April 25, 1974

FINANCE-STATEMENT OF MINISTER CONCERNING LEVEL OF CORPORATE PROFITS AND NECESSITY TO PASS ON COST INCREASES

PC

Reginald Francis Stackhouse

Progressive Conservative

Mr. Reg Stackhouse (Scarborough East):

Mr. Speaker, some weeks ago I directed a question to the Minister of Finance (Mr. Turner) relating to the skyrocketing prices in the construction industry. I asked what measure was being considered to stabilize prices in this important sector of our economy. I raised that question because of the way in which prices are soaring. Many small construction firms are finding it all but impossible to continue in business. The report from one firm of chartered quantity surveyors, for example, indicated the following claim:

Material shortages and labor and material price increases will continue into the 1974-1975 period and contractors and sub contractors will be forced to carry substantial contingency sums in any estimate prepared during this period in order to cover costs that cannot be determined at the time of tender.

This is all but impossible for small companies to undertake. Many find this kind of provision all but beyond them because many of their would-be customers demand a firm price. Many of these small firms are not capable of absorbing the losses they risk in the present period of price instability.

To give an example, I draw statistics provided by the Department of Industry, Trade and Commerce. With regard to residential buildings, if we take as a base index 1971 prices and signify that by the number 100, we find that prices of material rose in 1972 from 104.1 in the month of January to 115.1 in the month of December. In 1973, they rose from 116.8 in the month of January to 125.5 in the month of September.

In the same period, the cost of labour rose in 1972 from 105.8 in January to 116.1 in December and in 1973 from 116.5 to 123.4.

In the non-residential building sector, the same process was followed. If we take as a base index the costs in 1961 and signify that by the number 100, we find that the cost of materials in 1972 rose from 138.1 in January to 146.7 in December and in 1973 from 148.9 in January to 160.1 in December.

From this can be seen the predicament that is challenging every firm in the construction industry. It is an almost impossible problem for many small firms that have very little margin to go on. The escalation of prices continues, so that between the time a firm submits a tender to a customer and delivers its product, the contractor is almost doomed to suffer a loss. This is a risk that small firms find they simply cannot bear.

To illustrate, I will cite an example of one company just outside the area of metro Toronto. It found that electrical conduits increased in price 100 per cent in one year. The

cost of small items like switches, outlet boxes, fasteners and so on rose from 50 to 100 per cent.

This kind of escalation of prices resulted in the following experience. They submitted a tender on October 30, 1973. They estimated that the job would require $2,815 per 1,000 feet of cable. When the order was placed for supplies on December 18, 1973, the price had risen to $3,303 per 1,000 feet of cable. When the cable was delivered in mid-January, 1974 they were billed $3,517 per 1,000 feet. That meant an increase of $702 per 1,000 feet, or 25 per cent, in two and a half months. It was for that reason that an officer of that company wrote that the situation is running wild and urged that the government put on controls to end these large price increases.

I cite the predicament of that small firm as an example of small business who have various people working for them. I plead with the government to take more seriously the predicament of these small companies in the construction industry. They simply cannot carry on. I the present price escalation continues, some action will be necessary.

I plead with the government to pay more attention to the plight of these companies and to give them more support. What we need is an effort at price control, an effort to stabilize prices so that small companies submitting tenders and offering contracts can have some assurance that prices will not run hog wild during the period between tender and delivery. It is all but impossible for a small company to absorb a 25 per cent price increase in a period of two months.

This is a serious matter not only for businessmen but for the consumers involved. We read in one newspaper a report that the cost of building or replacing the most unpretentious house in metropolitan Toronto in 1974 will be 25 per cent more than last year. We are all aware of the difficulties faced by would-be house purchasers. These difficulties are now becoming almost insurmountable by people contemplating the purchase of a home, with costs going up at this rate.

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   FINANCE-STATEMENT OF MINISTER CONCERNING LEVEL OF CORPORATE PROFITS AND NECESSITY TO PASS ON COST INCREASES
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LIB

Joseph-Roland Comtois (Parliamentary Secretary to the Minister of Finance)

Liberal

Mr. J.-Roland Comtois (Parliamentary Secretary to Minister of Finance):

Mr. Speaker, it must be agreed that the profit picture varies from one industry to the other, and that the risks involved in doing business come from various areas and reach different levels.

