but be laid, with some elaboration, before parliament in order that hon. members may be able to realize the exact situation. After all. we all understand that this Dominion constitutes but a single political entity. There is but one government. It is true there are many departments of that government, but the departments of government are all intimately corelated and all thoroughly interdependent. There is but one common head, one common fund, one common liability, and one common responsibility. Indeed I think I might say in the language of the Apostle Paul: While there are many members there

The Budget-Mr. Guthrie

is but one body. " The eye cannot say unto the hand, I have no need of thee. Nor again the head to the feet, I have no need of you. And whether one member suffer all the members suffer with it." So it is with the government of Canada, responsibility of every public department finally rests in the body politic, which is the government itself.

Now this year's budget contains, perhaps, one notable feature. Since the last session of parliament the Minister of Finance has undertaken to have an audit of his departmental accounts by a firm of chartered accountants, and for the first time, I think, we find in the public accounts to-day a certificate from a firm of chartered accountants to say, that for the years 1924, 1925, 1926 and 1927 they have examined the public accounts of Canada and have found them to be correct. But

there is in that same certificate an express reservation in regard to the railroad liabilities of the Dominion. That is to be noted, Mr. Speaker, and it is likewise to be noted that the audit is only extended over four years. Now during the course of the present debate the Minister of Finance was asked as to how he came to have an audit of his accounts made^ by chartered accountants, and in reply he said that he had seen a speech of mine in the newspapers, and had sent that speech to a firm of chartered accountants in Montreal and asked them for an audit-I do not know whether it was an audit of my speech or of the public accounts of Canada. Well I want to tell the Minister of Finance that 1 have no complaint against the public accounts of Canada. I have no quarrel with this audit even. I have always accepted the public accounts as genuine and correct and I have never challenged them. What I have challenged on more than one occasion are ministerial statements made in this house and in the country in respect of those public accounts. And when ministerial statements do not agree with the public accounts I have always sided with the Auditor General and submitted that the public accounts were correct and the ministerial statements which disagreed with them were incorrect. Now if my hon, friend the Minister of Finance desires to send speeches to a firm of chartered accountants, I would suggest to him that instead of sending my speeches he send some speeches of his own and ask the accountants to make a report upon them. I refer specifically, for the information of the Minister of

Finance who is now in his seat, to the speech which he delivered in this chamber on April 10, 1924 and in which he made this statement :

tMr Onthrie.1

These two amounts, totalling $9,622,760.37, together with $20,786,349 surplus of revenue over total expenditures, reduce our net public

$30 409 109^37IarC^ hy the amount of

That statement was made in this house. It appears in unrevised Hansard in these words, it apears in revised Hansard in the same words, and in a special edition of his speech prepared at the instance of the Minister of Finance and sent broadcast through the Dominion. I maintain the minister's statement is not correct, and if the minister will read his own statement and turn to the public accounts of his own department he will find that instead of having a surplus of 830,000,000 odd on March 31, 1923, the public accounts disclose that there was a deficit of approximately $31,000,000. Now let him send his speech to the chartered accountants and let them report upon it. I will grant you it is probably a mistake on the part of the Minister of Finance; he has probably made a slip.

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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

No, no.

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CON

Hugh Guthrie

Conservative (1867-1942)

Mr. GUTHRIE:

He has probably made an error, but the slip or the error was rather an important one. Instead of a surplus of thirty millions the actual figures show a deficit of thirty-one millions, a difference in the public accounts of Canada of $61,000,000. The newspapers always give the speeches of the Minister of Finance great prominence. His supporters use them throughout the country on the hustings and the parrot-like propensities of his followers in this house have been fully displayed upon every political platform. They start off under the impression that the minister's statement in this house in 1924 was a correct statement. They do not know that he was $61,000,000 out in his calculation or in his statement. Why we heard very recently, in the by-election in North Huron, Liberal speakers claiming that there had been a reduction in the national debt of $166,000,000 during the last five years, notwithstanding the fact that the riding was flooded with pamphlets published by the Minister of Trade and Commerce (Mr. Malcolm) to show incidentally that, in four years the reduction in the net debt of Canada was only $105,000,000, The $61,000,000 mistake of the minister made the difference. Many Liberal orators actually claimed a reduction of $166,000,000. If that election had been prolonged another couple of weeks, some Liberal orator would have had the whole national debt of Canada paid off! Why does the Minister of Finance start his accounting with the year 1924? Why does he select a thoroughly artificial, arbitrary starting point? He has been a member of the Liberal administration or the Liberal

The Budget-Mr. Guthrie

party since they took power in this house, and he knows the attitude assumed in regard to this question by his predecessor in office, the Right Hon. Mr. Fielding.

