May 9, 1928

BANKING AND COMMERCE

MOTION FOB CONCURRENCE IN REPORT OP COMMITTEE


Mr. F. WELLINGTON HAY (North Perth) moved that the seventh report of the select standing committee on banking and commerce be concurred in.


LAB

James Shaver Woodsworth

Labour

Mr. J. S. WOODSWORTH (Winnipeg North Centre):

I believe I am in order today in making a few remarks on this motion. As I tried to say the other day, the work of the committee was somewhat limited in its scope. We were given to understand that we ought not to bring in any recommendation that would involve a change in the Bank Act, and this made the work of the committee rather academic in character. I would point out that it is impossible to bring witnesses from a distance, such as economists from the United States or Great Britain, who might be considered authorities in this matter. Further, we found some difficulty-those of us who were trying to present the standpoint of the general public-in securing suitable witnesses. I discovered that a number of business men who were complaining about inadequate credit facilities were not willing to come before the committee. Whether or not their contention was correct, they took the ground that if they passed any adverse criticism their credit might be endangered. As a matter of fact, therefore, all the witnesses who appeared before the committee, with the exception of one who

represented the Canadian Council of Agriculture, represented either the department or the banks.

While I think the report as presented fairly gives the main points that were considered, I should like to direct attention to the fact that other suggestions were also offered. For example, it was urged that there might be established small local banks and co-operative credit societies. The committee did not go into these matters in any detail. There were also a good many general criticisms of the present banking system. The bankers claimed that these criticisms were not well founded. In order to save the time of the house as far as possible I have summarized the claims of the banks as follows:

(a) That the small number of banks in Canada-four banks controlling approximately 70 per cent of the entire deposits (page 28)-is in the interests of Canada, (page 27).

(b) That according to the bank's code of honour, in the granting of credits, there is no discrimination against a business concern that is a rival to one in which a bank director is also a director. (pages 104-105). That is to say, that the charge that interlocking directorates is inimical to the welfare of the public at large is not well founded.

(c) That, on the contrary, interlocking directorates are a distinct advantage, (page 105).

It has been said, especially in western Canada and in the maritimes, that the concentration of headquarters of banks in Montreal and Toronto is not good for the east or for the west. The banks claim:

(d) That districts remote from headquarters are under no disadvantage, (page 44).

It was complained that in some instances business enterprises, especially in their initial stages, were not able to secure credits such as were necessary, and that private individuals had at this stage to do the financing of such concerns. That is the complaint. The claim of the banks is:

(e) That it is not the function of a bank to take the hazards of the commencement of a manufacturing business (page 102), but that any solvent concern in a liquid shape can obtain all the credit it can reasonably desire for legitimate purposes, (page 100).

Mr. A. E. Phipps was emphatic. He said:

No legitimate loan properly secured has been refused, from one end of Canada to the other, since I have been a banker, (page 44).

It seems to me that the general public will have to decide whether or not these statements of the bankers are in accordance with the facts. I might, in -passing, call the attention of the house to the fact that in Eng-

Banking and Commerce-Mr. Woodsworth

land bankers and other financial men, and industrialists, are considering whether or not the present system -is adequately meeting the credit needs of the country; and when men of the type of Sir Alfred Mond are beginning to give attention to a question of this character, looking to reform, it would seem that we might take some action in Canada.

The main proposal 'brought before the committee was undoubtedly the establishment of a central bank. The statements made in the report are, I think, quite fair; but they do not cover all the ground which personally I should like to have seen covered. I might suggest some of the things that are found in the evidence but not included in the report: (a) That under the Finance Act the government performed, with less machinery and expense, some of the functions of the federal reserve bank, but that the banks use the Finance Act to a very limited degree.

fb) That the control of the federal reserve banks over the money market through the open market transactions might be difficult to exercise in Canada, (page 70).

(c) That, in the opinion of Mr. H. P. G. Harding, governor Federal Reserve Bank, Boston: (1) The mutual savings banks in

New England have been highly successful, (page 82). (2) That in the United States

western cities would organize their own banks, (page 89). (3) That the federal reserve

banks have been helpful in stabilizing the price level by stabilizing the money market, (page 75). (4) That a federal reserve system

organized on the same basis as in the United States-that is, a regional system-would be impossible in Canada, (page 89).

Now there is only a bare mention in the report of what many of us consider to be the most vital matter, namely, the possible control of the general price level. As many of the members of the house will recognize, there are two distinct schools of thought on this matter. Some bankers and economists claim that there is very little relationship between the amount of money in circulation and (the price levels; others claim that there is a very vital relationship. Indeed, some go so far as to say that the amount of money in circulation determines the general price level and that if this is so the general price level may be controlled by a control of t)he money in circulation. That was considered true when gold was the chief medium of exchange. It is recognized that the issuance of bank notes also has an effect, but more than that I think these newer economists and some bankers such as Mr. Reginald McKenna are recognizing that credit facilities including the checking system,

which is responsible for something like 96 per cent or more of our business transactions today, have a very important effect on the general price level.

