March 15, 1933

CON

Robert James Manion (Minister of Railways and Canals)

Conservative (1867-1942)

Mr. MANION:

Of the Canadian Pacific

Railway?

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LIB
CON

Robert James Manion (Minister of Railways and Canals)

Conservative (1867-1942)

Mr. MANION:

It is about one-sixth of

that.

C.N.R.-C.P.R. Bill-Mr. McIntosh

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LIB

Cameron Ross McIntosh

Liberal

Mr. McINTOSH:

Turn to page 15 of the report and you will find it is exactly what I said. That is another prejudiced presentation I find in the report of the commission.

Let me turn now to another. On the same page in the report we find an item dealing with rentals for rolling stock. In that connection the Canadian National Railways is debited with over $23,000,000, and the' Canadian Pacific Railway is credited with $15,000,000. In other words, the commission has drawn the attention of every reader of the report to the fact that there is a difference between one rolling stock rental and another rolling stock rental of approximately $38,000,000. What is the fact? The commission makes the statement that:

Whereas in 1922 the Canadian National had 12'7 per cent more passenger train cars than the Canadian Pacific, in 1931 it had 18'1 per cent more. In 1922 the Canadian National Railways had 34-4 per cent more freight cars than the Canadian Pacific and, in 1931, 40-9 per cent more. The average mileage operated (first main track) of the Canadian National system was 39-6 per cent greater than that of the Canadian Pacific. The ratio of freight car ownership of the Canadian National system is thus found to approximate closely the difference in the actual mileage operated by the two systems. Generally speaking, the Canadian National has been abundantly equipped.

Well, the Canadian National system is abundantly equipped now, but what about it in 1923, 1924 and 1925? In what condition was it up until the last year or two? The commission did what? Whether purposely or not, it failed to note that while in 1922 the Canadian Pacific cars were modern and up to date, those of the Canadian National system were old wooden boxes which had to be replaced, because other roads refused to accept them on their lines. That is another prejudiced presentation, and when I read it I naturally come to the conclusion I can have no confidence at all in the report.

But let me proceed; let us turn to capital expenditures as they are shown at page 19 of the report. We are told again that the Canadian Pacific system is confined to Canada while, as a matter of fact, it is not. The Canadian National system is again presented in an international light. What difference does it make? It makes a difference in the capital expenditures of the Canadian National Railways of at least $58,000,000 not mentioned by the commission at all. Then, if we take the figures at page 19, and divide the Canadian National Railways capital expenditures by the number of miles in the system, what do we get? We get about $19,000 per mile. If we take the capital expenditures of the Canadian Pacific Railway and divide them by the

EMr. Manion.]

number of miles in the system we get what? We get approximately $20,000 per mile. What does that mean? It means that from the standpoint of capital expenditures the Canadian National system did not spend as much as the Canadian Pacific system, although it appears to have excited the commission a great deal, and prompted it in the report to take a fling at the Canadian National system wherever possible.

Now let me take up another point. At page 52 of the report the commission said:

When considering the scale upon which branch line extensions and acquisitions, as well as hotel expenditures were made, and railway and steamship services duplicated, it is impossible to avoid the conclusion that the board of directors and the management of national railways were amenable to political influence and pressure, which it would have been in the public interest to have withstood.

This is a sweeping statement, and no doubt the commission thought it very eloquent, but what do we find? The investments of the Canadian National and the Canadian Pacific

are as follows:

Canadian

Branch line National

construction.. .. $ 73,256,570 Branch line

acquisition 18.780,309

Hotels 31.828,234

Steamships 7,201,117

Ocean steamships..

Canadian Pacific $ 65,067,288

5,347.378

71,148.772

6.339.302

50.271,336

$131,066,230 $198,174,076

So after all the Canadian National did not spend money like water, as the government and its propagandists say : they did not throw money to the winds. They took cognizance of wise railway development and safeguarded every dollar of public money spent on branch lines and railway development. I would change that paragraph with regard1 to political influence and pressure to read thus: "When

considering the scale upon which branch line extensions and acquisitions as well as hotel expenditures were made, and railway and steamship services duplicated, it is impossible to avoid the conclusion that the board of directors and the management of the Canadian Pacific Railway were amenable to influence and pressure it would have been in the public interest to have withstood."

I would balance the picture; my figures go to prove that if such a statement should have been made at all it ought to have been made with regard to the Canadian Pacific in the first place rather than the Canadian National.

