March 14, 1939

LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

Faith, I suppose.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

Well, to a certain .extent his faith has been rewarded. But I am still wondering what it was that prompted the minister to come and sit in this parliament.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

I think it is true that every hon. member of this house is here because he wished to serve the public interest.

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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

I am glad to have that statement from the minister. He prefers serving the public interest to seeking monetary reward. That is what I am getting at. If the minister and other hon. members of this house can serve the people of this country without the urge of monetary reward, why cannot the manufacturer of munitions be on the same basis? That is all I am asking. The minister says it requires the incentive of monetary gain; I believe that munitions can be produced without the incentive of monetary reward, just as so many hon. members of this house are prepared to give their services in the interest of Canada.

Further I believe that once you open the door to profit-making in the manufacture of munitions, the profit cannot be limited to five per cent, no matter how many audits are made of the books. I think it has been proved over and over again that these limitations do not limit. I would far rather see the government itself go into the production of munitions as far as practicable. I am

satisfied the government could do it on an efficient basis, just as the Ontario government runs its hydro, the city of Toronto its street railway system, or the city of Winnipeg its hydro. There is in this country to-day wherever you go a growing feeling of hostility to the making of profits out of armaments and munitions. When men are asked to serve in the military forces for SI.10 a day it is not a question of profit as far as they are concerned; it is a question of duty to their country. In the same way we should expect men to serve their country in time of need by producing munitions without profit.

I notice that the bill provides for the appointment of one paid officer, the chairman, and three others who will be given their out of pocket expenses and a per diem allowance. I am wondering what incentive there is to those three men to give their best services on this board. As to who is to comprise the board, I have just as much faith in the officials of the government who are in a way directly responsible to parliament as I have in any persons who may be put on the board. I believe that in .many respects this bill will not achieve the purposes for which it is intended. All it will do is create another department of government. I do not know where there are any greater experts outside than we have inside the service. Past experience with boards of this kind has not shown them to be very successful. All I hope is that if the bill goes through in its present form, at least there will be appointed to this board men of such a calibre as to merit the confidence of this house and the country.

Under the provisions of the bill now before us the functions of the board will not be very important, because once they have rendered a decision on certain contracts, those contracts will still come under the jurisdiction of the permanent officials of the Department of National Defence and the Department of Finance, and their decisions will ultimately have to be approved by the governor in council. That seems a cumbersome way of doing business. I would prefer to see a simpler method of awarding government contracts, a method under which those who award them will be directly responsible to this house.

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Hon. R. J. MANION (Leader of the Opposition) :

I wish to say only a few words at the present stage; I shall reserve any detailed suggestions until the bill is in committee. Unfortunately the demands on the time of all hon. members are such that we have not as much opportunity as we should like to study questions of this kind. However I have read the bill a few times, and I have read over again the speech of the Minister of National

Defence Purchasing Board

Defence (Mr. Mackenzie). As other hon. members have emphasized, I believe the bill is one of very great importance; I cannot think of any subject before the people of Canada to-day which is of more importance than the proper handling of the money that is to be spent in huge amounts by the Department of National Defence.

I want to refer briefly to one or two remarks made by the minister in regard to selected lists of contractors under past governments. In the first place, of course, I know nothing about this; I accept the statement of the minister in regard to the number of contracts let to those on selected lists. I had nothing to do with that department; I had my own troubles in the department of which I was the head, and had little time to follow the doings of other departments. At the same time I remind hon. members that during the time the Bennett government was in power we did go through a world depression, and an attempt was made at that time to allocate contracts of various kinds in such a manner as to relieve unemployment in various parts of this country. I also agree that possibly the use of selected lists may at times be the best way to deal with contracts. I do not wish to go into that question at length.

There is this also to remember: that in that period the whole world was hoping for peace, as unfortunately we cannot do with such confidence now. The German dictator had not come to the zenith of his power as he has recently. We all remember how Great Britain refrained from rearming, as many now think she should have done. We in Canada were in the same position. I made it my business to look up the amounts expended on armaments by Canada in the last ten years. I find that for the five years we were in power the total estimates of the Department of National Defence for defence purposes amounted to some $75,000,000. This year alone an expenditure of $63,000,000 is proposed.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

I believe that includes some amounts for unemployment relief.

