Railways and Shipping Report
C. S. Gzowski, chief engineer of construction, Canadian National Railways;
Dr. W. J. Black, director of colonization, Canadian National Railways;
B. J. Roberts, comptroller of government guarantee branch. Department of Finance;
R. B. Teakle, vice-president, Canadian National Steamships;
A. H. Allan, general manager, Canadian National Steamships.
Canadian National Railways Bill 79
Your committee have had under consideration Bill 79. "An act respecting the Canadian National Railways and to authorize the expenditures made and indebtedness incurred during the calendar year 1931" amounting to $68,500,000 and have agreed to report the same without amendment.
Your committee have also had under consideration Bill 83, "An act respecting the Canadian National Railways and to authorize the guarantee by His Majesty of securities to be issued under the Canadian National Railways Financing Act, 1931" and beg leave to report the same without amendment.
The committee have considered the general report of last year's operations of the railway made by Sir Henry Thornton as president of the company and chairman of the board of directors and were partioidarly interested in his expressed intention to reduce the expenditures on capital account and wherever possible «n operation and maintenance. Yout committee heartily approve of such proposed action and recommend that for the present projects entailing capital expenditure be curtailed as far as possible.
Your committee desire to call the attention of the bouse to the proposal made by Sir Henry Thornton at one of the sessions of the committee. He referred to the serious position of the transportation business generally and recommended that a commission be appointed for the purpose of considering the whole question of Canadian transportation. Your committee regard such a recommendation coming from such a source at this time as worthy of the serious consideration of the government.
Canadian Government Merchant Marine
Your committee have had under consideration item 379 of the estimate's-loan to the Canadian Government Merchant Marine, Limited, to be applied in payment of deficits in operation of the company and of the vessels under the company's control during the year ending December 31, 1931, amounting in all to $588,500.
Your committee also reviewed the balance sheet of the company and are of the opinion that the amount of $588,500 included under item 379 of the estimates, is required for the purposes of the company and should be granted by this house.
Your committee believe that the time has come when the government should very carefully consider the abandonment of the Canadian Government Merchant Marine, and the making of arrangements with other shipping companies so that the external trade of Canada will not be jeopardized. In this respect we wish to point out that the total original cost of this
enterprise which was undertaken solely as a result of the exigencies of the war was approximately $80,000,000.
After almost ten years of operation there has not been a single year in which an operating profit has been shown by the merchant marine.
Throughout the whole period, a deficit of over $57,000,000 has accumulated, including depreciation on ships sold and interest due the government, but does not include accrued depreciation on vessels remaining in the fleet, which depreciation amounts to more than $17,000,000 in addition. Your committee has been informed that the ships are for the most part obsolete and only part of the fleet is now in operation.
Canadian National (West Indies) Services
Your committee have had under consideration item 380, loan to the Canadian National (West Indies) Steamships, Limited, whose steamships provide the services called for by the West Indies Trade Agreement.
Your committee note that the operations for the year ending December 31, 1930, resulted in an operating loss of $523,136.98, which is partly offset by the fact that previously a subsidy equial to $380,000 per annum was paid to a private company by the Dominion government for a similar service.
Your committee further believe that the steamship service established on the Pacific coast and known as the Triangular Service between Vancouver, Seattle, and Victoria should not have been established as it does not earn its operating expenses. We, therefore, recommend that serious consideration be given to immediate action looking toward the elimination of this loss.
Maritime Freight Rates Act
Your committee have also had under consideration item 382 of the estimates, to provide for the payment to the Canadian National Railway Company as required by the Maritime Freight Rates Act, of the deficit incurred during 1931 on eastern lines, the amount of the estimated deficit being $6,631,856, and in addition the sum of $2,450,632, representing the estimated amount by which the revenues of the eastern lines will be lessened during the coming year by the reduced rates granted under the Maritime Freight Rates Act in accordance with the recommendations of the Duncan commission.
By reason of the special consideration involved in the maritime railway situation, with which the house is familiar, your committee are of the opinion that these amounts are necessary to give effect to the Maritime Freight Rates Act in the operation of the eastern lines.
Your committee have -also had under consideration item 381, to provide the sum of $900,000 from which privately owned railways operating in territory eoveTed by the Maritime Freight Rates Act shall be reimbursed the difference between normal tolls and special tolls provided by that act. Your committee are of the opinion that this amount is necessary to implement the provisions of the act in that regard and should be granted by this house.