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LIB

James Alexander Robb (Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

May I answer my hon. friend?

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CON

Hugh Guthrie

Conservative (1867-1942)

Mr. GUTHRIE:

The minister will have

a reply in this debate and he may answer then. I know the attitude assumed by the Right Hon. Mr. Fielding when he was Minister of Finance. He absolutely repudiated any responsibility for the year 1922. In his budget speech delivered in in this house on the 11th May, 1923, he referred to 1922 as a Conservative year and stated that only three months of it were under the control of the Liberal government. That is true. It was the Conservatives who prepared the estimates and arranged all the financial details for that year. Nobody would seek to charge the Liberal government with the year 1922, but Mr. Fielding always manfully assumed responsibility for the year 1923. The Liberal government had complete control of the finances of Canada for the year 1923. They prepared the estimates; they spent the money, and they are responsible for all that took place during that year, but the present minister wants to get from under in respect of 1923. What does Mr. Fielding say in regard to 1922? When he spoke in this house on the 11th of May, 1923, he had not a bad showing to make financially. He announced that he had received in ordinary revenue in 1922 $381,000,000; that he had spent in ordinary expenditure $347,000,000, and he was able to declare a surplus of $34,000,000 of revenue over expenditures. But he said that he must pay all capital and special charges which amounted to $18,000,000, and even after paying all these outgoings he was able to proclaim for 1922 an actual surplus of $16,000,000. But this is where the trouble came in. Railway financing for that year took $97,000,000 which Mr. Fielding paid out of the treasury of the Dominion of Canada, leaving a deficit in the public accounts for 1922 of $81,000,000.

What did Mr. Fielding say about the year 1923? He was also able to exhibit a very substantial surplus. He had a surplus of ordinary revenue over expenditures of over $62,000,000. Then he paid all of his capital expenditures and special expenditures amounting to $24,000,000 and he still had a balance of more than $37,500,000 for the year 1923. But again trouble arose through the national railways of Canada which called upon him to pay deficits amounting to $92,000,000, and the merchant marine amounting to $6,000,000, or a total deficit of $98,000,000, which were paid out of the treasury of 56103-71

Canada, leaving him after all calls had been met with a deficit of $31,000,000 for that year. Mr. Fielding delivered on that occasion his last budget speech and since that date the budget speeches in this house have been delivered by the present Minister of Finance. I have asked hon. members to note that the Minister of Finance takes as his starting point the year 1924, disregarding the fact that his predecessor always took the year 1923, as the starting point of the Liberal administration.

I come now to another branch of the question, that is in connection with the Canadian National railway finances. I received only two hours ago through the courtesy of the Minister of Railways and Canals (Mr. Dunning) a copy of the financial statement of the Canadian National Railways for the year 1927, and I have had time only to glance casually over that rather voluminous document and to satisfy myself as to certain salient features of it. I think this house received a few days ago in the speech of the hon. member for St. Lawrence-St. George (Mr. Cahan) more real and useful information and more sound criticism in regard to Dominion railway financing than it has received in this chamber in many years. I heard his speech; I afterwards read it with the greatest of interest and if in the figures which I quote I am not able to agree entirely with those quoted by him, all I can say is that I have before me the Canadian National railway report for the year 1927 which was laid on the table of the house yesterday and which he did not have an opportunity of examining when he made his speech. However any discrepancies in our figures are not very material. I was amazed when the hon. member for St. Lawrence-St. George announced in this chamber that the indebtedness of the Canadian National Railways, not to the government of Canada but to the investing public, now amounted to the enormous sum of $981,000,000. I find that in the statement just issued that figure is correct. My statements as to amounts are all made in round numbers; I am not dealing in odd figures. Of that sum of $981,000,000 which the public have as a first charge against our railways, $657,000,000 is guaranteed by the Dominion of Canada as to principal and interest, $93,000,000 is guaranteed by the various provinces and the unguaranteed portion amounts to $231,000,000. But for the whole $981,000,000 the Dominion of Canada is responsible. This country is the owner of that road subject to a prior mortgage. These bonds on maturity must be paid and the interest on them must be maintained and

The Budget-Mr. Guthrie

paid. This country can never afford to allow any creditor of that railway system to seek to put it into liquidation or to wind it up under the Railway Act. We must protect it. Therefore in the final analysis we are responsible for 8981,000,000 worth of bonds, the larger portion of which we have actually guaranteed.