Again to summarize what I think hon. members will find in the evidence as submitted to the committee, I would say:

First, that bills and coins constitute less than 4 per cent of the total volume of money (page 42);

Second, that deposits created by loans are not kept, separate from savings deposits (page 40);

Third, that the bankers, in keen competition-to use the words of the bankers themselves-" are a practical people" "meeting the situation from day to day" and not considering the ultimate economic effects of the extension or contraction of credit (page 35);

Fourth, that there is no government control over the extent to which the banks can issue credit; that this is a matter of banking policy (page 3);

Fifth, the preponderant opinion of the witnesses was that only to a limited extent could the banks or a central bank influence the general price level (pages 34 and 84). Mr. Harding, in opposition to the position taken by Mr. McKenna and others of his school, agreed with Mr. Mellon that "neither the federal reserve system nor any other system can control prices (page 84).

It seems to me, Mr. Speaker, that whilst I can endorse the greater part of that report, we should add to it a clause providing that the committee which the Minister of Finance is urged to associate with himself, in addition to the work which they are asked to do, "should further explore the possibility ;of stabilizing the money market and preventing the recurrence of periods of inflation and deflation, with their attendant evils." In view of the very great evils which we have experienced in the past; the inflation that appeared to such a degree at the time of the war; the subsequent deflation which so adversely affected business in this country; the fact that students of this question would indicate to us that all through the past there have been recurring periods of inflation and deflation which have been responsible for upsetting general financial arrangements; for transferring large sums of money from one set of pockets to another and for creating great hardships alike for business men and labour people-in view of these considerations it would seem to me that the time is ripe for the government itself to give more care-

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fill attention to this whole subject, and to attempt to bring scientific knowledge to bear upon this most important financial problem.

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Motion agreed to.


RAILWAYS AND SHIPPING

MOTION FOR CONCURRENCE IN REPORT

LIB

William Thomas Goodison

Liberal

Mr. W. T. GOODISON (West Lambton) moved:

That the fourth and final report of the select standing committee on railways and shipping owned, operated and controlled by the government, be concurred in.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Hon. R. B. BENNETT (Leader of the Opposition) :

Strictly speaking this report

should be read, because it contains many clauses which in the view of many of the members of this house are wholly unwarranted, particularly those parts which endeavour to give approval to the method in which the accounts of the company aire kept. In our judgment those accounts are not kept in accordance with the methods which prevail in many similar organizations. It, of course, is a matter of difference of opinion as to how the accounts should be kept in order to exhibit correctly the operations of the system, and possibly this question arises from the fact that the system is divided into eastern and other sections which include parts of several lines. Under these circumstances, since the report has nor, been read, I only desire to state that the report does not represent the unanimous views of the committee, as I am informed, and certainly it does not carry with it the judgment of all the members who sit on this side of the house. We content ourselves merely with observing that the report concurred in is concurred in on division, and not with our consent.

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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Hon. C. A. DUNNING (Minister of Railways and Canals):

If the fact that the report has not been read has any effect in preventing debate upon the motion for adoption and if that is what my hon. friend has in mind, I would suggest that the report be read in order to permit discussion.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

All that was meant was

that, the report not being read, I was not going to point out the particular sections with which we disagree. It will be open to us to do so when the minister deals with the railway estimates, and my object in rising was merely to observe that we should not be understood as acquiescing in the report, that

[Mr. Woodsworth.l

the concurrence was on division and was not the unanimous sentiment of the house.

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CON

Thomas Langton Church

Conservative (1867-1942)

Mr. T. L. CHURCH (Toronto Northwest):

When this motion was up on Monday last it was agreed that notice must be given for the adoption of this report. This is the most important committee we have, but it has not carried out its instructions; meetings have been held in private, yet the house is asked to concur in this report. I did not feel that any useful purpose could be served by attending the meetings of this committee, which only touched the fringe of the subject. I am not a critic of public ownership; I venture to say that I stand second to no member of this house as a proponent of public ownership, but I do object to the way in which these railways are administered. For instance, the committee held a private meeting and went into the affairs of the merchant marine in private.

The Central Vermont Railway is in liquidation, and this government propose to spend $3,500,000 of the people's money in betterments on that road. Then again, the city of Flint, Michigan, can get a new station while the city of Hamilton, Ontario, can get nothing in this line but speeches and promises. I asked a question in this house yesterday with respect to the relationship existing between certain newspapers in this country and the railways; I asked for the production of the pass list and advertising list, but I was unable to get it. It is a well known fact that many of our newspapers just apply to the government for passes in exchange for advertising and for eulogy articles written in connection with officials of the railway. Just a little while ago the Canadian National Railways gave up a valuable right of way on Woodward avenue in the city of Detroit, of the Detroit-Grand Haven 'Railway on which they paid only $25,000 a year in taxes, in exchange for a right of way on a side street for which they have to pay $150,000 in taxes. This agreement was never considered or passed by this house.

