1926-05-25

FUEL SUPPLY COMMITTEE

[Stage Direction]
Mr. E. A. LAPIERRE (Nipissing) moved that the first report of the committee appointed to investigate the fuel supply of Canada, which was presented to the House on Thursday last, be concurred in.
Motion agreed to.

[Stage Direction]
Annual report of the directors of the Central Vermont Railway Company.-Mr. Dunning.

Mr. J. E. ARMSTRONG (East Lambton):: Mr. Speaker, I beg leave to present a petition from the celery growers in my constituency which reads as follows:
To the honourable the Senate and the House of Commons of Canada, in parliament assembied
The petition of the undersigned celery growers of the constituency of East Lambton, Ontario, humbly showeth: That we desire to have an embargo piaced on celery coming from the United States into Canada similar to the embargo placed on this product going into the United States from Canada by the government of the United States, from October to February of each year.
Wherefore your petitioners humbly pray that your honourable House may be pleased to grant the prayer of this petition, and as in duty bound your petitioners will ever pray. May 18th 1926.
The explanatory note is very short. It reads as follows:
Thedford, Ont., May 18, 1926.
J. E. Armstrong, Esq.,
Member of House of Commons,
Ottawa, Ont.
Dear Sir:
Enclosed find two copies ol our petition for the Senate and the House of Commons.
For your information the duty on celery entering the United States is twenty-five per cent and an embargo has been on for years against the celery from

C.N.R.-Minister's Statement
Canada entering the United States on account of the com borer which to date has never bothered celery but is used as a handle to stop exportation.
We would appreciate it as a body if an embargo was on from October to February 1st each year, so as to allow the local supply to be consumed before the southern states flood the market.
This resquast is asked not as a handle to boost prices but to allow the home grown product to have the market and work off the supply before foreign goods come on.
Thanking you in advance and trusting you will be successful in our cause,
I remain,
Yours very sincerely,
Chas. Kinmerley.
I may say that the crop grown in the district in 1924 consisted of over 250 carloads.


MR. MEIGHEN'S RECOVERY CONGRATULATIONS BY PRIME MINISTER AND MR. FORKE
Right Hon. W. L. MACKENZIE KING (Prime Minister):: May I say to my right
hon. friend the leader of the opposition that we are all pleased to see him back in the House again. We hope very sincerely that he has completely recovered from his recent indisposition.


Mr. ROBERT FORKE (Leader of Progressives) :: On behalf of hon. members in
this corner of the House, I desire to express our very great pleasure at seeing the right hon. leader of the opposition in his place once more. We hope that his health is fully restored.


IMPORTATION OF MINERS
[Stage Direction]
On the Orders of the Day:
Mr. J. S. WOODSWORTH (Winnipeg North Centre):: I should like to ask the Minister of Labour if he can give us a statement with regard to the application for workers from Europe for the mines in Nova Scotia?


Hon. J. C. ELLIOTT (Minister of Labour):: I may say, Mr. Speaker, that the information I have received is to the effect that applications were made for workers by some of the mines in Nova Scotia. The applications were communicated to the department which asked its various agencies for information as to the extent to which these demands could be supplied. The reply received was to the effect that there were, perhaps, sufficient workers available in Canada to meet the requirements. Up to the present it has not been deemed necessary or advisable to at all comply with the request which was made for additional workers from outside Canada. That is the information on the matter so far as I have been able to obtain it.


James Shaver Woodsworth: May I ask whether it is the policy of the department to supply workers from Canada before allowing workers to be introduced from Europe?


John Campbell Elliott: That was exactly what
the department had in mind. It endeavoured to get an estimate of the labour available in Canada before attempting to send outside for help. That is, of course, the policy of the department.


CANADIAN NATIONAL RAILWAYS
[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Railways and Canals) moved that the House go into committee of Supply.
He said':	In attempting to present, for the
consideration of parliament, what has come to be known as the railway budget, I do so with every appreciation of my own somewhat recent contact with federal railway affairs. Since taking hold, I have gone far enough into the activities of the department over which I have the honour to preside to acquire a lively appreciation also of the splendid service rendered by that veteran of public life and my own immediate predecessor, the Right Hon. George P. Graham. We on this side of the House regret his absence to-day and none more so than the one to whom has fallen the difficult task which years of experience had made so easy for the former minister. Mr. Graham had the very happy faculty of presenting National railway matters in such a way as to invite their consideration on a high plane. It is my wish that there should be no departure from that very desirable practice, and that whatever criticism there may be-and criticism there is bound to be- may be of a constructive and helpful nature, and to the advantage rather than hurt of the country's immense investment in our National railways.
Following the precedent established last year the Canadian National railway report was this year made available in advance of the minister's annual statement, and has been in the hands of the members for some weeks. The report presents much detail, not only as to operating results, but of the financial ramifications of the system. It is well that such full information as to the management and operation of the National lines should be freely available to parliament. The National railways are the people's property, in the success of which the Canadian public are deeply concerned, and, as representatives of the owners, it is desirable that members of this House should take a very close interest in our railway affairs.