But on the other side of the page what do we find? We find that in addition to that, the obligations of that railway system directly to the Dominion government are as follows:

Cash advances $595,000,000

Unpaid interest 226,000,000

Appropriations account, government railways 436,000,000

Total, about $1,258,000,000

Such is the claim of the government of Canada which comes subsequent to the claim of bondholders to the extent of $981,000,000, making a total indebtedness in respect of the national railways as of this date of $2,237,000,000. These figures are astounding. It is difficult to comprehend them. They bulk too large for the ordinary mind or imagination but they are the figures which are submitted to parliament by the Minister of Railways in the national railway report tabled yesterday.

What is the position to-day in regard to these railways? According to this report, the position is that the total operating revenue last year was $256,000,000, and the total operating expenses $214,000,000, and the year closed with a net revenue from operation of $42,000,000. I think we should congratulate the president and the board of management of the Canadian National Railways upon the splendid showing they have made during the past year, and of all men I think the one who should be the first to tender his thanks and congratulations to the president is my hon. friend the Minister of Finance.

What was the situation in connection with the national railway on January 1, 1923. The situation then was that the net operating revenue of the Canadian National system was 84,155,000. That figure was announced by Sir Henry Thornton in a speech in Toronto on the 13th of February last. On January 1, 1923, the net earnings of the road were $4,155,000. I pass now to 1924. A change had taken place by that time, through the efficient management of Sir Henry Thornton and his board of directors, and the net operating revenue had risen in 1924 to $18,000,000 odd-a rise in one year of $14.000,000-so that the treasury of the

[Mr Guthrie.]

Dominion of Canada, which is in charge of the Minister of Finance, was relieved of railway payments that year to the amount of $14,000,000 which had to be paid out of the treasury the year before. In 1925 there was a further increase in net operating revenue to $33,000,000, as against $4,000,000 in 1923. In 1926 the net operating revenue had increased to $48,000,000, and in 1927, the year just closed, these earnings had been $42,000,000.

Now what do the figures I have just given for these four years mean? The increase in 1924 was $14,000,000, in 1925, $29,000,000, in 1926, $44,000,000, and in 1927, the year just closed, $38,000,000, or a total increase in the net earnings of the railway in those four years of $125,000,000-1125,000,000 which formerly had to be withdrawn from the treasury of the Dominion, but of which the treasury during the last four years has received the direct benefit on account of increased earnings of the road. Nobody will pretend-not the Minister of Railways, for he knows too well, nor the Minister of Finance -that this government or any member of it is entitled to a particle of credit for the improved showing made in connection with the Canadian National Railways. The management of the road is supposed to be entirely divorced from government control. It is under the absolute control, so far as management goes, of Sir Henry Thornton and his board, without government interference, and they are entitled to the full credit for the result obtained-$125,000,000 of relief for the treasury of Canada in four years. Now look at the boasts of this government and of the Minister of Finance that in the last four years they have paid off $105,000,000 of the net debt of this country-$20,000,000 less than the actual relief that they received from the Canadian National railway system under the management of Sir Henry Thornton, and under conditions which do not entitle the government to one particle of credit

Do you not think, Mr. Speaker, that in a proper financial statement presented to this house, the facts and figures I have given should be set side by side with the general financial statement showing the reductions of the national debt. The Finance minister has actually received in relief $125,000,000 from the railway, and he has paid off from the net debt of Canada in those four years only $105,000,000, and yet he calmly accepts congratulation and applause for himself and hi.s friends accord it to him. The real fact is that the Finance minister and the Minister of Railways are endeavouring to appropriate

The Budget-Mr. Guthrie

to themselves the credit that is due to Sir Henry Thornton. They are endeavouring to bask in the reflected glory of the president of the Canadian National Railways without there being the slightest foundation for their claiming any credit for his achievement.