That is the fifth prejudiced presentation I find in this report, and therefore you cannot wonder if I do not put much credence in it. I do not believe it was necessary to have a

C.N.R.-C.P.R. Bill-Mr. McIntosh

royal commission to investigate transportation in Canada; I think that investigation should have been carried on by the Minister of Railways and his department. I believe he could have saved a great deal of public money had he done so. The minister quoted Sir Henry Thornton and President Beatty as having put themselves on record in favour of a transportation commission, but I do not think their statements had very much effect on the policy of the government. I believe the government determined to appoint this commission, and I do not think they should try to protect themselves in any rearguard action by saying that the sentiments of the presidents of the two roads had anything to do with the creation of the commission at all. .

In his speech the minister said this was a cooperative bill. When I heard that I thought of that quotation from Shakespeare, which I might paraphrase as follows, "Methinks the Minister of Railways doth protest too much." This is not a cooperative bill at all; it is a coercive bill. Anyone who reads the bill must realize at once that it is compulsory from first to last, and that is why I am opposed to it. I thought the minister made a splendid speech; he discussed the transportation problem dispassionately, as I think it should be done. At the same time I think it is well that we should put ourselves on record for or against this measure, and so far as I am concerned I am against it. The minister went on to say:

There is, however, every expectation, particularly after the events of the last week, that we shall in the near future experience that revival in business which we confidently anticipate.

AVe are to have a revival in business because of the upheaval which occurred in the United States, according to the minister. I do not think we shall have any such revival as a result of some international event; I believe international action will have something to do with it, but I believe a business revival, like charity, should begin at home. So I think it would have been better if the minister had put himself on record as being opposed to the fiscal policy of his own party. Only if his party is driven out of power will we experience a national revival which, in common with an international revival, really will get us somewhere.

Then the minister went on to say that as a matter of fact it was not so much the wheat and grain traffic that was the paying traffic of the railways, as the fact that the people of the west were selling their products at a reasonable price and had the money with which to purchase goods from some other section of the country, thus providing return

traffic, and the total traffic brought about the prosperity of the railways. That is sound logic, but I do not think we are going to have any return traffic while the policies of this government are in operation. I believe we must have a different policy. We sell our wheat, our cattle, our pigs and so on for almost nothing, and we have no buying power which would mean full cars coming back from eastern Canada. Therefore I find it hard to believe that there will be any real revival of business until this government is driven out of office.

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CON
LIB
LIB

Charles A. Stewart

Liberal

Hon. CHARLES STEWART (West Edmonton) :

Perhaps there has been no bill before the House of Commons at this or any other session which was of so much importance to the railways of Canada and to the people of the country as the bill which is now before us. This legislation will have far-reaching effects and I have listened with considerable interest to the speeches that have been made both in its defence, by members of the government, and in (opposition by members on this side. Needless to say, everyone in Canada who has a stake in the country is tremendously interested in the idea of making a success of public ownership. I doubt if there are many hon. members or many people in Canada who do not feel that the least that can be done is to give the best opportunity possible to the public ownership and administration of this great utility. That was the object which the recent government had in mind. I for one am going to confess that when I joined the government in 1922 I had some doubt whether a great commercial enterprise of this kind could be successfully managed and operated under government auspices, but after ten years' experience and despite the criticism made of the administration and operation of the line, it can be said that it has been quite as efficient as its privately owned competitor. I do not think anyone who has given careful consideration to the history of the Canadian National Railways for the last ten or twelve years will dispute that statement. I know there are hon. gentlemen in this house who hold the opinion that a privately owned system is much superior to a publicly owned system, but those who criticize the publicly owned system, and indeed some of those who criticize the privately owned system, should bear in mind that throughout all these years

3038 COMMONS

C.N.R.-C.P.R. Bill-Mr. Stewart (Edmonton)

the people of Canada have enjoyed lower rates, both in passenger and freight traffic, than have our neighbours to the south upon their privately owned railways. That is something which we must not forget.

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CON

Thomas Cantley

Conservative (1867-1942)

Mr. CANTLEY:

That is not universally true.

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LIB

Charles A. Stewart

Liberal

Mr. STEWART (Edmonton) :

Almost universally true. My hon. friend should not complain.

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CON
LIB

Charles A. Stewart

Liberal

Mr. STEWART (Edmonton):

My hon.

friend's locality is enjoying a preference of twenty per cent over the rest of us.

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CON

Thomas Cantley

Conservative (1867-1942)

Mr. CANTLEY:

The rates are still fifty per cent higher than they were in 1912.

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LIB

Charles A. Stewart

Liberal

Mr. STEWART (Edmonton):

I am not speaking of the rates in effect in 1912; I am speaking of those which have been in effect for the past ten years and comparing them with the rates which have been in effect in the United States. We should not forget this fact when we are critical of expenditures made for whatever- purpose upon these lines.