Then there is the question of whether or not there is really a surplus in the operating accounts and annual statement. They have no sinking fund or proper depreciation fund. The annual statement is only a partial statement. It does not include the eastern lines or the Central Vermont or others, or all subsidiaries. It all is a matter of a play on bookkeeping and of accounts whether you have a surplus or not. The $193,000,000 also owed the government on old interest account is left

Railways and Shipping-Mr. Church

out, but it is in the annual report of the Department of Railways and Canals. It depends on what kind of accountancy you have. In the United States to-day, the railways, no matter what railway it is., are subject to the regulation and control and accounting system of the Interstate Commerce Commission. The accountancy, equipment of the road, condition of the roadbed, treatment of the public, grade and passageways, freight and passenger rates, are all brought under this public control of the Interstate Commerce Commission. The trouble with our railway is they are a law to themselves and can do as they like, and all the railway commission does is to issue a form of accountancy which is a scrap of paper with our Canadian National.

I asked for information last year in this parliament, when such a resolution as this had been rushed through in a few minutes and opposed the appointment of this committee but could get no information at all.

I am a supporter of public ownership, but only the kind of public ownership that the people of the province of Ontario have in their hydro, and not the kind of public ownership represented by this particular railway to-day. Mr. Speaker, private cars are being handed out, and passes are being given, both against the good of the railway and the Railway Act. I asked the minister yesterday for the return of these papers, and he said that it was not in the public interest to give me the particulars or that papers receive a hand-out of nearly $400,000 a year for this. I say that it is in the public interest to have this information. We should know what newspapers are receiving free transportation in exchange for advertising and for eulogy articles of the system and its heads. I have never asked for a pass on this system; I do not want any. I did ask this question regarding the newspaper flood of flattery, all for privileges costing $303,809.25 to the system:

1. What sums were spent on advertising in newspapers by the Canadian National Railways in 1927 and 1928, and to whom paid?

2. What sums were spent on free transportation in exchange for (a) newspaper space, (b) eulogy articles on the system and its officials, and to what papers in each case was transportation issued accordingly, (c) to aid in securing new business for the system?

3. How was an item of $175,162 increase in such advertising in 1927 and 1928 expended, and what papers benefited?

4. What was the number of passes granted each paper, and to whom?

Mr. Dunning:

This question calls for information of a kind that the management of the Canadian National Railways holds not to be in the public interest to divulge in detail, as publication, while serving no useful purpose, may place the Canadian National Railways in an invidious position with respect to competitors whose advertising appropriations are not subject to publication.

Even if it were advisable to bring down the information asked for in detail, it could not be given in the form of an answer to a question as it covers advertising of all kinds-newspapers. magazines, printing of booklets, etc.- and also not only the entire Canadian field, but such portions of the United States as are. served by Canadian National lines in that country.

The item under advertising in Canadian National accounts which the hon. gentleman refers to as having increased by $175,162 during 1927, covers advertising of all kinds throughout Canada and the United States. During 1927. the management expended on advertising in newspapers $303,809.25. In addition thereto there was issued transportation in lieu of cash for advertising space in newspapers in Canada only $197,225.39.

Did you ever hear such an answer? I know two papers where all hands just go in and get passes and pay nothing. The advertising part of it is all a myth and of no value. Little of it is given and it is of no value to the system. The whole system of accountancy needs to be reorganized. Is is a mere matteT of figures, and I just ask for a few days to give the members time to study this report. The committee they have only touched the fringe of the whole question. The committee just sat there and smoked a pipe or a cigar, and it all looked to me like a pipe dream and a smoke screen was thrown up to prevent a proper presentation of the real picture and the extravagant management of the stystem. I challenge anybody to look over these estimates of the merchant marine and discover anything. They went to work with 64 ships, and they sold without tender all but 46. They cleared the committee room when questions on the merchant marine were asked. Let me ask the minister if the Canadian Pacific Railway do not know everything that is going on in the Canadian National Railways? They do, and can tell all the inside affairs of the Canadian National Railways. Why were the head offices moved from Toronto to Montreal? Why should they be in Montreal? iMontreal is not a public ownership city; it never was and never will be. It is from the central regional area that most of the revenue comes. It was a sorry day that the railway offices were taken out of the public ownership province of Ontario. I would rather see these Canadian National railway offices established in Winnipeg, or Hamilton, or Vancouver, or some other place. They should never have gone where they did go, as headquarters of a great publicly owned system.

Last year we asked the government for a return of the railways' new rates obtained

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Railways and Shipping-Mr. Church

secretly from the Bell Telephone Company, over the head of the railway commission of this country. There was an application pending 'before the commission for an increase in telephone rates. The application was on the part of the municipalities to remove discrimination. While this was on the Canadian National Railways made a secret contract with the Bell for cut rates. The Canadian National railways board looks like a Liberal campaign committee of directors who do not direct. The service western Ontario gets from the Canadian National Railways, owing to poor rolling stock and terminals, is not fair to Ontario. Let me tell the Progressive members from the province of Ontario that it is a disgrace to any publicly owned road. A few months ago I was in Kitchener, the home town of one of the ministers; you could not get a train out of there on Saturday night after five or six o'clock. It is the same all through western Ontario generally and the trains and equipment are in some cases as old as the hills. What is the reason? I will tell you. This so-called publicly owned road took $22,000,000 of cash out of the old Grand Trunk in Ontario. They took $122,000,000 of credit out of the Grand Trunk. Where did they take that money and credit to? They invested it in what is known as the Grand Trunk Pacific. There has not been hardly one dollar spent since on the Grand Trunk railway in the province of Ontario, although the cream of the business is in Ontario and the chief earning power of the system is there.