C.N.R.-Minister's Statement
Last year's operating results were so far in in advance of previous years that I feel that my first duty in relation to the report itself should be the altogether happy one of congratulating the chairman and president, the board, the responsible officers and the rank and file of the National railways on the results achieved. To have done more business at less cost is an accomplishment which has brought commendation from quarters ordinarily inclined to hold that such things were not really possible under public ownership. The figures indicate roughly that while two-thirds of this year's improvement of fifteen millions in net earnings was the result of increased business due to a good harvest and improving trade, one-third was due to decreased costs of operation. And it will be noted that Sir Henry Thornton affirms that this improvement was accompanied by no deterioration in service or unfair treatment of employees. It affords me pleasure, therefore, on behalf of the government, to acknowledge the loyal service of officers and employees, whose enthusiasm and good will made last year's achievement possible.
This gathering, Mr. Speaker, in the House of Commons, is the only body which bears the relationship to our National Railways which is borne by the annual shareholders meetings of a private company to the affairs of that company, and I propose to deal with the subject this afternoon rather as if the members of this House were, as they are, representatives of the great body. of shareholders throughout the Dominion of Canada in this property. The presentation I will endeavour to make will be analytical in character rather from the point of view of a man who comes freshly into contact with the railway system and its affairs, and who settles down to study the system, and probably my point of view will be more interesting because of that.
The accounts are presented in balance sheet form as designed by the Interstate Commerce Commission of the United States, and adopted by the Dominion Bureau of Statistics. The form is that used by the railroads of the United States, and by the use of such a standard form, comparison is readily made with the accounts of other railroads which have adopted this standard of accounting practice. The balance sheet of the National lines carries the signature of the chief accounting officer of the railways and, in addition, the certificate of a well-known firm of chartered accountants.
It should be kept in mind that this is not the balance sheet of the Canadian National Railway Company, but is a consolidated
balance sheet designed to show the aggregate assets and liabilities, under each balance sheet classification, of every company embraced within the Canadian National system, with all inter-corporate transactions eliminated. By this form of presentation there is clearly displayed the total assets under the control of the National Railways, the total liabilities to the public against such assets, and the total liabilities for capital less deficits to the government as shareholders, and for loans and advances.
The Central Vermont Railway is not included in this consolidation except in respect of the control account with that company carried in the National books under investments in affiliated companies. It will be of interest to honourable members to know that there are no less than 87 separate balance sheets included in this consolidated account. Between many of these individual balance sheets are numerous inter-related transactions which require to be eliminated in any consolidation so as to present a clear picture of the relationship of the National Railways to its public creditors and to the government.
I believe every hon. member has in his desk a copy of the annual report, and will be able to follow my reference to the various pages of that report.
On the asset side of the balance sheet it will be seen that the accounts are separated under four headings-Investments, Current Assets, Deferred Assets, and Unadjusted Debits-and that on the liability side, a corresponding separation is made. A classification under Interstate Commerce Commission standard headings of expenditures, less retirements, during the year 1925, applicable to investment in road and equipment, is given on page 23 of the report, and similar information relating to improvements on leased railway property will be found on page 24. These statements indicate a net improvement of $17,964,827 during the year in the railways' investment in road and equipment, and of $430,628 on leased railway properties.
In the next item, sinking funds which have been created in accordance with the provisions of trust deeds for the redemption of certain items of funded debt, there is a balance of $9,374,000 of which $5,064,000 represents the par of system securities acquired, but held alive in such sinking funds. This should be considered in the sense of a reduction to that extent of the total funded debt held by the public.
The item, miscellaneous physical property, $53,912,609, includes hotels, lands, and so on, and in connection with the latter a footnote directs attention to the fact that the provinces
[Stage Direction]
C.N.R.-Minister's Statement
of Ontario and Quebec dispute the title of lands valued at $7,318,140.
A detail of the investment in affiliated companies is given on page 37 of the report. In this list is a new account of $3,677,500, representing acquired bonds of the Toronto Terminal Railway Company issued in connection with the financing of the Toronto new station and viaduct scheme in connection with which legislation was enacted last session. Twenty-five millions odd of this thirty-seven millions shown as investments in affiliated companies represent the Canadian National holdings in the Central Vermont.
The next group of accounts, Current Assets, shows a total of $95,500,000 as against $99,-
500,000	last year. Cash on hand in the general funds of the company which, at December 31, last, totalled $31,677,083, is up $1,669,000. Special deposits, which represent funds set aside for specific purposes, are up $4,000,000. In thig account are carried unexpended balances of proceeds of securities which are released, from time to time, on the authority of the Minister of Finance. Miscellaneous accounts receivable are down $2,500,000. Part of this decrease is due to accounting reclassification, but the decrease is also attributable to better collections, indicating better business conditions generally. The value of materials and supplies on hand at December 31, was $42,582,983, as compared with $50,459,444 at the end of the previous year. As explained by Sir Henry Thornton in his review of the year's operations, expenditures on purchasing and stores account were considerably less in 1925 than in 1924. A determined effort also was made to reduce stocks, so that at the end of the year, materials and supplies on hand amounted to almost eight millions less than at the end of 1924.
Under Deferred Assets-Insurance and Other Funds-is carried the investment of the company's fire insurance and other reserve funds which I will refer to when I come to the reserves under deferred liabilities. The increase of a million in other deferred assets is occasioned by accounting reclassification.
Discount on funded debt, an unadjusted debit item, represents the discount below par at the time of the sale of all securities, which discount is amortized by charges to income account in equal amounts over the life of the securities.
On the other side of the balance sheet the principal account is that of long-term debt, which shows an increase during the year of $63,630,126.52. It will be noted that in this year's presentation it is made a little clearer that this account includes interest accrued on government loans, which, under present