I listened with a great deal of interest to the speech of the Minister of Railways (Mr. Manion). I agree with him in his plea that we should view this question dispassionately and, as far as humanly possible, not from a political standpoint. Personally, I propose to view it in that way. At times I resented some of the criticisms made of the administration of this railroad while it was under the control of the government of which I was a member, but I think it can be said that most hon. members of the house have tried to be fair in their criticism of this great national institution.

No one will deny, and the minister does not deny, that the situation with respect to our railways, both national and privately owned, is extremely critical. But we must not forget that the same thing can be said, with scarcely a single exception, of every other business in this country. We all know of industries which were thought to be stable and beyond question as to their financial standing but which now find themselves in difficulties. We must admit also that mistakes have been made in the management of our railroads, but we must remember that this management was human the same as the management of other institutions, not only in our country but in every other country of the world. These are days when our faith in our country and its commercial institutions is rather severely shaken.

Perhaps I may be pardoned for interjecting a little politics at this point. While the present government perhaps cannot be held responsible for the major difficulties of to-day, it can be held responsible for a considerable portion of the difficulties facing this institution which we are now discussing as well as other institutions in the country. The fact that barriers have been placed in the way of trade has contributed in no small degree to the difficulties of the Canadian National and the Canadian Pacific railways. I cannot conceive of any individual engaged in the transportation business who would be in favour of trade restrictions to such an extent that they practically force the cessation of operations. I made a computation some time ago and found that we have spent something in the neighbourhood of over five billions of dollars upon our transportation system. By this I mean the steamships, [DOT] the necessary port facilities and everything needed for the transporting of goods in and out of the country. Nearly one-half of that huge amount has been expended with a view to the carrying on of international trade. When we erect barriers against that trade, is it any wonder we find ourselves in our present position? Is it any wonder we are seriously alarmed about our financial situation and particularly about the situation facing our transportation system?

I have no complaint to make as to some of the suggestions made by the minister, but I have a great many complaints in respect to the provisions of this bill. I agree with what many of my colleagues have said, that there is evidence in this bill from start to finish of the unloading upon or the delegating of responsibility to a board over which this government, this house or this parliament will have little or no control. I am entirely in favour of a reduction in the board of directors, b.ut I am sorry that the minister has interjected trustees in their place. I would be entirely in favour of a board of three directors, and I must disagree with many of my hon. friends on this side when they say that there should be sectional representation upon the board. If complaint could be made of any one thing it would be that in the past we attempted to give sectional representation and representation to labour and other crafts. All of this was unnecessary and in my belief led to some of the difficulties which were experienced in the administration. I am entirely in favour of a board of three directors. I refuse to call them trustees, and I shall have some opinions to offer later on with respect to this matter.

C.N.R.-C.P.R. Bill-Mr. Stewart (Edmonton)

I should like to state what I consider to be a few of the salien't facts with respect to this situation, and in doing so I shall not go back beyond 1920. Let me refer to the evidence given by Mr. Hungerford before the commission, because it meets entirely with my approval and because he says, but in a much better way, what I would wish to say. I shall not cite the statement which he made as to conditions prior to 1921, but this is what he says about the situation in that year as it affects the Canadian National Railways.

The situation which confronted the new management of the consolidated properties was an extremely difficult one and it had a great multitude of problems to solve. The Grand Trunk Pacific and The Canadian Northern were not entirely completed nor equipped for operation and the earlier constructed lines of the latter company were in a very poor physical condition; while the Grand Trunk and intercolonial were badly run down as a result of war pressure and financial limitations. All of these groups were very short of rolling stock and what was owned was generally in a poor condition of repair. _

On practically all of the lines the condition with respect to ties, rails, ballast, bridges, buildings, and other features of like character was most unsatisfactory; terminal facilities required enlargement and rearrangement to permit of satisfactory and economical operation; the coordination of the various groups so as to operate as a single system involved the construction of numerous connecting lines and rearrangement of facilities. Altogether, the physical condition was such as to preclude giving even reasonably satisfactory service.

Beyond all this, the management was faced with the following combination of conditions: -

(a) Property bankrupt by a very wide margin, i.e., capitalized far beyond its earning power.

(b) Lowest average traffic density of any large system in North America.

(c) Very low freight rates as compared with other countries.

And I am confident Mr. Hungerford was comparing it on that occasion with United States lines.

(d) Necessity of spending large amounts of money to keep certain lines in condition to

operate at all.

(e) The necessity of spending large amounts to place the property in reasonable and economical working condition.

(f) The insistent demand of the public for the construction of branch lines, grade separations. stations and hotels, and for a higher standard of service generally.