I am not criticizing the president of the road personally, but I am criticizing his methods in the administration of the road. I made a speech at the party nomination of the member for Toronto West Centre (Mr. Hocken) along very similar lines, and I have been invited to go there again. I will speak there at the next meeting in his constituency. I do not need to take any lessons from him as a supporter of public ownership. I am a public ownership man first, last and all the time. He tried in 1912-14 to sell the street railway and the electric light company to the city for $32,000,000, but it did not go through. If it had, we would never have been able to take over our railway and would have had 10 cent fares forever.

We proposed a system of hydro radials in Ontario, the electrification of the Grand Trunk branch and suburban lines in the cities and towns of thih province. This was proposed by Sir Adam Beck in the province of Ontario, and the municipalities were prepared to take many of these old lines which were out of use, and some which had been torn up, and electrify them. Sir Adam proposed to take

many of the dead ends of the C.N.R. and electrify them. They extended from western Ontario down to Peterborough. They would have acted as feeders for the National railways. When Sir Henry Thornton arrived in this country he sent telegrams to the municipalities, and the project was defeated; the life work of this great patriot of the province. Sir Adam Beck has done more for public ownership than Sir Henry Thornton ever can do all his life. Sir Adam had an agreement to buy from the government the Toronto and Eastern railway, the Toronto Suburban railway, and the Niagara and St. Catharines railway, but Sir Henry Thornton vetoed it.

The committee was not interested in this matter. They held a meeting regarding the Canadian Government Merchant Marine. I have asked for a return on the matter, and I cannot get it. There was a report made about two years ago regarding the sale of sixteen ships. No tender was called for. Some of these ships cost $1,000,000, $1,250,000 or $1,500,000. I think sixteen of the smaller ships were sold without a tender. Some of them cost $1,250,000, and were sold for $50,000. That was the report made to parliament before the present minister was in the house.

We are asked to adopt the report of this committee. They asked a few questions in the committee regarding the merchant marine, and then they decided that the balance should be considered in camera, and the press were ordered out. The revenues and rates were not brought out at all. Under a proper public ownership system, like the hydro-electric, or the telephone systems of Alberta and Saskatchewan, every dollar of expenditure must be accounted for. In the case of the Hydro Electric Power Commission of Ontario there is $300,000,000 invested in heat, light and power and transportation. When Sir Adam Beck brought down his estimates in the legislature, there was no committee to whitewash the estimates; they were before the whole house and every dollar and every item passed the house-all the cards were on the table.

When you ask a question in the house here, you are told that it is not in the public interest that these things should be given out. In any properly conducted public ownership venture, like the hydro-electric, the utmost disclosures are made to the ratepayers, who are the shareholders. Why all the secrecy? The Canadian Pacific railway know anyway, first-hand, of the running of this "me too" road.

And now, Mr. Speaker, Sir Henry Thornton is going around the province of Ontario and making speeches nightly. He spoke in

Railways and Shipping-Mr. Church

Niagara Falls last night, and mentioned that he had seen the Chippawa plant at the falls. This plant generates an enormous amount of power, and is a real public ownership proposition, owned by the municipalities in the hydro. Sir Henry compilmented the engineers on the administration of that particular work. It cost $75,000,000. All the engineers are Canadian born, and, unlike the administration of this particular railway, everybody connected with it is a Canadian.

Who is Mr. Gaston? Mr. Gaston is a New York gentleman. He was asked in the committee if he was a lawyer and Sir Henry Thornton said last year that he was. He is not a lawyer at all. He graduated from the Yale School of Law; but that does not make him a lawyer. Nobody knows what he is receiving and apparently the work that he has to do is something that any young returned soldier lawyer in a law office could do. I believe in having Canadians put in charge of the administration of our roads which are being run under public ownership and in a policy of Canada for Canadians.

A few days ago I was attacked by a learned paper in the city of Ottawa on this question of public ownership in the administration of this particular railway. They said that my voice was the only one that was raised against this item. As long as I am a member of the house I am going to assert my right and privilege as a member of parliament to criticize the administration of the road, for the way Ontario has been discriminated against, the way the assets of the old Grand Trunk have been used elsewhere by the present head of the system, the way the great province of Alberta and the great maritime provinces have been discriminated against in the coal policy of this road. There was an order in council passed months ago in regard to the movement of coal from Alberta but it is still a dead letter, they say now the switching charges should be added1 to the rates. We will never get any coal brought down from Alberta if Sir Henry Thornton has anything to do with the matter. He would rather quote a rate of $9 to $14 a ton for carrying coal from Alberta and the result of that would be that we would have no business; whereas, if he would quote a rate of $9 a ton we would get the cream of the business. Sir Henry Thornton has done everything he can to defeat the development of the great coal industry of the country and to aid the Pennsylvania coal barons. Our coal industry should be a protectionist industry and one which should bring a great deal of relief and work to the people of Ontario and western Canada. Sir Henry has done nothing to assist the great coal industry in the maritime provinces or Alberta. He has sold sixteen merchant ships of a small type which could be used on the great lakes to go down to the seaboard as far as the ports of Nova Scotia and which could be converted to carry coal from Nova Scotia to central Canada and to cities like Hamilton during the summer.