But what has been going on during the last five years in financing the debts of the national railways? During the last five years the bonded indebtedness of the national railways has been climbing at an alarming pace. On December 31, 1923, the bonded indebtedness of the national railways to the public was $823,000,000; on December 31st last the bonded indebtedness to the public was $981,000,000; in other words, the bonded indebtedness of the railway has been increased in that five year period by $158,000,000, for which this country has granted its guarantee of payment both as to principal and interest in every instance- $158,000,000 of increased liabilities, and only $105,000,000 of decreased public debt in this country. Can one fairly separate the figures? Should they not be considered together? Should they not be set side by side and expounded together by the Minister of Finance to this house? Do the people of Canada or even the members of this house realize the extent to which these guarantees are growing? I met a man in Ottawa, not in this house, who asked me why it was that Canada was called upon to guarantee the bonds of the Canadian National Railways. I assume that every member of this house knows why. Because the Canadian National railway system is an insolvent system, and I am sorry to have to say that you will find, if you look at the railway statement, that on the 31st of December last it was insolvent almost to the extent of half a billion dollars, according to the statement signed by Sir Henry Thornton, the president of the road, or to be exact, the road is behind $443,000,000. Do you wonder that the railway cannot raise a dollar on its own bonds? Do you wonder that it cannot go into the money market and borrow a dollar on its own securities unless it puts up special pledges of rolling stock and the like?

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

The same as any other

road.

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CON

Hugh Guthrie

Conservative (1867-1942)

Mr. GUTHRIE:

The railway has to come

to the government and get its guarantee in order to float a loan, and the moment the Finance minister puts his name on the back of one of these bonds it becomes a positive liability of the Dominion of Canada which some day the Dominion treasury will be called upon to pay. My hon. friend the Minister of Railways shakes his head. In the excellent speech which he made in this house a few days 56103-711

age he said: We have followed this principle of not recognizing these guarantees as liabilities or debts because in the province of Ontario the provincial government does not recognize the guaranteed bonds of the Hydro Electric Power Commission as debts of the province.

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

No; I must beg my hon. friend's pardon.

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CON

Hugh Guthrie

Conservative (1867-1942)

Mr. GUTHRIE:

That is the one case which the minister cited-

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

As an instance.

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CON

Hugh Guthrie

Conservative (1867-1942)

Mr. GUTHRIE:

*-in justification of the method of book-keeping adopted by this government. Let me point out to him that the cases are not parallel. This government is guaranteeing the bonds of an insolvent company; the Ontario government is guaranteeing the bonds of perhaps the strongest financial corporation in North America to-day.

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

Why do they guarantee

them?

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CON

Hugh Guthrie

Conservative (1867-1942)

Mr. GUTHRIE:

For every dollar of

guarantee of Hydro Electric Power Commission securities in Ontario, there are many, many millions of dollars of physical assets in excess of the guarantee.

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

Why the guarantee then?

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CON

Hugh Guthrie

Conservative (1867-1942)

Mr. GUTHRIE:

The guarantee is for the purpose of allowing the hydro-electric commission'-it is really but an association of certain interested municipalities-to go into the money markets and be recognized as a financial institution and be in a position to secure money at the lowest possible rate of interest.

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

Exactly.

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CON

Hugh Guthrie

Conservative (1867-1942)

Mr. GUTHRIE:

Does my hon. friend not see the distinction between guaranteeing the bonds of an insolvent institution and those of a perfectly solvent institution?

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

I do not admit that it is insolvent.

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CON

Hugh Guthrie

Conservative (1867-1942)

Mr. GUTHRIE:

In the one case you incur liability, in the other you do not. If my hon. friend does not see the distinction I am not going to labour the matter any more, because I am satisfied that I cannot make him see it.

Now, Mr. Speaker, the point which I desire to make is this, that if credit be due to anyone in respect to the reduction of the net debt of the' Dominion, that credit is directly due to the management of the Canadian National Railways; for the improved showing which they have been able to make and for the relief which for the last four years they

The Budget-Mr. Guthrie

have been able to afford to the treasury of Canada. Without one move of the hand or - one stroke of the pen by the Finance Minister or any of his colleagues, Sir Henry Thornton and his board have accomplished that feat, and to them credit ia due, and to them the thanks of the country should be returned.