Looking at Canadian industry as a whole, it may be seen that profits increased substantially in 1973. Their relationship to sales is not however at record level. Higher ratios were experienced in the 1950's.

Recent profit improvement derives mainly from the increase in prices relative to inventories. Disregarding gains on inventory revaluation, operating profits as compared to sales did not even reach in 1973 the average level of the period since 1949.

The profit increase was parallelled by very strong growth in capital expenditures by corporations. This is an encouraging sign for, in an inflationary economy, rising offer stemming from increased spending on capital goods will have positive results.

It must be remembered that a large part of those investments has taken the form of industrial and commercial

April 25, 1974

buildings, and this, allied to rapidly increasing housing construction, has led to considerable activity in the construction industry. Businesses in that sector are extremely varied and I am sure all of them have not managed to the same extent to match their profits with rising costs.

The Minister of Finance (Mr. Turner) has said that, to his mind, higher profits, although useful from the point of view mentioned, would become undesirable if they were to exceed the level required to encourage the necessary productive investments. Basing himself on a study of currently available statistics, he said that, generally, the Canadian industry now enjoys enough prosperity to produce those investments, but that additional profits would be unjustified.

In closing, Mr. Speaker, I will say that the minister has in fact asked Canadian businesses, each in the light of its particular situation, to take into account the interests of the people. Those interests are not well served by price increases that produce profits exceeding those the companies need to finance the expansion of their production capacity, which is so important in present day circumstances.

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   FINANCE-STATEMENT OF MINISTER CONCERNING LEVEL OF CORPORATE PROFITS AND NECESSITY TO PASS ON COST INCREASES
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TRANSPORT-ACTION TO IMPLEMENT TRANSPORT COMMISSION RECOMMENDATIONS FOR PREVENTION OF RAILWAY ACCIDENTS

NDP

Mark Willson Rose

New Democratic Party

Mr. Mark Rose (Fraser Valley West):

Mr. Speaker, I believe it is both appropriate and timely that I speak tonight about railroad safety since the Canadian Transport Commission hearings concerning the recent tragic deaths of railroad enginemen Boyd and Battuci in the middle of March are expected to conclude tomorrow in the city of Vancouver.

I think it is sad but true that it usually takes a death or two to bring everyone to his senses regarding the lack of track maintenance and sufficient regard for safety procedures, both of which items are and have been appallingly lax in my province of British Columbia for a decade at least, and certainly since the introduction of unit trains.

During these current hearings of the CTC we learned that the rock face which let go in March killing the two men, and one which is contiguous to the CPR main line rail track, have been described by a Canadian Pacific geologist as unstable and likely to crumble at any minute. Probably if they do it would rain death and destruction on the trains that pass beneath every day.

A 10-mile per hour slowdown was first issued, then cancelled, then reinstituted by the CPR in that slide area near Spencer's Bridge where the tragedy occurred. The CP main line number one passenger TransCanada passes this spot every day. I am told that a watchman has been placed in the slide area with a lantern, but if that rock face ever lets go it is goodbye watchman, bringing the tragic death total to three.

We have also assumed, because of these hearings and the nature of some of the testimony, that many CPR engineers tend to be a bit reluctant to be over-explicit in giving evidence before the hearings. I wonder if this could be because of the jeopardy their testimony might place

Adjournment Debate

them in with the company, since for two years or so engineers have had hanging over their heads approximately $130,000 worth of court injunctions which followed their protest in 1972 over an identical lack of safety features and decent working conditions. I could detail this if I had time.

In any event, their protests were the result of these identical conditions that caused the deaths of Mr. Boyd and Mr. Battuci in March. Only a sudden shock, such as the news in the middle of March that these two Kamloops men had died in the train wreck, makes us think about the fact that for railroaders the Fraser Canyon is an exceedingly dangerous place to work. Yet hundreds of men who live in my riding and surrounding ridings constantly face snow and rock slides and numerous other hazards as part of their normal routine, especially in winter months.

While each fatality is tragic and brings headlines rail deaths in the canyon, or for that matter all across Canada, are by no means uncommon. Derailments caused by track conditions on both national railways in 1972 were up three times over 1959, and nearly double the mishaps in 1969. Over the past 20 years the lines from Kamloops to the coast of Vancouver have been the scene of 115 accidents, with 14 killed and 51 injured. Additionally, in another 29 accidents at level crossings, and similar accidents associated with railroads, there occurred three fatalities and injuries to 42 people. In the last month since the tragic deaths of the two men there have been six serious derailments in that canyon.