I have great respect for and I like the Minister of Railways; but I would say, with all due respect, that the committee held only six or seven meetings and there are many other matters that should have been looked into. There is the question of the administration of the Central Vermont. There is the question whether the railway commission has not power to put their officers on the road the same as the Interstate Commerce Commission can do. If there was a proper system of accounting in connection with the system large deficits would be revealed in capital and maintenance. This matter came up on the debate on the address and also on the debate on the budget and it was shown that there is a large sum of money amounting to about $197,000,000 of unpaid interest owing to the government. If anybody else owed that money they would have to pay it, but now it is a mere matter of bookkeeping. That amount should be included in the statement given in the report. The statement in my opinion is not a statement at all, or only a partial one. The eastern lines are not included in it, nor the accounts of the Central Vermont or other subsidiaries. The administration of the Intercolonial has a large deficit, but this is put on the tax rate of the country by way of subventions to the maritime provinces and this is shown not in the statement but in a separate one. The hon. member for Toronto-Scarborough (Mr. Harris) put a very leading question to the committee but he could not get an answer. He asked for the assets and liabilities of the Central Vermont railway but the information was not available since 1926, as they say the railway is in liquidation and the case is before the courts. Yet they can show that the Central Vermont is going to require $3,700,000 for betterments. Where do they get that figure if they cannot show what the assets and liabilities are? Many other matters are left out of this particular statement that has been laid before the house.

There are a number of scrapped railways running out of Toronto; the old Canadian Northern, the Belt Line, the Toronto and Eastern, which could be used to give the people a service that they are not getting today. Sir Adam Beck would have bought the latter. What is the condition of affairs?

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They are tearing up parts of whole railways east of Leaside to Brighton and selling them as scrap. This was done without tender. They are tearing up part of the Canadian Northern bridges, ties, rights of way and everything. It is all very well to ask for a committee but I venture to say that if a proper independent investigation was held into the whole Canadian National Railways matter we would have something nearly as bad as the customs inquiry.

My former hydro leader, the late Sir Adam Beck, upheld the principle of public ownership and development of the great province of Ontario, but this province has failed to get a square deal or the rural places there a service from the National railways under public ownership. They took $122,000,000 out of the old Grand Trunk in credits and $22,000,000 in cash under private ownership, a road that was giving good service, that built up western Ontario and that was doing well, and they spent these assets elsewhere. As Sir Henry Thornton said in the city of Toronto the other night, the main part of the revenues of the Canadian National Railways to-day comes from the central regional area; but the trouble is that we have too much radio, too many frills and fads in the system, too many golf courses, too many deadhead passengers and hotels with deficits. I venture to say they have not an hotel that is a paying proposition to-day and last year the hon. member for Westmorland (Mr. Price) in a return to this house got a return of the hotel deficits showing that every hotel had a large deficit. Yet they proposed to build an hotel in Paris and now they are proposing to build an hotel in Halifax. They are proposing to build two or three new ships to carry on a service between Canada and the West Indies although they have sold, for a few thousand dollars in some cases, sixteen boats that were convertible for further use to the people of Canada.

The last time these matters were up in March I opposed a special committee for these estimates because I believed it would do nothing but whitewash the system. The hon. member for Toronto West Centre (Mr. Hocken) said then that I attacked the system.

I did not. I wanted efficiency and economy. He said that 'he represented ninety-five per cent of the people of Toronto. He did not represent one per cent of the people of that city in the 1913-14 purchase deals to acquire for $32,000,000 the Toronto street railway and electric light plant and all their intan-[Mr. Church. 1

gible assets. I venture to say that he does not represent the people of Toronto in his views that one must keep quiet and say nothing when Ontario gets the worst of it and the United States the best of it from the Canadian National.

The Canadian National have a piece of property at the comer of King and Yonge streets, railway offices, but they went to work and moved to the comer of King and Toronto streets, not once but two or three times. They had the telegraph offices of the old Canadian Northern at the corner of Scott and Wellington streets and they moved them to the corner of King and Yonge streets. Large sums of money have been spent in renovating these properties, but they use them for only a few months and then they move back again, backwards and forwards. They have moved backwards and forwards in this way at a cost of five or six thousand dollars in losses of renovations, business and fixtures, and the system allowed a lot of speculators to use the government's and railways' home towards a deal that fell through for a skyscraper at the corner of King and Yonge streets. There is a large exodus of Canadian university graduates from McGill, Varsity and Queen's to the United States. There have been a large number of articles on that question in the newspapers. Our graduates in electrical science were good enough to develop the whole Chippawa power scheme for Sir Adam Beck, which is the most shining example of engineering there is in the world, but they are not considered good enough by Sir Henry Thornton to be given a position in the engineering department of the Canadian National Railways, or the law department. They fill up with Americans like Mr. Gaston.

