October 23, 1919 (13th Parliament, 3rd Session)


Frank S. Cahill

Laurier Liberal

Mr. F. S. CAHILL (Pontiac):

Mr. Speaker, very little new light has been shed upon this question since it was first introduced into the House, but I presume it is the intention of the Government, when we get into Committee of the Whole on the Bill, to furnish us with certain information, provided they have it.
Last night when the Minister of the Interior (Mr. Meighen) was speaking in reference to the attitude of the Liberal party on the Canadian Northern purchase, he said that the Liberal Administration of 1916 had advocated and supported a policy of arbitrating the value of the stock of that railway and its assumption by the country on the basis of arbitration. He pointed out that my hon. friend the leader of the Opposition (Mr. McKenzie) had stated that when they made the proposal to take over the road it was on the basis that not more than $30,000,000 should be paid for the stock. The Minister of the Interior (Mr. Meighen) also informed the House that the Government of the day loaned the Canadian Northern people $35,000,000-I believe the correct figure is $40,000,000-and that therefore the assets of the company were worth more than they were before this money was advanced to them. In other words, he argues that the more money the Dominion Government loaned to the company the more the stock of that company would be
worth, and therefore his Government was justified in paying $10,090,000 for what was described by the Drayton-Acworth report as worthless stock.
Much has been said, Mr. Speaker, during this debate, and also during the debate in the previous session, with regard to the railway policy of the Liberal party, which many hon. members opposite claim to be responsible for the present involved railway situation in this country. I have been looking up the figures on this question, and I find that during the period from 1896 to 1911-15 years, the total aid granted by the Liberal Administration to all railways in Canada was $48,000,000. That information will be found on page 436 of the year book for 1917. During the period from 1911 to 1917-6 years, the Conservative Administration advanced $37,000,000 by way of cash aid to our railways. In other words, during six years they advanced an amount within $10,000,000 or $11,000,000 of the total aid granted by the Liberal Administration during the much longer period of 15 years. Those figures will be found at page 413 of the year book for 1918. But it may be argued, Mr. Speaker, that it was not the system of cash grants which stimulated so much railway construction, but the guaranteeing of bonds. I find that for the period from 1896 to 1911 bonds were guaranteed to the extent of $85,000,000 by the Liberal Administration; but between 1911 and 1918 $103,000,000 worth of bonds were guaranteed by the Conservative Administration. So that there is apparently no foundation for the statement made by some hon. members opposite that the present railway position is a legacy from the Liberal party.
During the period from 1896 to 1911, 10,000 miles of railway were constructed under the Liberal Administration, or an average of 670 miles per year. Between 1911 and 1917 under the Conservative Administration 13,000 miles of railway were built, or an average of 2,100 miles per year. During the period between 1896 and 1911 the colonization of the country kept pace with our railway construction. According to the Drayton-Acworth report there were 285 people to every mile of railway in this country in 1896. In 1911 the report gives the population at the same figure, but it goes on to say that in 1917 there were only 185 people to every mile of railway. So that the Conservative Government during the period between 1911 and 1917 apparently forgot about colonization and embarked on the policy of guaranteeing bonds and giving cash assistance to stimulate railroad construction all through the country.