That was the condition of these lines in 1921. It was well said by both the hon. member for North Bruce (Mr. Malcolm) and the hon. member for Shelburne-Yarmouth (Mr. Ralston) who, speaking of this question, went more into detail with respect to these matters, that fair value-and I shall perhaps except one or two items-was obtained for the expenditure of the money that went into

the lines. In 1930, when our government went out of office, we felt that the lines were in such a position that in at least one or two years they would be taking care of the interest charges due to the public. I well remember, and I beard with a good deal of satisfaction, the statement of Sir Henry Thornton on that occasion and indeed the observation of the present Minister of Railways after he took office, that so successful was this institution that within a period of three years it would be in a position to pay its way. I know that difficulties arose and I repeat that while the government of the day were not responsible for all of them, they must be prepared to assume a fair share of responsibility for some of the difficulties in which the railroads now find themselves. Hon. gentlemen opposite, rightly or wrongly, felt they were going to improve not only the railways but commerce generally by the policies which they said they would put into effect if returned to office. In that regard they kept their word; they did put their policies into effect, with disastrous results. I sincerely trust that when the budget is brought down next week they will remove some of these obstacles to trade and give some assistance in rehabilitating the railways.

Speaking of 1930, one must not forget the added burden that was thrown upon the management of our railways by the employees who were kept on and who were really not required in the service. All credit is due to the government for keeping them on, but this caused an addition to the burden of railway administration. It is true that these men had to be employed somewhere and the government did their part in providing employment or retaining them in employment when their services were really not required, but to that extent they made the position of the railways just that much more difficult.

I want to deal now for a moment or two with what Mr. Hungerford suggested and which in my opinion should be the main features of the bill. I am leaving out his evidence and simply stating what I believe was sane and reasonable advice to the commission in assisting them to bring in a report that would be satisfactory and would lead to some solution of the difficulty. Let me at this point say that I do not wish to confuse any evidence that might be given by Mr. Hungerford with my own deductions with respect to some of the difficulties under which the railways are operating. This is his suggestion :

Having regard to all the circumstances I believe the best ultimate results will follow the adoption of the following policies:-

3040 COMMONS

C.N.R.-C.P.R. Bill-Mr. Stewart (Edmonton)

(1) Maintain present status and organization of the two railways.

(2) Cooperation between the two companies as far as feasible subject to the condition that in any case, neither company shall suffer loss, and that one or the other, or both, shall secure substantial advantage.

(3) Continue the present policy of effecting every practicable economy in operation.

(4) Take all reasonable measures to combat highway competition.

(5) Restrict capital expenditures to:

(a) Items necessary for safety of operation.

(b) Items ordered by competent authority or obligation assumed by agreement.

(c) Items which will undoubtedly earn a full return on investment.

In view of past experience and future prospects as I see them, I believe that these measures will best meet the circumstances, particularly as there are certain encouraging features in the Canadian National Railways situation as follows:-

And I think this is absolutely true.

(1) During the period under review, operating expenses have been increased much above normal by rehabilitation work and this may now be regarded as fairly complete.

The minister took considerable credit for the reduction in operating expenses effected during the last year or so.

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CON

Robert James Manion (Minister of Railways and Canals)

Conservative (1867-1942)

Mr. MANION:

I did not take any credit personally.

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LIB

Charles A. Stewart

Liberal

Mr. STEWART (Edmonton):

I am merely citing what my hon. friend said. If he would prefer to give the credit to the officials of the company I am quite content. The above mentioned statement confirms the reason it was possible to put into effect many of these savings. I am not going to enter into that because, as I said before, former speakers have covered the ground fairly thoroughly. But I want to reiterate that the money expended upon these lines, resulting in the position in which they found themselves in 1930, renders it much easier to-day to effect economies than otherwise would have been the case. He continues:

(2) Capital expenditures in the future will be on a much reduced scale as the general improvement of the lines has been largely completed and no considerable new mileage is likely to be constructed.

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CON

Robert James Manion (Minister of Railways and Canals)

Conservative (1867-1942)

Mr. MANION:

What is the date of that, please?

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LIB

Charles A. Stewart

Liberal

Mr. STEWART (Edmonton):

That was the evidence given before the royal commission. Quoting further from Mr. Hungerford's evidence :

The railway is now operating in every way on a more economical basis and with a return to a more nearly normal trend of earnings it will undoubtedly earn the interest upon securities in the hands of the public and something besides.