Who asked Sir Henry Thornton to go to Mexico? How is he able to leave the work of administering the Canadian National railways for five or six weeks? I asked for a return to be brought down on this subject in the house. A debate was not allowed upon my motion, but I have the return here, and I find a letter in it signed this way:

I have the honour to be, with the highest respect, Sir,

Your most obedient servant,

(Sgd) H. H. Wrong,

(For the minister)

The minister being His Excellency, the Honourable Vincent Massey, Envoy Extraordinary and Minister Plenipotentiary for Canada, Washington, D.C.-and he is I tell

Railways and Shipping-Mr. Church

you most extraordinary. You would think that we were back in the old feudal days of William the Conqueror, with all this vanity and flattery. Sir Henry Thornton must have an awful lot to do when he can be talking on the radio every night all over the country making speeches and promises, and out on the golf links, and going down to Mexico on a mission that was not in the interests of the people of this country. He talks of spending 15 or 20 millions on immigration also. In this return that was brought down I find this letter:

My dear Mr. Minister:

My government is desirous to invite Sir H. W. Thornton, President of the Canadian National Railways to visit Mexico in order to undertake a survey of the present organization and functioning of the Mexican national railway lines, so that he may bring to the attention of our appropriate authorities the suggestions for the reorganization of those lines which his long professional experience may think fit.

As my government understands that an express assent of the Canadian government would be necessary for Sir Henry Thornton to undertake this survey on behalf of the Mexican Railway lines, I have been instructed to approach Your Excellency, which I have the honour to do, to request Your Excellency's good offices near the Canadian government so that Sir Thornton may be given the necessary authority to undertake the aforesaid labours in Mexico.

Sir Henry stirred up a small sized riot in Canada and created more strife and dissension than good will. I think Sir Henry Thornton would be better employed trying to give service to the people of this country. He would have been for instance, better employed to go out to Alberta and see what he can do towards moving Alberta coal out to the central provinces, or he might go to the mari-times and see if he could not utilize the ships that are being sold for almost nothing, to bring Nova Scotia coal to central Canada than in going this time to Mexico or to-morrow to Philadelphia to help the coal barons there. The Mexico business was a farce and a mistake and did Canada no good. Let him solve Canada's ills first.

As one coming from the province of Ontario, I am not satisfied with the investigation which this committee made. The questions asked in the committee did not touch the fringe of the subject. The whole thing was a white wash and of no value whatever. Sir Henry Thornton talks now about electricity, but he was the very man to destroy in the province of Ontario the dream of Sir Adam Beck for electric radial railways which would have revived every dead Grand Trunk Railway line in Ontario and have acted as feeders for the Canadian National Railways main

lines. My hon. friend from Toronto West Centre (Mr. Hocken) used to be interested in the hydro radials and knows, and I am sorry that he was not more critical of the administration of the railways in Ontario and the raw deal Ontario has got. I attended meetings in his riding, and I know that the people in his riding would have been glad to have had the hydro radials which did so much to build up Michigan, New Jersey, Ohio and Pennsylvania.

Sir Henry Thornton, at a great cost, is buying these German engines, instead of using the hydro-electric energy in the province of Ontario for the electrification of our lines. These Diesel engines or electric units are made in Germany. True, they may have later a patent for them in the United States, but I maintain that we should be using our own electrical energy developed on the Chippawa or in the province of Ontario or Quebec, to electrify our suburban lines in these two provinces and bring feeders to the main line, instead of getting a lot of foreign type of Diesel German engines on which the wear and tear is very heavy, and which last only a few years compared with electric power and electrification of the suburban steam lines in industrial centres with trains operated with electricity instead of one coach by a Diesel engine.

There was a great lot of talk in the committee about the traffic which the Central Vermont railway brings to Canada. All that the Central Vermont is doing, when it assembles that freight away out west, is to bring it to the American seaboard through Canada. True, it goes to Portland, but that particular freight should be routed through all-Canadian channels and would mean more to Canada. It could be routed through to Quebec or Montreal by rail and water, or all rail, or be routed to St. John and Halifax by all rail, instead of that traffic being diverted to the United States. The same is true with regard to the shipment of our hard wheat, which is not being sent through Canadian channels and from Canadian ports to United States, lake Erie and American seaboard ports to mill.

I have read every line of the reports of this committee three or four times, and if this is the best that we can get from the investigation of the estimates by a committee, I think nothing is to be gained by referring estimates generally to a committee. The committee met some six or seven times and had some witnesses before them. It was the most obliging and polite committee on deport-

2828 COMMONS

Railways and Shipping-Mr. Church

ment I ever saw. It was, "Please Sir Henry this," and "Please Sir Henry that," and "After you my dear Alphonse," and "after you my dear friend Gaston-you first, not me." The report runs this way: Mr. Harris has asked for some report, and Sir Henry Thornton asks': "Have you got that report, Mr. Henry?" Sir Henry says, " I have got that report," and then Mr. Harris says, "We shall be pleased to accept it." Sir Henry presents it and then "Thank you, Sir Henry, thank you, thank you also, Mr. Harris." Then at page 125 of volume 5 of the evidence I find this: That Sir Henry after five years of

opposing Sir Adam Beck and his radials and electrification turns around and supports such a policy for suburban areas by electric units of one ear with Diesel engine when he could have had trains of hydro radials five years ago. I quote from the committee report:

Mr. Cantley: What success have you had with suburban car traffic, with either the Deisel or gasoline car? Are you extending that service?