conditions, is a matter of book-keeping only and does not represent additional cash advances by the government. This interest account has been increased by $31,703,510.70 during the year, and now accumulates to more than $161,000,000. Analyzing the increase in debt of $63,000,000 during the year, we shall find the debt held by the public has increased $17,416,219.94, and the debt to the government $46,213,906.58. The increase in the debt to the public, as explained under the heading of Finance on page 6 of the report, comprises two guaranteed issues, one of $17,000,000, and the other $18,000,000, against which there were retirements amounting to $17,583,780.06. The increase in debt to the government of $46,213,906.58 is made up of three items, the first of which is the book-keeping item of interest accrued on government loans, $31,703,510.70. It will be well to keep in mind, in discussing the railway debt, that a large portion of the increase in debt as shown by the railway accounts is not additional cash advanced by the government to the road, but is this item of interest which they are compelled to set up in their books. I wish to emphasize this because frequently the impression gets abroad that the railway has used up during the year much more cash than is actually the case. For the year 1925, for instance, of the increase in debt, approximately one-half is cash and the rest is a bookkeeping transaction.
The second item in the increase in government debt is an amount of $14,259,435.69 repaid to the railway. When the railway issued its four and a half per cent gold bonds in September, 1924, the proceeds not immediately required were temporarily lent to the Minister of Finance and were repaid by the minister to the railways in the early part of 1925. The third item is an amount of $250,960.19 representing certain payments made through the Department of Railways and Canals for compensation and pension payments to Canadian Government railway employees under special legislation, which are taken up in the accounts of the National Railways so as to make a complete accounting for the entire property.
Full details of the outstanding debt held by the public, or by sinking funds, are to be found on pages 28 and 29 of the report. The schedule also shows to what extent the outstanding securities are guaranteed by Canada or the provinces, and indicates that, of the $931,000,000 of funded debt due the public, $674,000,000 is guaranteed and $256,000,000 is unguaranteed. Of the $674,000,000 guaranteed, $581,000,000 is guaranteed by the Dominion and $93,000,000 by the various