Certain questions relating to the salaries and emoluments paid to executive officers of the company were asked by members of the committee. and were by resolution of the committee submitted to a sub-committee for consideration. The report of the sub-committee has been re-
Railways and Shipping Report
ceived accompanied by a statement from the president of all salaries of $15,000 per annum and over, together with the names of the officials receiving them. The president, Sir Henry Thornton, has expressed the opinion that it is not in the best interests of the railway that the list of such salaries and the names of the recipients be published.
Your committee, while of opinion that many of the salaries are much too generous, and in some instances excessive, accede to the expressed wish of the president that the list be not published for the reasons given by him.
Your committee, however, are of opinion that the salary of the president stands on a different footing as he 'has a term contract calling for the payment of $75,000 per annum from the National Railways and all its subsidiaries, besides legitimate out of pocket expenses, which wras negotiated by the previous government and approved by order in council. Therefore, to all intents and purposes the salary of the president is a matter of contract with the Dominion of Canada and is a public document.
Your committee also are informed that in addition to the contractual salary of the president above referred to, he is, with the approval of the former board of directors, in receipt of other substantial amounts in the form of salary and emoluments, which he receives in addition to his contractual salary.
It has also come to the knowledge of your committee that the late board of directors in the year 1929 passed a resolution recommending the payment of an annuity of $30,000 per annum for life to Sir Henry Thornton, if his services to the railway Should at any time be terminated. Your committee are of opinion that such resolution was unnecessary and should be rescinded forthwith. If later on the services of Sir Henry Thornton are discontinued and his contract terminated, the matter of a retiring allowance may then be discussed on its merits, by the directors and the government.
In view of the decreased revenues of the company, and the economies being made in other branches of the service, your committee are of the opinion that the executive committee of the board of directors should immediately consider the whole question of salaries, allowances, disbursements, pensions and retirement previsions for executive officers and officials of the company, receiving salaries of $5,000 and over in order that every reasonable and proper economy should be effected. #
Your committee recommend thiat immediate action be taken in these matters and a report be made to the select standing committee on railways and shipping, owned, operated and controlled by the government, at the next session of parliament.
Your committee strongly condemn the practice which has grown up under which the National railways are chargeable with large amounts for payment for the social entertainment and other activities of officials on other than official business. Your committee recommend that this practice should be discontinued forthwith. Expenditures for such purposes are in the opinion of your committee, wrong in principle and practice, and should never have been permitted.
When it is necessary in the interest of the business of the railway that moneys should be expended chargeable to the railway for entertainment, then it should be approved by the executive committee.
In reporting the result of the conferences of the committee with the president and officials of the railway, your committee would draw the attention of parliament to the magnitude of the task wdiieh was referred to them by the house. In the opinion of your committee, it is a practical impossibility to conduct an exhaustive inquiry into the affairs and management of the Canadian National Railways and Mercantile Marine within the time at the disposal of the committee. The result of the partial investigation conducted by the committee is by no means adequate, complete or satisfactory. Full justice cannot he done in respect, of an undertaking of so great magnitude without much greater time than the committee had at their disposal. The committee desire to emphasize this phase of the matter to the house, and recommend that in order that the operations of the company be fully scrutinized, a thorough audit by an independent auditor, appointed by the government, should be made from time to time of all such matters and accounts as may be designated by the minister.' and reported to him. -
Your committee are glad to record that all the members present as hereinafter stated are unanimous in the foregoing report, namely:
Hon. R. J. Manion, Minister of Railways and Canals, Hon. J. D. Chaplin, chairman. I [on. Robert Rogers, Hon. W. D. Euler; and Messrs; Beaubien, Bell (St. Antoine), Botliwell, Cantley, Duff. Edset (Sir Eugene), Fraser (Cariboo), Gobeil, Gray, Hanbury, Hanson (York-Sun-bury), Heaps, Kennedy (Peace River), Mc-Gibbon, MacMillan (Saskatoon), Power, and Stewart (Lethbridge).
Your committee append hereto a copy of the proceedings and evidence adduced before your committee, for the information of the house and recommend that the same, together with this report be printed as an appendix to the journals of the house.