Sir Henry Thornton: Yes, we have certain suburban branch line services which, under steam operation, have been conducted at a loss. We cast about to try and find some cheaper but equally efficient method of operation. In the course of our investigation we developed the Deisel electric unit, which we believe is the solution of the branch line problem or the solution of problems which involve the provision of steam service at a loss. We have built a number of these units and are putting them on wherever circumstances justify them. They have been highly satisfactory. (To Mr. Henry). Do you happen to have with you any figures on the subject?

Mr. Henry: I believe we have.

There was altogether too much " I believe ' and " I think " about this whole committee and the whole evidence. It is pretty nearly time we had a showdown about the way Sir Henry Thornton refused to work with the hydro-electric movement in the province of Ontario five years ago to bring the joy of living to the farmer on the farm and to the toiler and artisan in the city through the Hydro Radials. Michigan, New York, and New Jersey have all become the great states they are to-day through the great network of electric railway lines which they have developed as feeders to the trunk lines. In New Jersey you will find little villages every mile and a half or two miles, but Sir Henry Thornton, when a gilt-edged proposition was put before him by the hydro-electric municipalities of the province, backed by the province itself in 1923-24, threw the whole thing into the waste paper basket. He says, "My dear Mr. Harris", or "My dear Mr. Henry, we will buy a few more donkey Diesel engines and use them in Hamilton and other places throughout the .province", when we

could have had a great system of 1,000 miles of electric radials all through the province, at 'Peterborough, Brockville, London, Toronto, Windsor, Ottawa and many other towns, and have developed a system which would have saved this government the loss which the railway now sustains in the province of Ontario, by electrifying the old Grand Trunk branch lines and making them feeders to the main line of the Canadian National Railways. There are a number of bridge bills before this house at the present time, one at Sarnia, one at Windsor, and three across the St. Lawrence. What is the purpose? It is to build bridges where the Canadian National railways now have the cream of the business and own the territory. The Canadian National Railways declined to preserve .the territory and the local business of motor truck and motor bus competition at the territory tributary to these bridges and with the state governments or United States federal or municipal authority control these international bridges and their rates for the system and the public. The telegraph and telephone system accounts should not be mixed up with a lot of petty subsidiaries in the statement. They have a unit with net earning power of $700,000 a year.

There should be a survey of a plan for electrification of certain main lines for parliament. All betterments now go into capital. This is bad financing and we pay in long-time bonds for some of the betterment plans twice the actual cost, over thirty-year bonds, far beyond the life of the work. There should be a reclassification and revaluation and a physical survey .made of the entire railway at once. There is too much reference to the United States in rates, in accountancy methods. in depreciation plans. We are not in similar circumstances to class "A" American roads and ,our laws, federal and state, are different. Our slow Railway Commission should audit actively itself, and compel sinking funds and depreciation on a modem plan. The committee just dealt with a statement all old and just a post mortem. The auditors' system is merely one of checking; it is worthless to the country. No one knows what is going on. There should be a reclassification between operating and investment accounts and a reclassification of what belongs to each. At present there is no sinking fund that takes care of depreciation which is very rapid in the Canadian National Railways equipment and rolling stock. The same rule should be adopted as the hydro has adopted in Ontario. The huge increase yearly in capital is out of all proportion to the real book value of the Canadian National Railways to-day. There are

Railways and Shipping-Mr. Dunning

too many novices in the Canadian National Railways crying for the fads and frills of American railway associations. The Canadian National Railways, except on lines in the United States, has no depreciation or retirement reserve and is on an unsound and uneconomic basis at present. Had Sir Henry Thornton been alert to the traffic possibilities he would have got control of these proposed international 'bridges for public ownership as a means of mobilizing motor bus and motor truck lines to collect local business to feed the railway. But no. When you get down to private bills you find lobbyists there, representing the Canadian National Railways, actively supporting the granting of these charters to private promoters for speculation purposes. When he was asked to go into a rich district like the Red Lake district, he would not entertain the proposal; but when he is asked to take over a branch line that won't pay for twenty-five or thirty years, it is a different proposition. I intend to take the platform again when the proper time comes, as Sir Adam and I did for five years on the hydro radial program, and explain to the people throughout Ontario the raw deal handed to the province by this railway.

Topic:   RAILWAYS AND SHIPPING
Subtopic:   MOTION FOR CONCURRENCE IN REPORT
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LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Hon. C. A. DUNNING (Minister of Railways) :

Mr. Speaker, I do not intend to follow the hon. member (Mr. Church) who has just sat down in his travels from Toronto to Mexico and back via Germany and then across Canada. I rather agree with the leader of the opposition (Mr. Bennett) that detailed discussion of Canadian National Railway matters can most effectively take place when we are in committee of supply. To attempt to follow the lengthy address in which all sorts of statements regarding the system and its management are made, is not in my view the most effective way of dealing with business of such importance. If when we are in committee of supply my hon. friend has any questions which it is within my ability to answer, I shall endeavour to deal with them. I would, however, commend to all hon. members the study of the reports of the select standing committee on railways and shipping owned, operated and controlled by the government, in order that before the house does get into committee of supply with regard to Canadian National railway affairs there may be a general understanding of the work which that special committee endeavoured to do and also of the information which was placed on record for the use of hon. members.