C.N.R.-Minister's Statement
provinces, as follows:	Ontario, $7,859,997;
Manitoba, $24,389,892; Saskatchewan, $17904,061; Alberta, $18,394,427, and British Columbia, $25,026,001. Grand Trunk debentures of 216 millions, included in the guarantees by the Dominion, are guaranteed as to interest only under the Grand Trunk Railway acquisition agreement.
The provincial guarantees have, in effect, been taken over by the Dominion, since it has also acquired the properties. There never was any question of interest being paid other than by the Dominion so far as any of the Canadian Northern guarantees are concerned. In the case of the Grand Trunk Pacific, complications due to receivership created confusion at first and the provinces of Alberta and Saskatchewan were obliged to meet certain branch line interest payments. It developed that on the provinces meeting this obligation over four six-monthly interest periods, they could have taken possession of the Grand Trunk Pacific branch line properties. Former President Hanna, considering that these branches would be useful to the National system, recommended that they bs retained by the Dominion. The danger of partition of this Grand Trunk Pacific property was thus avoided, the two provinces concerned were reimbursed the interest charges they had met, and the Dominion has since provided the interest.
In the debt due the government is included appropriations account of the Canadian Government Railways amounting to $453,935,303. As is well known, this item includes the direct contributions by the Dominion to the Intercolonial and branch lines, the Prince Edward Island railway in Eastern Canada, the Transcontinental railway between Moncton and Winnipeg, including the Quebec bridge, and also the construction cost of the Hudson Bay railway. It also includes the working capital advanced from year to year by the government to those railways prior to their being taken over by the Canadian National for management and operation, and
it also includes the operating losses cn those railways since January 1, 1921, at which date authority was taken to pay operating expenses out of earnings. It is understood, of course, that this item of $453,935,303 is not a liability of the Canadian National Railway Company, but is brought into the consolidated balance sheet as the offset account against the assets of the Canadian Government railways as set up at their ledger value.
It will be observed that the total of loans and advances on Dominion of Canada account is shown in the balance sheet as 572 millions. Hon. gentlemen may have noticed that the Minister of Finance, in his budget speech, stated that the actual cash outlay in respect of these railway corporations charged to the debt of the Dominion, was 601 millions. The apparent discrepancy of $28720,547 is accounted for by these circumstances:	The ten millions advanced by the
government to the railways was made after December 31 last, and appears in the budget statement, but not in the railway statement. The railway does not include in loans and advances $8,720,547.06 voted under Advances to Canadian National Railways and utilized for requirements of Canadian government railways. The amount is added by the railways to the separately-shown Appropriations account, Canadian Government Railways. The balance of the difference is the ten million dollars paid by the Dominion for Canadian Northern commoa stock. Naturally, that item has no place in the railways' loan account with the Dominion.
I have here a statement showing the allocation of these 601 millions to March 31 last. It is of interest in that it shows the extent to which these government loans and ad- ' vances have gone to meet operating deficits, interest, refunding and retirements, capital expenditure and to working capital. With the permission of the House, I would like to hand the statement to Hansard, for the information of the members generally.
The statement is as follows:
[Stage Direction]
C.N.R.-Minister's Statement
Distribution of Cash Advances to The Canadian National Railways to March 31,1926, as given in Speech of
Minister of Finance, April 15, 1926
-	Total	Chargeable to	Canadian National Railway Co.	Canadian Northern Ry.	Grand Trunk Ry.	Grand Trunk Pacific	Canadian Government Rlys.Operating deficits... Interest	
Refunding and Retir-	$ cts. 55,269,684 39 186,872,514 20 108,334,685 22 179,352,204 66 28,528,993 66	$ cts. 5,468,300 86 1,898,433 01 2,633,266 13	$ cts. 23,810,869 22 121,144,730 33 53,721,326 10 124,376,243 94 3,187,466 56	$ cts. 1,877,047 56 29,055,222 48 52,714,926 11 16,832,947 36 18,102,038 82	$ cts. 30,595,524 56 31,204,260 53	$ cts. 1,013,756 95Capital expenditure. Working capital	
Total Loans	
Purchase of bonds... Purchase of stock.... Total given in speech of Minister of Finance	25,775,443 22 7,239,488 28	9,734,304 01558,358,082 13 33,048,000 00 10,000,000 00	10,000,000 00	326,240,636 15	118,582,182 33	94,814,716 59 33,048,000 00	8,720,547 0610,000,000 00	
601,406,082 13	10,000,000 00	336,240,636 15	118,582,182 33	127,862,716 59	8,720,547 06
Of the loans from the Dominion of Canada, 485 millions odd, 127 millions went directly into betterments during the last six years. Including capital expenditure provided from moneys raised by guarantees during the same period, the total is $228,693,560. If to these be added 36 millions put into the property
as the result of the railways' own financing, we have a total expenditure on investment account, during the last six years of $265,068,560. This capital expenditure, on a yearly basis, is set forth in a statement which, with the permission of the House, I will hand direct to Hansard.
Expenditures on Investment Account Canadian National Railways
Improvement of property by new construction betterments, property acquirements and new equipment:-
			Dominion	Direct Riy.
1920-21		Total	Dominion Loans $ 60,464,922 30 29.748,478 74 21,343.131 26 7,943,457 18 5,321,302 65	Guarantees	financing $27,000,000
1921-22				$ 3,903,030 65	
1922-23					
1923-24				55,715,292 04 23.620,679 12 18,000,000 00	
1924-25	 1924-25					9,375,000
1925-26			2.633,266 13		
$265,068,560 07	$127,454,558 26	$101,239,001 81	$36,375,000
The 18 million guarantee, 1924-25, was for branch lines construction and Toronto terminals, under the viaduct agreement.
Turning now to some of the other items on the liability side of the balance sheet, traffic balances and accounts payable show an increase due to additional business at the close of the year. Interest matured, unpaid, shows a substantial reduction of $6,500,000, due principally to a reclassification of unpaid interest on the Grand Trunk Pacific 4 per cent debenture stock. The interest on this security is accrued by charge against income, but is not paid if not earned. Unpaid arrears

are now classified as a deferred liability, and this explains the increase in the item, Other Deferred Liabilities.
Under unadjusted credits, insurance and casualty reserves increased $1,408,000 of which $1,387,000 is the fire insurance reserve. The merchant marine is also insured through the railway insurance fund. The steady increase in this reserve indicates the wisdom of the policy adopted in placing insurance