Now, Mr. Speaker, much has been said about the folly of the construction of the Grand Trunk Pacific and the National Transcontinental. I was in Saskatoon in 1905, and I remember survey parties of the Grand Trunk Pacific going through to Edmonton, running their surveys from the South Saskatchewan to where the railway was to be constructed to the North Saskatchewan at Edmonton, a territory com-, prising 300 miles of the very finest land, with practically not a settler on it. The Grand Trunk Pacific opened up that territory. The Transcontinental in the East also opened up the magnificent territory running through the province of Quebec and the province of Ontario. But again the policy of this Government was to discourage settlement in that territory, and that discouragement, coupled with the bad railway service, has made it impossible to induce settlers to come in, although there are some 15,000 inhabitants in the territory in- the province of Quebec immediately east of the Ontario boundary living in a very fine country, and it would be an exceedingly prosperous country if the people had proper railway facilities to enable them to take out their products and develop the land.
We are also told, Mr. Speaker, that the Grand Trunk under their agreement with the Grand Trunk Pacific and the Transcontinental were unable to live up to its terms on account of the high cosit of the Transcontinental. I believe the Transcontinental was estimated to cost in the neighbourhood of $60,000,000 odd. The final returns show that the cost was in the neighbourhood of $160,000,000. Well, Mr. Speaker, if this road did cost $100,000,000 more than was originally estimated, could not an arrangement have been made with the Grand Trunk and the Grand Trunk Pacific to assume the liabilities of the road on the basis of the first estimated cost of $60,000,000 odd? If the Grand Trunk Pacific were made to live up to the original agreement with the Government, an adjustment might have been- made on the basis of what they considered in the original estimate was the fair cost of the road. The Grand Trunk then in turn could have been forced to live up to their agreement with the Grand Trunk Pacific in regard to the bonds of the latter which they guaranteed.
No reason has been given why the Grand Trunk was not made to live up to its agreement in respect of the Grand Trunk Pacific. Hon. gentlemen tell us that it would be impossible to live up to that agreement. Well, if it would be impossible to live up to that agreement why do the Government pay $60,-

000,000 to the Grand Trunk Railway Company before they undertake to make that company live up to its obligations in respect to the Grand Trunk Pacific? But they had no intention of asking the company to live up to that undertaking; the Minister of the Interior, who was in charge of the negotiations, states quite clearly that he has no such intention. In his letter of July 11, 1918-which, he tells us, is the basis of the negotiations which we are now asked to complete-he said:
The Government to take over the Grand Trunk Pacific Railway and branch lines and the Grand Trunk Railway Company; to acquire all assets, and to assume all obligations of both "ompanles.
There is absolutely no question of asking the Grand Trunk Pacific to live u,p to their obligations or the Grand Trunk to live up to its obligation in regard to the Grand Trunk Pacific. He goes on to say that the Grand Trunk could not do so, but in the very next breath he says that although the company are unable to pay the $97,000,000 which we claim they owe us, we will pay them $60,000,000 before we attempt to arbitrate the amount of our claim against the Grand Trunk. There is no foundation whatever for the purchase on the basis of inability of the Grand 'Trunk to meet their obligations in respect of the Grand Trunk Pacific agreement; at least, no argument to that effect has been substantiated here.
A fairly good argument, however, has been put up by the ministers in charge of this Bill on behalf of the Grand Trunk. When we refer to the Drayton-Acworth report, which points out that some thirty millions should have been spent on maintenance, up-keep and betterments, and ask what condition the Grand Trunk Railway system is in, they tell us: "Well, the president of the company says that the road is in first-class shape and that the company are able to pay dividends." But the report of these experts, on the basis of which the Government are attempting to purchase this road-and that is the only advice which they have on the subject-states that the road is not in good condition and that it is not in a position to pay dividends. Yet members of the Government tell us, when they bring the Bill before the House, that they have the assurance of the President of the Grand Trunk Railway Company that the road is in first-class order. In -other words, the man who is selling them the gold brick says that it is pure gold,
Mr. Speaker, in Committee on the resolution, I and a number of members on this