I have only one other observation to make, and I have but a few minutes in which to make it. There is another aspect of the budget I do wish to mention, and it is in regard to what I call the iniquitous sales tax. On a former occasion during the present session I mentioned the sales tax, and I told the Minister of Finance that so far as it was in the power of an opposition to make demands upon the government, this opposition was going to demand the abolition of the sales tax during the present session of parliament. I regret that the tax has not been abolished; it has merely been reduced to that point at which it was seven years ago when the Liberal government took office. The sales tax was imposed as purely a war measure. The war has been over for ten years, but this administration still maintains that iniquitous burden on the people' of this country. My hon. friend the Finance minister may wave his hand and announce that he has made another cut in the income tax, and the wealthy men of Canada will appreciate that no doubt; but if he had wiped out the sales tax he would have conferred a benefit, not upon the wealthy, but upon the people of the Dominion least able to bear that tax. I had to smile when in delivering his budget speech the Minister of Finance came to that particular portion where he discussed the changes in tariff rates in regard to woollens. What do you think he said? Does anyone remember? These are his words:

In revising the woollen schedules two main considerations have been kept in mind, the vital necessity for warm clothing in a climate such as ours,-

That is the first consideration, and I remember the seraphic smile that passed over his face as he slowly raised his eyes to heaven and in measured tones pronounced those solemn words. What do his changes in the woollen tariff mean to the ordinary man in the street who buys a suit of clothes? They involve a difference of about two cents a yard-all the manufacturers' profit in many instances, I grant you. That difference represents seven, eight, or nine cents on a suit of clothes, something that will never be passed on to the purchaser but will be absorbed by intermediaries. Now, cannot I warm up his heart in regard to the sales tax? I agree that

[Mr Guthrie.]

ours is a cold climate in the winter season; people must wear woollen clothes. By retaining this sales tax of three per cent a man has to pay an extra ninety cents on. a $30-suit of clothes. Do the people of Canada yet realize that they are paying this iniquitous tax into the treasury? Do they know that this war burden is still in force? I know the complaint is made from time to time that the retail merchants are still keeping up prices, but do the people realize that on $100 worth of purchases of boots and shoes, clothing, furniture, everything save food, they have to pay to-day $3 into the treasury of Canada to help in the reduction of the national debt? I do not believe they realize that. Four per cent they paid last year, five per cent the year before, and six per cent for a while. And with what a grand flourish the ministers of the crown announced these reductions! Last year the minister said: We have reduced the sales tax twenty per cent. It sounded like a large reduction, but it was only one per cent as a matter of fact-one cent on a dollar. The other day the minister announced: We have reduced the sales tax 25 per cent. The ordinary people thought: It must be gone this time sure. But only another cent has been shaved off the top, and for every $100 worth of clothing, hats, mitts, boots and shoes, to be worn in this cold climate of ours, three dollars must be paid into the treasury, although the war was over ten years ago. What did the minister say last session? " Why," he said, "how can I do it?"

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LIB

Hewitt Bostock (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Time.

Mr. FRANK S. CAHILL (Pontiac): Mr. Speaker, I regret that the new rule compelled you to call "time1" on my hon. friend from South Wellington (Mr. Guthrie), who, to my mind, has this afternoon delivered the greatest eulogy on the Liberal party that I have ever listened to. He made out a most complete case for the administration, as he usually does when he prepares his speeches. He started by saying that the members of the government were an entity, one body, and he quoted scripture to prove that every member of the cabinet was responsible for all governmental action regardless of the department in which it originated. He castigated my hon. friend from St. Lawrence-St. George (Mr. Cahan) for saying anything about the Canadian National Railways, and then he proceeded to show that under the Liberal administration, which had selected Sir Henry Thornton as the president and manager of the system, it had been brought out of the condition of chaos in which he and his party left it a few years ago, and he praised Sir

The Budget-Mr. Cahill

Henry Thornton for the marvellous surpluses earned by the system during the time he has been in office. If anything more were required to demonstrate the virtues of this government than the fine eulogy pronounced by my hon. friend this afternoon, I do not know where you would look for it. Certainly when you eulogize the success and progress of the Canadian National Railways, that very satisfactory condition of affairs cannot be separated from the prosperity of Canada generally.

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March 8, 1928