C.N.R.-Minister's Statement
through the company's own fund instead of outside underwriters. Under present policy, all profits which the underwriters would have received, remain with the company.
Profit and Loss account, being a debit balance, is shown as an impairment of the government equity in the property as represented by $265,628,338.70 of capital stock owned by the Dominion and $1,188,482,341.48 in Dominion of Canada account.
Before leaving the balance sheet, I would just like to make one further observation. The Minister of Finance (Mr. Robb) in his budget speech, estimated that for the fiscal year ended March 31, 1926, there was a shortage of net earnings against the interest payable to the public of $7,400,000. When the budget speech was delivered, the actual figures for the government fiscal year were not available. Since they have been available, it is shown that the position is even better, and that the deficiency in net earnings to meet interest charges due the public was not $7,400,000, but $5,735,502-and this after allowing for such charges as amortization of discount, depreciation accruals, and retirements of the ledger value of equipment taken out of service, amounting in all to more than three million dollars.
Sir Henry Thornton, on page 7 of the report, has dealt with increases and decreases in certain items of the income statement. I will simply add, for the information of parliament, a statement of the profits of separately operated companies as shown in account No. 512 of the income statement, and of losses of separately operated companies, as indicated by account No. 545. Perhaps the members will be good enough to take these as read and let them appear in Hansard.
CANADIAN NATIONAL RAILWAYS Profits of Separately Operated Companies, as Shown
in Account No. 512
Oshawa Railway	,	
$ 151,777 58Thousand Island Railway	
25,418	60Terminal Warehousing Company	
77,767	59
Chicago, New York & Boston Refrigerator
Company	
194,600	26Montreal Warehousing Company	
104,835	28G.T.P. Terminal Elevator Company.. ..	19,155	07
Canadian National Express (except revenues
and expenses)	
281,113	49Canadian National Realties	
16,087	12Niagara, St, Catharines & Toronto Railway Navigation Company	
83,014	77Canadian National Steamships	
24,837	87Canadian National Telegraphs	
176,061	14Canadian National Transfer	
24,388	45
[Stage Direction]
Losses of Separately Operated Companies, as Shown in Account No. 545
Rail & River Coal Company	$293,206	18Duluth & Virginia Realty Company	
18,605	09
Grand Trunk Pacific Development Company. 107,625 04
Prince Charles Limited	
3,791	56G.T.P. Telegraph Company	
13,256	38Montreal & Southern Counties Railway..	19,344	09Canada Atlantic Transit Company	
164,002	74G.T.P. Alaska Steamship Company	
2,568	57Toronto Suburban Railway	
228,919	83Prince Rupert Dry Dock	
58,031	44Toronto Terminals Railway-Adjustment ..	150,291	29
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The adjustment item represents the National's contributions to March 31, 1925, (to the Toronto Terminals Railway Company, to enable the latter to pay the interest on their outstanding notes in favour of the Bank of Montreal and charged to Account 545. In September 1925 this amount was repaid in bonds of the terminals company, hence the adjustment.
It is customary, also, to bring down a statement of income account, including the Central Vermont, also giving separately the detail of operation of Canadian lines and United States lines, and this I shall, with the consent of the House, hand to Hansard for use as an appendix.
CANADIAN NATIONAL RAILWAYS (Including Central Vermont) INCOME ACCOUNT
Years Ending December 31st, 1925 and 1924
Gross Operating Revenue
Canadian National Railway Lines in Canada. Canadian National Railway Lines in U.S.
$ 208,218,920 82 $ 201,224,493 13 36,752,281 79	34,363,689 42
Total Canadian National Railways Central Vermont Railway	
244,971,202 61	235,588,182 55
8,463,639 14	8,380,752 39
Total