side'attempted to get some information from the Government, and the reply that we received was very much like the speech of the Minister of the Interior last night in, which he gave absolutely no information, said very little, if anything, pertaining to the subject, and did little more than attempt to ridicule members on this side for asking for information. On page 41 of the blue-book I find that the total funded debt of the Grand Trunk undertaking amounts to $448,000,000. Add to that the $60,833,000 of 4 per cent guaranteed stock, which has practically become a funded debt, and we get $509,000,000; and if we add to that the current liabilities we get a total of $579,885,000 as the capital sum on which we are agreeing to ipay interest if we acquire this railway system. I am not giving these figures as correct, because no information is available that we can speak of as being correct; but I ask the Government to state what the exact figures are, if these are not correct.
In answer to a question, the Minister of Interior takes up the blue-book and says: "Can the members not read the statement which appears here? There are two sides to it; the totals on both sides are the same." But he does not tell us what the liabilities are, what the assets are or what the totals are. He states that there are notes payable, liabilities amounting to $35,000,000 and another item of current liabilities amounting to $22,000,000; and he says that there are current assets to offset that amounting to $51,000,000. I ask for the details of that item of current assets. Surely a matter of forty or fifty millions is of sufficient importance justify even this Government in satisfying itself whether or not these are real assets. If these assets are liabilities of the different companies that we are taking over
liabilities to the parent company-certainly they would not be a liquid asset in any sense of the word. That is one of the items that I would like to have cleared up.
The Minister of the Interior tells us that the Grand Trunk statement is the statement to accept with regard to the liabilities that we are assuming. But when we assume the liabilities under the Grand Trunk purchase we are assuming all the liabilities of that undertaking, including the liabilities of the Grand Trunk Pacific and the other subsidiary companies; and that is not shown in the Grand Trunk statement. We should have a statement of the assets and of the liabilities of the whole undertaking so that the people will know what this legislation means and what it amounts to.
The President of the Council (Hon. Mr. Rowell) made what I thought was a significant remark in his address the night before last when he said that we must get these railroads all together; that we have one end in the West and another end in the East and that for operating purposes it is absolutely necessary to get them all in with the Canadian National, and that if at any future time we hand it over or dispose of it, it will be a more valuable asset with the Grand Trunk included. Now, that is just what I fear; that when the Government make a huge loss in operation they will hand the system over to some persons, and those persons are likely to be the present operators of the Canadian National railways -the Mackenzie and Mann crowd. The minister said that the national railways should be efficiently managed, and wThen I asked him if they were efficiently managed, he said that they were. But it is common knowledge to any one who has anything to do with the Canadian National railways that they are not efficiently managed. I doubt whether one manufacturer out of ten in Canada would route his stuff over the Canadian National railways in preference to the Canadian Pacific if he had the choice. They are not efficiently managed; they are managed purely and simply for the people who are controlling them-the Canadian Northern crowd, Mackenzie and Mann and Lash and Hanna, who are selling supplies to this company, constructing lines for it and making profits out of it.
In answer to the member for Huntingdon (Mr. Robb) the Minister of Railways stated that in one year the deficit in operating the Canadian National railways has been $15,000,000 and interest charges $19,000,000, and that the Grand Trunk Pacific deficits and interest charges would be not less than $12,000,000, making altogether $46,000,000 that the Canadian people are out of pocket in respect of one year's operation of these systems.
I should like to know how much money is being made by the people who. are handling the undertaking, the people who have the privilege of buying the ties, rails and other supplies of all kinds for this undertaking and who are paying absolutely no attention to the management of the railway except so far as their own interest is concerned. . The condition of the railway has been allowed to run down throughout the country; it is getting in bad odour everywhere it is being operated, and even the operation of the Intercolonial is not as good as it was before it was taken over by the Canadian National railways.
Facing this condition, hon. members say that we must acquire the Grand Trunk.