The picture is so grim that in 1970 the CTC launched a study into rail safety and has published three fat reports, devastating in their condemnation of CN and CP safety practices. These reports only confirm what the CN and CP engineers, conductors and trainmen have been telling me for years. It is time the CTC got tough with the railroads who have stalled decent safety measures for years. The decline of track maintenance is criminal at a time when trains are longer, 150 cars, and heavier than ever before. In the Spencer's Bridge wreck the engines that plunged to the highway carried no ditch lights, no roll bars and no padding in the cab, permitting the cab to collapse like a tin can. But track maintenance, slide fences, ditch lights and roll bars cost money, and both our national railroads are far more interested in profit than they are either in service or safety. I think that has been demonstrated particularly over the past year.

Treating the railroads as a public utility is bound to improve service, but only an aroused public and a zealously vigilant Canadian Transport Commission can reduce the accident rate to a reasonable level. There have been far too many mornings when some railroader's family have awakened in horror to find that they no longer have a daddy.

One of the many reasons for the derailments has to be the heavy unit trains. Some railways, notably the Santa Fe in the United States, have quietly experimented with much smaller trains. They have found that the turnaround time is much faster and more productive despite the matter of economy of scale which suggests that longer trains are more efficient. They find that is not true at all. They are getting far more use from their rolling stock and equipment by using shorter trains, even though they have

April 25, 1974

Adjournment Debate

to use the same crew on a 100-car train as they might have had on a 150-car train. This is the kind of innovation that I think could be copied in Canada.

I close, Mr. Speaker, because I see you are getting ready to leap, but may I say I do not think the CPR would mind if the government took it over tomorrow. In fact I think the CPR has let its tracks and rolling stock run down in anticipation of this very move. But just the rail takeover would not be enough; we must do something immediately to stop this carnage in the canyon.

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   TRANSPORT-ACTION TO IMPLEMENT TRANSPORT COMMISSION RECOMMENDATIONS FOR PREVENTION OF RAILWAY ACCIDENTS
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LIB

Joseph-Phillippe Guay (Parliamentary Secretary to the Minister of Transport)

Liberal

Mr. Joseph-Philippe Guay (Parliamentary Secretary to Minister of Transport):

Mr. Speaker, the Canadian Transport Commission has the obligation of ensuring that all railway operations in Canada are carried out in maximum safety. In order to identify the factors involved in railway accidents and explore the effect on safety of operation of the longer heavier trains now being operated, the commission undertook to conduct a railway safety inquiry.

The third report, issued on December 28, 1973, contained the committee's findings and recommendations in specific areas such as signal systems, staff training, slide detectors, fences, and track and bridge maintenance. This report indicated that the earlier formed railway safety advisory committee, consisting of members representing CNR, CPR, Canadian Railway Labour Association and chaired by the RTC, would be expected to work on the conclusions and findings of the general inquiry, and would provide a forum for discussion on matters of railway safety. The

work of the advisory committee is on a continuing basis and the committee is scheduled to meet at regular intervals for the purpose of dealing with material before it in accordance with established priorities.

The committee met on January 25, 1974 at which time the terms of reference of the committee were approved. During this meeting the following two areas were designated as priorities regarding the establishment of higher safety standards: first, condition of track-movement of long trains, heavy trains and high speed trains; and second, inspection of track, and so on. The advisory committee also gave official recognition to the formation of a group to deal with the subject of public disclosure of railway accident reports.

On April 5 the Minister of Transport (Mr. Marchand) released copies of correspondence which was exchanged between himself and the railway presidents on the subject of the CTC report and safety on the railways. These letters certainly highlighted the minister's concern that prompt, sensible and practical measures be taken. The minister has also announced his support for a new type of transport accident investigation structure.

We feel that through the mechanism of the railway safety inquiry and with the co-operation of those who manage, operate and maintain the country's railways, acceptable standards of operation and maintenance of railway trains can be achieved.

Motion agreed to and the House adjourned at 10.22 p.m.

Friday, April 26, 1974

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   TRANSPORT-ACTION TO IMPLEMENT TRANSPORT COMMISSION RECOMMENDATIONS FOR PREVENTION OF RAILWAY ACCIDENTS
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April 25, 1974