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C.N.R.-Minister's Statement
Gross Operating Expenses
Canadian National Bailway lines in Canada	$ 184,373,201 44
Canadian National Railway lines in U.S	 28,333,586 38
Total Canadian National Railways	 212,706,787 82
Central Vermont Railway	 7,357,918 37
Total	$ 220,064,706 19
Net Revenue or Deficit from Railway Operations
Canadian National Railway lines in Canada	$ 23,845,719 38
Canadian National Railway lines in U.S	 8,418,695 41
Total Canadian National Railways	 32,264,414 79
Central Vermont Railway	 1,105,720 77
Total	$ 33,370,135 56
Tax Accruals, Uncollectable Revenues and Miscellaneous Operations
Canadian National Railways lines in Canada	$	3,048,206 96
Canadian National Railways lines in U.S	 1,338,865 14
Total Canadian National Railways	 4,387,072 10
Central Vermont Railway	 238,665 04
Total	$	4,625,737 14
Total Operating Income or Deficit
Canadian National Railways lines in Canada	$ 20,797,512 42
Canadian National Railways lines in U.S	 7,079,830 27
Total Canadian National Railways	 27,877,342 69
Central Vermont Railway	 867,055 73
Total	$ 28,744,398 42
Non-Operating Income or Charges Net
Canadian National Railways lines in Canada	$	9,119,271 05
Canadian National Railways lines in U.S	 6,552,760 93
Total Canadian National Railways	 2,566,510 12
Central Vermont Railway	 465,52160
Total	$	2,110,988 52
Total Income or Deficit Before Fixed Charges
Canadian National Railways lines in Canada	$ 29,916,783 47
Canadian National Railways lines in U.S	527,069	34Total Canadian National Railways	
30,443,852	81Central Vermont Railway	
411,534	13Total	$ 30,855,386 94
Fixed Charges
Canadian National Railways lines in Canada:-
Interest due public	$ 39,539,506 95
Interest due government	
31,450,381	89„	70,989,888	84
Canadian National Railways lines in U.S.:-
Interest due public	 898,728	39
Canadian National Railways	$ 71 8gg 617 23
Central Vermont Railway due public	
528,323	39"	"	due Can. Nat. Rlys	705^966 03
1,234,289 42
Total C.N.R. and C.V. Rly	$ 73,122,906 65

[Stage Direction]
$	5,239,891 25

[Stage Direction]
$	1,194,54931

[Stage Direction]
C.N.R.-Minister's Statement
Total Deficit
Canadian National Railways lines in Canada	S 41,073,105 37
Canadian National Railways lines in U.S	 371,659 05
[Stage Direction]
Total Canadian National Railways	 41,444,764 43
Central Vermont Railway	 822,755 29
54,860,419 22 897,062 51
Total Deficit
$	42,267,519 71 S 55,757,481 73
Briefly, the Central Vermont adds §8,163,639 to the Canadian National gross revenues, and $7,357,918 to the pperating expensed. The .net revenue from operation was $1,105,720, but taxes took $238,665 and the total operating income was thus reduced to $867,055; income charges of $455,521 further reduced this amount to $411,534. As the fixed charges were $1,234,289, the deficit after fixed charges was $822,755, an improvement of $75,000 over the previous year.
I would like also to hand to Hansard', a summarized statement of the progress of branch line construction under the programme at present in hand.
CANADIAN NATIONAL RAILWAYS Branch Line Construction
During 1925 the following work was done in connection with the railways' branch line programme, involving an expenditure of $6,743,164:
Grading	 166.6 miles
Tracklaying	 355.0 miles
Ballasting	 238.5 miles
Last year's work brought the total expenditure on branch lines, under the three-year programme, to $8,386,052 *to December 31 last, at which date the following work had been done:
Grading	 235.7 miles
Tracklaying	 446.5 miles
Ballasting	 277.0 miles
The following programme of work has been prepared for the current year:
Grading	 104.9 miles
Tracklaying	 157.2 miles
Ballasting	 328.0 miles
involving an estimated expenditure of $7,568,000 on the following projects:
				|
				S ,
				