There is only one purpose for taking that course. One of the ministers- said that it was the policy of the Government since 1911 to have public ownership and management of railways. I did not know that this Government had been in office since 1911; but apparently the President of the Council (Mr. Rowell) was quite satisfied with that -statement, and he said that it was the policy of this Government to own and operate the railways of Canada. But they all balk at the Canadian Pacific; they will not go so far as to acquire that railway. They are quite willing to go as far as building up a competing line to hand over to the Canadian Northern, but they will not go a step further. They are willing to pay any price for the Grand Trunk. If hon. members were honest in their advocacy of public ownership, the first thing they would want to do would be to get the railway at a reasonable and fair price. Prior to the purchase of the Canadian Northern by the Government $100,000,000 worth of unguaranteed securities was circulated. The Government would not furnish us with the information as to who held those securities, which were passed out to friends of Mackenzie and Mann before the purchase was made. The Drayton-Acworth report will tell you that there was against this road $100,000,000 worth of securities more than the road was worth; yet these hon. gentlemen tell us that it was in the name, and for the sake of public ownership that we must pay these exorbitant prices. When we come to the purchase of the Grand Trunk, the same thing occurs. The first thing they do is to advance $60,000,000 worth of stock to persons unknown, but it is intimated in the press that these people must have had knowledge from governmental sources, because the stocks were hound to advance as soon as they were guaranteed by the Government. They did advance, and there is no doubt that some people will, in less than a year make anywhere from thirty to forty million dollars out of this transaction. Why does the Government not reserve that for the people of Canada who are furnishing the money to acquire this railway? What reason is there for giving some people $60,000,000 before you attempt to set a price on the property by arbitration? As regards one item of $40,000,000 or $50,000,000, I do not know whether it is worth a cent or not, and that without taking into consideration anything of the value of the undertaking. We agree to pay the shareholders of the Grand Trunk $60,000,000,
and then we agree to arbitrate the value, if any, of the property. We release them from their Grand Trunk obligation and from their National Transcontinental obligations, and we give them $60,000,000 and then arbitrate as to the value, if any, of the property. Just because they write across the cheque "for public ownership" the Government think they can issue a cheque for any amount they may desire. The Government are not satisfied with paying these exhorbitant prices; but in order that their friends may be safe, they appoint an arbitration commission. Does the report of arbitration come back to Parliament for the money to be voted? Not at all. The Government by Order in Council take the right to issue a cheque for whatever amount the arbitrators may decide upon. They give power to that arbitration to enable them to pay out to their friends money that Parliament would not give to the Government; that the Government would not dare to come to Parliament and ask the privilege off issuing cheques'for and of spending money without submitting their estimates to Parliament; hut in this case they purpose issuing a cheque for an unlimited amount without the sanction of Parliament. It looks to me as though there was something very urgent about this deal so far as the (Government of Canada was concerned.
The minister stated that the deal was finally completed after prolonged negotiations. The negotiations were cut off after July 11, 1918. The Chairman of the Board of Directors of the Grand Trunk Railway Company said that he did not understand the letter of the Minister of the Interior (Mr. Meighen), and he took it to the Prime Minister of Canada and asked for an explanation. The Prime Minister said that the letter meant the same offer as was made in February of that year, but in that letter there is this paragraph which might be construed differently:
Should the company desire, the guaranteed stock may he treated as an obligation in the same way as the company's bonds.
But the Prime Minister said that that did not mean anything and Sir Alfred Smithers, Chairman of the Board of Directors of the Grand Trunk said that it did not mean anything. The Prime Minister said that the offer was practically the offer made in February of that year, so that the transaction which was brought in the last days of this session was an entirely brand new transaction; it was a transaction based upon an understanding arrived at between Sir Alfred Smithers and the Minister of the In-

terior, an understanding of which Parliament and the country had absolutely no knowledge. There never before was any suggestion that these bonds would be guaranteed first and the value, if any, of the balance of the stock arbitrated afterwards. The suggestion was never made in the Dray-ton-Acworth report, and we are now asked, in the last days of a session that was called for another purpose, to sanction this purchase. The Government come down with a proposal on which they have absolutely no information. They do not know what liabilities the country is assuming; they do not know what the assets amount to; they have no idea whether the road is worth the funded debt or not, nor whether the stock is of any value or not. But they first give $60,000,000 worth of stock so as to make their friends safe before they attempt to arbitrate, and they tell us that they must get this road in order to complete a system with connections at both ends that will b- useful to their friends, the Canadian Northern crowd. The Minister of the Interior said last night that it was impossible to make a working arrangement, as suggested by Mr. Kelly, President of the Grand Trunk, between the Canadian National railways and the Grand Trunk Railway system. In the United States, there is not one railroad running from the Eastern States or from New York clear to the Pacific coast. There are five railways through the Western States, all of them with working arrangements with Eastern railways. There is not in the United States one line owned from coast to coast. Therefore, they are all under working arrangements, and why could we not have a working arrangement if it were in the best interest of the country? The Government were apparently very anxious to bring forward this matter as a public ownership proposition. I for one do not know that I would be very much opposed to public ownership of railways provided that the undertaking were managed by an efficient Liberal administration; but public ownership of railways managed by the present Administration with the assistance and connivance of the Mackenzie and Mann interests is something to which I am absolutely opposed, and I think it will be found that the country will he opposed to it too.

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