I read that into Hansard because I for one implicitly believe that that statement is true. I believe that with reasonable economy and efficient management there is no doubt at all that the line will do as was suggested by Mr. Hungerford in giving his evidence. Despite the fact that the horizon looks very dark at the moment, I do not think it does very much good to be talking about it, I believe that we should if at all possible cooperate in measures which will bring about a return of prosperity. Cooperation may not be possible because we seem to be so widely divided upon perhaps the most important question that we have to discuss in this house. I have cited the evidence given by Mr. Hungerford because he is a man of very wide experience, with thirty-five years spent in railway operation, and he states that in his opinion the future is not so dark as it is depicted by some of our friends who are critical of the railway itself.

Coming to the bill itself, I have stated that I am entirely in favour of a board of three directors. With such a board I believe that a lot of sectional influence can be eliminated and perhaps we can get away from certain expenditures which have been incurred in the past because of sectional influence, not political but sectional, which was brought to bear upon the administration.

I am also in favour of giving the board wide powers, and in favour also of the board having control over every vestige of administration. But I might state here the reason why I differ from the statement of the Prime Minister. I do not for a moment pose as one with the wide knowledge he may have with respect to law, but when he stated in the House of Commons the other day that it was not the people of Canada but the bondholders who owned the road and were in control of the system, I think that his statement was very wide of the mark. If you, Mr. Speaker, or I were a bondholder and we were not receiving our interest, I wonder against whom we would take recourse in respect to the interest on a government-guaranteed bond, whether it would be against the property itself, or against the government which was behind that guarantee. I merely suggest that in passing because I am not going to take time now to enter into an argument as to the correctness of the statement of the Prime Minister. I assume, Mr. Speaker, that the peiople of Canada do own this enterprise, and that they are responsible as regards the bonds of nearly every private bondholder who has invested his money in this enterprise, and the people of Canada will have to see this enterprise through.

C.N.R.-C.P.R. Bill-Mr. Stewart (Edmonton)

It is for that reason, Mr. Speaker, that I object to the name "board of trustees," because it has all the semblance of a board placed in charge of an institution in bankruptcy, and I do not believe that this line is in bankruptcy. Despite the fact that our friends opposite are placing this country in a very hazardous position by pursuing their policies, I do not believe that Canada is on the verge of bankruptcy either. I believe that the people of Canada, as in the past, will come through their present difficulties.

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LIB
LIB

Charles A. Stewart

Liberal

Mr. STEWART (Edmonton):

My hon.

friend from Charlevoix-Saguenay (Mr. Cas-grain) says, under a Liberal government. I will qualify my statement to this extent, that if this government remains in office it will have to change its policies to bring the country through its present difficulties.

Again I reiterate that I am entirely in favour of a board of three directors for the reasons that I have given, and to that extent I will support the bill. But when we are conferring such exceedingly wide powers upon the board of trustees it does seem to me, despite the promise of the Prime Minister to reinsert in the bill the provision against amalgamation, that we are not sufficiently safeguarded against the disposal of the assets of the property, and when the proper time comes, in committee of the whole on the bill, I propose to move an amendment providing that the board shall not in any way dispose of the properties comprising the system without the consent of the governor in council. Despite a provision against amalgamation, which the Prime Minister promises will be reinserted in the bill, it does seem to me that under the provisions of the bill as it stands, the board can proceed to divest itself of the property. Then, in another part of the act, further powers which are very wide indeed are conferred upon the board with respect to the arbitral tribunals. In a sentence, Mr. Speaker, what I object to in this legislation is that it places in the hands of this board powers that they should not have. I repeat that I am prepared to give them every power to deal with the administration of the line and the operation of the road without let or hindrance, and they can spend the revenues that are derived from the operation of the road, as was the privilege of the old board; but to say that the board can lease or otherwise dispose of the properties of the company without the consent of the governor in council seems to me to be going much too far in the way of handing over authority to the board.

Then as regards their appointment, what in the world is the necessity for all the provisions embodied in the bill in that respect? It seems to me that the system now in vogue under which the responsibility is placed upon the government itself and the governor in council, for the appointment of members of the board, should remain. I do not know what on earth is the necessity for the enactment that reduces the responsibility of the governor in council for these appointments. I am not going to quibble over the term of office, whether it should be five or seven years, but I do say that with respect to the appointment of this board of trustees, and with respect also to the disposal of the property in any way, both these matters should be in the hands of and under the control of the governor in council.

Mr. MANIOiN: Some of the strongest

protests against it being in the hands of the government came from my hon. friend's friends in their speeches in this house. Quite a number of them took the attitude that the appointments should not be in the hands of the government.

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LIB

Charles A. Stewart

Liberal

Mr. STEWART (Edmonton):

I have

already said that I did not subscribe to all that has been said on this side of the house. I am voicing my own objections, as I am free to do.

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March 15, 1933