± s	2 a	d G	Eastern lines:	o o	H O	K 3St. Remi d'Amherst.. ..	2.3	2.3	$ 70,000Prairie lines:	Pine Falls	. 1.6	4.7	19.0	260,000Bengough -Willow br. .	. 4.5	19.8	28.4	681,000Dunblane-Central Butte	1.4	26.0	1,530,000Eston, S.E	.3	5.0	143,000Turtleford, S.E	. 39.6	43.7	67.0	1,600,000Acadia Valley	25.0	25.0	461,000Lovema Westerly.. ..	50.1	406,000St. Paul, S.E	. 20.2	21.0	21.0	514,000Warden-Hanna	44.1	395,000Rosedale-Bullpound .. .	. 33.0	39.0	39.0	915,000British Columbia lines:	Kelowna-Lumlby	453,000Cowichan Bay	1.1	45,000Vancouver Island	95,000Total	*7,568,000
Dunblane-Central Butte expenditure includes the cost of completion of the bridge over the south Saskatchewan river. Rosedale-Bullpound item is for half cost only and the work is subject to a joint section arrangement to be made with the Canadian Pacific Railway. The Kelowna-Lumby item covers cost of stations at Kamloops and Kelowna, and other facilities. Cowichan bay estimate covers ballasting, buildings and telegraph lines and the Vancouver island item covers certain buildings and fencing.
It is now six years since the government became responsible for Grand Trunk financing, and while the reorganization and consolidation of the National system did not take place until late in 1922, we have a six-year background from which to judge of the progress made by the railways towards recovery from the difficulties which proved too much for private ownership. There are a number of ways in which progress may be noted. It is four years now since there has been an operating deficit. In 1920 the operating deficit was $34,GO0,0O0. In 1925 there was an operating surplus of $32,000,000. The extreme swing between the operating deficit of 1920 and the operating surplus of 1925 was $66,000,000, or an average improvement, over that period, of 11 millions a year.
A very hopeful feature also of our railway situation is the fact that the annual increase in operating earnings in recent years has been greatly in excess of the annual increase in fixed charges. While as stated, the total of the annual increases in operating earnings during the last six years was 66 millions, the total of the annual increases in fixed charges over that period was but 26 millions, or 40 millions less.
There has been improvement, also, in the matter of total deficit, including fixed charges. Six years ago, it was $80,000,000, while. last year it was $41,000,000-or about one-half. And of this deficit of 41 millions for 1925, 31 millions was a book-keeping charge for unpaid interest due the government, which has been written into the debt of the railway.
During the six years in question, the debt of the railway due the public increased by 130 millions, and the debt due the government-including interest-by 506 millions-a total of 636 millions. But of the latter sum 153 millions consisted of government interest. It may be asked why this item of interest should be segregated. Such a question might
[Stage Direction]
C.N.R.-Minister's Statement
be answered in this fashion, if applied to an ordinary case of loan on mortgage. The mortgagor failed, and the chief creditor took over the property on his own account, and that of other creditors interested. But the requirements of present railway accounting methods make it necessary to continue to set up the interest charges, although the government, the chief creditor, has taken over the property. Such a situation could rarely arise in an ordinary business transaction.
There has been criticism, in another place, to the effect that there is no assurance that the increase in railway debt would grow less in the near future. The answer is that the annual increase already grows smaller. Including government interest, the increase in railway debt has, as stated, amounted to 636 millions during the last six years. Stripped of the 153 millions of government interest the increase was 483 millions. Of the 483 millions, 243 millions were added during the two years 1920 and 1921, and 239 millions during the succeeding four years. In 1920, the actual addition to the debt, omitting the bookkeeping charge of government interests, was 131 millions; in 1925 it was $31,926,617. Quite clearly then, there is substantial reduction in the rate of increase in the railway debt.
I have pointed out that the debt of the railway increased to a greater extent during 1920 and 1921 than in the four years since. There were reasons for that, and in fairness to those responsible during those years, I should state that the railways, during 1920 and 1921, were at the very depth of their difficulties. It so happened that heavy maturities coincided with the peak of the deficits, and there were as well consistently heavy demands on capital account. Thus the total requirements of the railways were heavier in those years than they have, ever been since that time or are ever likely to be again. The bulk of the burden of financing the railways fell upon the government, private capital at that time not being entirely sure of the National Railway situation, and there was the added fact that money was not as plentiful as it has since become. That condition may be traced in the statement of the railway's unmatured funded debt, and will be found expressed in rates of interest which, even with the guarantee of the government, ranged as high as 7 per cent, in contrast with the 4 and 4i per cent issues put out in 1924 and 1925.
I now come to what seems to be a contentious matter in this chamber, the question of assistance to the railways in the form of guarantee rather than by direct aid, and, as a newcomer to the federal arena, I have endeavoured to

familiarize myself with the actual situation, not with the object of provoking further controversy, but with a view to ascertaining in what particular, if any, there has been change of practice and policy.
I find that prior to 1921-22, issues guaranteed were additional to the cash vote, as certain subsequent issues have been. In that way, the guarantees of 1920-21 were for refunding, and could not be utilized for any other purpose.
In 1921-22 for the first time, the estimates provided that advances to the railways might be made in the form of cash, or by way of guarantee, or partly in cash and partly by guarantee, in the discretion of the Governor-in-Council. It was further provided that the moneys thus loaned could be used on any of the following accounts, (a) operating deficits,
(b)	acquisition of "property, materials and supplies, (c) interest on notes, securities or Obligations, (d) the principal or interest on maturing or matured loans, secured or unsecured, and (e) construction and betterments. Thus it was specifically provided that the guarantees of that year, which of course reduced the cash vote to that extent, could be used for general purposes, and the 50 millions guaranteed that year were so utilized. The general form of this estimate has simply been continued by the present government. There is nothing wrong about it, and the utilization of such moneys is of record in both railway and departmental reports. Unquestionably, the moneys were utilized by the railways in accordance with the provision of the vote. Had they not been, the auditors whose duty it is to watch such matters would have had something to say. The practice, therefore, has been consistent since the present form of vote was introduced in 1921-22.
Sir HENRY DRAYTON:: Will my hon.
friend allow a question?