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

Probably it does, but that amount is almost equal to the total for the five years during which the Bennett government was in power. For the past two years the figure was $70,000,000, just about equal to the total amount spent during the five years of the Bennett government. I am not giving these figures in any spirit of criticism; I believe that with present world conditions we must be prepared to defend ourselves. As I said during the debate on the address Canada cannot sit back and depend upon other countries, however friendly they may be, to defend us if we are in trouble. Because of this huge expenditure, however, it seems to me all the more necessary that we should do everything in our power to avoid the errors of the past, if errors were made, as no doubt they were.

I have never questioned the statement that errors were mad'e during the war, though I have never checked up to see if that was so; and I presume such errors were serious. All the more reason, therefore, that at this time, when thank God the world is not at war, we should be very careful so to spend this huge amount of money that there cannot come from the public any condemnation of what we call our democratic parliamentary system.

To a certain extent I believe hon. members to my left, the Cooperative Commonwealth Federation, are right when they say the public demands or at least desires nationalization of the entire manufacture of munitions in Canada. The hon. member for Rosetown-Biggar (Mr. Coldwell) admitted, I thought very fairly, that this is too much to hope for. I forget the exact words he used, but he admitted, in terms with which I agree, that such nationalization is really too much to expect. However, I think if we could get nationalization without too much in the way of capital investment by the government, and without getting into government manufacture on a huge scale, it would meet with the approval of the people. At any rate the people do desire, in fact they demand, that there must be no unfair profits, which is what I would call profiteering, in regard to these expenditures. In other words if they cannot have nationalization, they demand that we must have full and absolute control of profits.

With the object of the bill and the principle behind it, as I said the other day, I believe we all agree; that is, the principle of cutting down profits as far as possible. Whether or not this bill will accomplish that end I do not know; some of its sections I think require elucidation, and when we are dealing with it in committee I intend to ask certain questions and make certain suggestions in an endeavour to improve the bill. To show what can be done by private enterprise, however, I should like to refer to the Canadian Annual Review of 1918, which contains a very good account of the work done during the war by the imperial munitions board. Even though it may be a little tedious I am going to take this opportunity of putting some extracts on record, because I am convinced that the business men of Canada are the equal of the business men of any other country in the world. I am also convinced of something

Defence Purchasing Board

with which some may disagree; that is, that the business men of Canada, if given the opportunity, are ready to do their share in serving this country. I believe that, and I believe business men should be given a greater opportunity to serve without remuneration. Therefore I believe that with a better appreciation of what they did during the war-much of it for profit I admit-we might safely come to the conclusion that by calling in the business men of this country to assist whatever government may be in power we can obtain service for this dominion which we cannot secure if we merely maintain in its entirety the old profit motive.

I quote from page 542 of the Canadian Annual Review of 1918:

To the imperial munitions board, which succeeded the famous Shell Commission in 1915, under appointment by the imperial government and with Sir Joseph W. Flavelle as chairman, much of this success was due. Prior to August, 1914, Canadian manufacturers knew nothing of shrapnel or shell-making and had never made a cartridge case or fuse; by December 31, 1915, under the Shell Commission, they had exported $57,241,852 worth; in the next three years, under the imperial munitions board, they had exported nearly a billion dollars' worth- $296,505,257 in 1916, $388,213,553 in 1917; $260,711,751 in 1918. The total for the whole war period was $1,012,548,501, with contracts in hand which would largely exceed that figure, as a manufacturing total. In 1915 desperate efforts were being made to produce fuses; at the beginning of 1918 Canada was turning them out at the rate of 2,750,000 per month and of such high quality as to win congratulations from the imperial authorities. By this time the making of 16,000,000 boxes to carry munitions overseas had been carried out and the production of explosives such as cordite, T.N.T.. acetone, methyl-ethyl and nitric acid steadily developed and maintained; large orders from the United States were on hand including 7,000,000 shells, 10,000,000 forgings and 2,000,000 cartridge cases; over 300 aeroplanes a month were being produced and large orders for steel ships were under way. The board in these months was spending $1,000,000 a day in Canada, and contracts had been given or were being worked out by 950 manufacturing firms. As the year 1918 passed on the work of the board grew in volume and variety. National munition plants were put in operation at a cost of $15,000,000 in Montreal, Renfrew, Trenton, Toronto and Parry Sound, and in them powder and high explosives were made, fuses loaded, steel and forgings produced and aeroplanes built.