In connection with Canadian National railway affairs the house adopted a number of sessions ago a practice which has been many times advocated by hon. members in relation

to the estimates of other departments of government. The house adopted, rightly or wrongly, what might be called the budget committee system, with respect to the accounts and estimates of the Canadian National Railways. That practice has been followed for a number of years, and was adopted again this year with the full consent of the house except, I think, of the hon. member who has just sat down. I think almost every other hon. member is convinced of the practical value of the investigation which can be made, and which is made, by a special committee of this character with respect to an enterprise such as the Canadian National Railways. Therefore I again commend to hon. members the study of the reports and evidence, which are all printed and at their disposal.

I desire to make reference to only one matter mentioned by my hon. friend from Northwest Toronto. I will not enter into his disagreement with his colleague from Toronto West Centre (Mr. Hocken). I am quite sure that that hon. gentleman is well able to take care of himself. But my hon. friend did make reference to what is a very serious matter if it is true. He stated, if I heard him correctly, that free transportation was issued to the newspapers of this country by the Canadian National Railways. He made a further statement which appeared to indicate that he had evidence that the Canadian National Railways illegally issued free transportation to people in the Dominion. Statements have been made in various places throughout the country touching upon this matter, and I should like to say to the house at this juncture that the provisions of the Railway Act with respect to the issuance of free transportation are very specific. The method provided by the Railway Act for the audit of free transportation is clear and definite. The Board of Railway Commissioners is the body that conducts the audit and certifies that the provisions of the act have been complied with. I have on many occasions investigated rumours of the improper issuance of free transportation by both our great railway systems, and I must say that I have never yet had an instance brought to my attention which turned out to be a contravention of the law. My hon. friend makes a direct statement in that regard, and, as minister, I would appreciate it if members who believe that transportation has been issued illegally by either of our great railway companies would bring it to my attention or to the attention of the Board of Railway Commissioners, which, as I have said, is the body responsible for the administration of the Railway Act in regard to free transportation.

2830 COMMONS

Railways arid Shipping-Mr. Dunning

Now, with reference to newspaper transportation, my hon. friend spoke of transportation issued to newspapers as if it were free transportation. No free transportation, Mr. Speaker, is issued to newspapers either by the Canadian Pacific Railway Company or the Canadian National Railways. But for many years before the institution of the Canadian National railway system it had been the practice of the railways to issue transportation to the newspapers in contra account for advertising. That is to say, every newspaper in Canada is from time to time in receipt of an order from the Canadian National or the Canadian Pacific to insert a certain advertisement. That advertisement is inserted. The newspaper has an account against the railway company. With respect to that account the newspaper can draw transportation to an equivalent amount.

Topic:   RAILWAYS AND SHIPPING
Subtopic:   MOTION FOR CONCURRENCE IN REPORT
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CON

Peter McGibbon

Conservative (1867-1942)

Mr. McGIBBON:

May I ask the minister a question?

Topic:   RAILWAYS AND SHIPPING
Subtopic:   MOTION FOR CONCURRENCE IN REPORT
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

Certainly.

Topic:   RAILWAYS AND SHIPPING
Subtopic:   MOTION FOR CONCURRENCE IN REPORT
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CON

Peter McGibbon

Conservative (1867-1942)

Mr. McGIBBON:

Is not this advertising

submitted to the newspapers without any expectation of the railway paying for it? That is, the newspapers are simply requested to publish the advertisement, and they are not paid for it except by way of free transportation?

Topic:   RAILWAYS AND SHIPPING
Subtopic:   MOTION FOR CONCURRENCE IN REPORT
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

Oh yes. Allow me to refer to the answer I made to a question by the hon. member for Toronto Northwest bearing on the point. It will be found in Hansard at page 2722. This is the concluding paragraph of the answer:

The item under advertising in Canadian National accounts which the hon. gentleman refers to as having increased by $175,162 during 1927. covers advertising of all kinds throughout Canada and the United States. During 1927 the management expended on advertising in newspapers, $303,809.25. In addition thereto there was issued transportation in lieu of cash for advertising space in newspapers in Canada only $197,225.39.

That is to say, the railway expended in cash not quite twice as much as it paid for advertising by the issuance of transportation. That answers my hon. friend's question.

Topic:   RAILWAYS AND SHIPPING
Subtopic:   MOTION FOR CONCURRENCE IN REPORT
Permalink
CON

William Garland McQuarrie

Conservative (1867-1942)

Mr. McQUARRIE:

I desire to ask the

minister if any record is kept of the transportation given to reporters and others connected with newspapers.

Topic:   RAILWAYS AND SHIPPING
Subtopic:   MOTION FOR CONCURRENCE IN REPORT
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

I have just dealt with that. Every bit of transportation issued to a newspaper for a reporter or for anyone else connected with that newspaper is charged up in the Canadian National accounts against the newspaper.

Topic:   RAILWAYS AND SHIPPING
Subtopic:   MOTION FOR CONCURRENCE IN REPORT
Permalink
CON

William Garland McQuarrie

Conservative (1867-1942)

Mr. McQUARRIE:

Giving details?

Topic:   RAILWAYS AND SHIPPING
Subtopic:   MOTION FOR CONCURRENCE IN REPORT
Permalink

May 9, 1928