A little lower down on page 543 there is a quotation from a statement by the British war cabinet, which I think is worth putting on record:

Dealing at this juncture with production, as it had been in 1917, the British war cabinet declared that "the manufacturing resources of Canada have been mobilized for war production almost as completely as those of the British isles/' and added these detailed facts-

This is the statement by the British war cabinet:

15 per cent of the total expenditure of the ministry of munitions in the last six months of the year was incurred in that country.

That is, in Canada.

She has manufactured nearly every type of shell from the 18-pounder to the 9-2-inch. In the case of the 18-pdr., no less than 55 per cent of the output of shrapnel shells in the last six months came from Canada, and most of these were complete rounds of ammunition, which went direct to France. Canada also contributed 42 per cent of the total 4-5 shells, 27 per cent per cent of the 6-inch shells, 20 per cent of the 60-pdr. H.E. shells, 15 per cent of the 8-inch and 16 per cent of the 9-2-inch. In addition Canada has supplied shell forgings, ammunition components, propelants, acetone, T.N.T., aluminum, nickel, aeroplane parts, agricultural machinery and timber, besides quantities of railway materials, including no less than 450 miles of rails torn up from Canadian railways, which were shipped direct to France.

Then this article goes on to say:

Ships to the value of $64,000,000 were put under construction by the board; the operations at Shawinigan in producing calcium acetate, and acetic acid grew to large proportions and included cellulose acetate for aeroplane wings with important orders, also, from the United States-

Over on the next page it gives the complete figures of our exports during the four years, in regard to quantities. There are a good many other details which I do not wish to put on record, but I think these are worth while:

Shells 65,343,647

Fuses 29,638,126

Fuse parts 16,174,073

Cartridge cases 48,627,673

Percussion primers 35,386,488

Shell forgings 6.412,115

Explosives; chemicals (lbs.) ... 111,297,107 Metals; compounds (lbs.). . .. 107,282,336

Lumber (feet) 53,327,107

Exploder containers 13,285,000

Then it goes on to deal with the matter in greater detail. I quote this, sir, because I think it should be on record in justice to our business men. It shows the magnificent work that was done during the last war. I repeat that it is my opinion that given the opportunity, particularly in peace time when there is not the pressure that existed during the war, we can produce munitions in Canada in the same splendid way that we did during the last war, as is illustrated by what I have just quoted. I repeat that I believe we should do more, I do not mind saying that on one occasion I proposed to my own leader, in connection with another matter, to call in the business men of Canada to assist us in certain matters. I believe if some of our leading business men were given a chance

Defence Purchasing Board

such as Mr. Purvis was given in regard to unemployment, if they were brought in to assist, that they would gladly do so in any way they can-just as members of parliament as was mentioned a few moments ago, desire to assist their country. Undoubtedly that is the desire of members of parliament. I believe they are working for the good of Canada, whatever the criticisms may be that are opposed to that suggestion.

I repeat I would prefer that there should be no profits at all in the manufacture of munitions for Canada. But, after all, the government has looked into the matter thoroughly. The minister reviewed the attitude of the governments of various countries, and it is the opinion of the government that we cannot go in for the manufacturing of munitions by ourselves. Therefore the government must do everything it can to maintain full control of profits, such as they are.

I have made the statement that I believe discussion in the house on the Bren gun inquiry has had much to do with the improvement of the bill. The bill is a refutation of the statement which has been made outside the house, as well as in it, that the Bren gun discussion merely held up the business of the country. Had it not been for that discussion I believe this bill would not be as good as it is. I believe the government will admit it is more ready, because of the criticism it received-and perhaps it claims some of that criticism was unjust-to see to it that the bill is as close to perfection as possible.

For example, had the measure now before us been in force-even as it now stands, without the improvements which I hope will be made as a result of discussions in committee- there would have been competition in the Hahn contract. There was no competition in that contract, either through public tender or, through use of a selected list. To my mind a selected list would have done away With the severe criticism of the Hahn contract. Then, there would have been no letter of introduction to one man, to the exclusion of all others, or the making of one man the representative of Canada. There would have been no pressure on Great Britain. There would have been no stock profits.

When the minister is on his feet I would like him to explain further what he said as it is reported at page 1759 of Hansard. In reply to a question of mine he stated in effect that in the Bren gun contract the possibility of stock profit had been done away with.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

The first time it was attempted.

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

But, as a matter of fact, under the Bren gun contract there was an opportunity to make a million in profits. That is one of the things which was most offensive to the people. If there had been some such provision as appears in the bill, a limitation of profits to five per cent or ten per cent on the capital, there would not have been the same danger of huge profits such as are going to be made in the Hahn contract.

There are a couple of suggestions I should like to make in regard to the bill. One of the great flaws in it-I mentioned it the other day in my remarks-is that there is not close enough connection between the proposed defence purchasing board and the defence council. As the minister knows, the defence council is made, up of the Minister of National Defence, as president, and the deputy minister of national defence, as vice-president; and the members are the chief of general staff and the director of naval services. The associate members are the adjutant general, the quartermaster general, the master general of the ordnance and the director of the Canadian air force. I believe one of the weaknesses of the bill is that there is not sufficient liaison, if I may use that term, between the defence council and the board proposed in the bill. I suggest there should be a closer association-

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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

May I interrupt?

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

Yes.

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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

Although it is not specifically provided for, in several places in the bill there are opportunities where the chairman of the board could consult the council with reference to requirements of the Department of National Defence. I refer to stock on hand and requirements for the future.

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I admit that. There is opportunity for the minister, who is president of the defence council, and would be the liaison between the two.

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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

Yes.

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I do not think that is sufficient. My own opinion is that the minister or the government could improve the bill. I was going to refer to the minister, but by virtue of his office he would have access to the board. But, let us take, for example, the master general of the ordnance, who does much of the purchasing of supplies and who has a military training. He could be placed on the purchasing board, as a non-voting member, if you like. Or, it might be done the other way, namely by placing the chairman of the purchasing board on the defence council.

Dejence Purchasing Board

The point is that there should be some member in addition to the minister who is associated with one body and has a place on the other so as to achieve a closer liaison than there would be under the bill.

At page 9 of the Bren gun report there is a suggestion from the Artillery Association of Canada, and one from the conference of defence associations. They suggest the setting up of a munitions board, not a purchasing board such as proposed in the bill. The quotation I wish to read is on page 9. It is as follows:

There was also read into the record a resolution passed on November 13, 1936

That is two and a half years ago.

-by the conference of the defence associations -a body comprised of senior officers appointed by the different service associations who meet for a conference each year. The infantry association, the cavalry association and the artillery association each appoint four of their senior officers to represent them at what is known as the conference of defence associations, which meets in Ottawa and at which matters pertaining to the militia are discussed. The resolution of November, 1936, read as follows:

"That this conference of Defence Associations urges the government of the Dominion of Canada to take immediate steps to create a munitions board or some similar body to control the production within Canada of such munitions as can now be made here satisfactorily and to prepare plans for the effective mobilization of our industrial resources in the event of war, and that a copy of this resolution be sent to the Prime Minister and the leader of the opposition."

This had reference to the late leader of the opposition. The report goes on:

And the following resolution unanimously passed in February, 1938, by the officers of the artillery association (both the permanent and the non-permanent force officers) was read:

"That steps should be taken by the government to appoint a munitions board-

The same suggestion.

-under the chairmanship of a skilled manufacturer to provide for the manufacture of all munitions which can be efficiently produced in Canada."

In view of these suggestions made by the only associations in Canada which really represent all different branches of Canadian defence forces, I think the government might be well advised to accept some such suggestion as I am making. I say that because it seems to me that the munitions board would go much farther than it is proposed the purchasing board shall go. In fact, I have had a couple of representations from members of the conference of defence associations urging that the defence purchasing board is not sufficient. On the other hand I have been told that at least one of the very prominent members of that association supports the board. The

minister may have information with regard to that. Anyway, I repeat that there has been opposition by a couple of members-

Topic:   NATIONAL DEFENCE
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

May I

ask a question?

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

Yes.

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Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

What

could the munitions board do that this proposed board could not do?

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

It would go much farther. After all, the proposed purchasing board merely puts into effect the requests of the minister.

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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

No.

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March 14, 1939