Mr. DUNNING:: Certainly.


Henry Lumley Drayton: Does my hon.
friend find any error in the figures which I gave the House in the budget debate, and which will be found at page 3258 of Hansard? I know his accountants have been studying them.


Charles Avery Dunning: Mr. Speaker, I have not
studied the figures given by my hon. friend.


Henry Lumley Drayton: They happen to be figures dealing with this question my hon. friend is speaking about.


Charles Avery Dunning: In reply to my hon.
friend, I have in my hand a statement dealing with the utilization of the guaranteed issues

CJVJt.-Minister's Statement
in 1921-22, and I find that on Canadian Northern account there was 826,228,163 guaranteed, of which $2,725,784 went into betterments and $5,172,807 into materials and supplies. On Grand Trunk account I find that $23,186,181 was expended under the guarantee, of which $1,177,245 went into betterments and $1,000,000 into materials and supplies. I find also that the date of the Canadian Northern issue to which I have just been referring was July 1, 1921, and of the Grand Trunk issue September 1, 1921. All of the Canadian Northern issue was utilized for 1921 accounts. The Grand Trunk issue was mainly applicable to 1921. I have the detailed figures in that regard.


Henry Lumley Drayton: Can my hon.
friend give the total amount of guaranteed bonds for 1920, 1921 and 1922, and the total amount of retirements? That is What counts.


Charles Avery Dunning: I have the retirements for each year. I presume my hon. friend refers to refunding. Of the $23,000,000 odd guaranteed for the Grand Trunk in that year $11,967,596 was for reifunding, and in the case-


Henry Lumley Drayton: I asked as to the total, that was all.


Charles Avery Dunning: I am trying to give my hon. friend the details; then he can total them himself. I have not the general total.


Henry Lumley Drayton: The general total is the only thing we are interested in.


Charles Avery Dunning: If I give my hon. friend the individual figures he can put them together. Or I will gladly sit down and add them myself.


Henry Lumley Drayton: I have got them together.


Charles Avery Dunning: Of the amount guaranteed for Canadian Northern account, $4,730,063 was for refunding and $8,599,507 for interest due the public. On Grand Trunk account $4,966,175 was for interest due the public. Those are the total figures for that particular year.


Henry Lumley Drayton: What year is my hon. friend referring to?


Charles Avery Dunning: 1921-22.


Henry Lumley Drayton: As a matter of fact, the statement of the Department of Finance shows that instead of the figures my hon. friend gives, there is a total redemption of $48,000,000 odd. It is extraordinary how different the figures are.


Charles Avery Dunning: As I said at the outset, I went into this not to add to the controversy but to settle whether or not there had been any change in practice as to the utilization of the guaranteed moneys, and I think I have proved conclusively that the practice now followed was started during the fiscal year 1921-22 by my hon. friends opposite. I am not finding any fault with them. What is the matter with the practice? I have not been able to discover anything wrong with it. The practice started in that year, as the figures I have just quoted prove, has been continued ever since, and I must say, Mr. Speaker, that from my point of view it is a good business practice and sound in every particular. I give my hon. friends credit for introducing it.


Henry Lumley Drayton: It is not a question of practice; there has never been any challenge of that. It is a question of presentation in so far as the debt is concerned.


Charles Avery Dunning: I am sure my hon. friend will not have any fault to find with my presentation of the debt of the National Railways. I presume what he is referring to is the debt statement as presented by the Minister of Finance (Mr. Robb.) He is quite capable of taking care of himself, and I do not intend to digress in that direction to-day.


Henry Lumley Drayton: My hon. friend is attempting to come some way.


Charles Avery Dunning: I am also advised by the Finance department that there has been no change on their part in their treatment of guarantees of railway issues-that is to say, they have never been taken into account as increasing the public debt. There has been no departure from former practice, therefore, in the matter of guarantees. Fortunately, during the last fiscal year we were able to get through without resort to guarantee. The only object of the guarantee is to secure a better rate of interest than might otherwise be possible, and, I have no doubt we shall all welcome the day when the position of Canadian National Railways will inspire such confidence as to attract any requisite capital without necessity of guarantee. During the last six years, guaranteed issues have totalled $264,500,000, but the increase in the debt due the public, of which the guarantees form part, was, during that period, but 130 millions, or slightly less than one-half the total of the guarantees. The explanation, of course, is that much of the guaranteeing was for refunding and simply replaced former debt. During
36S4

C.N.R.-Minister's Statement
the same six years, 265 millions were provided on investment account; Thus while the increase in debt to the public was one-half the guarantees, double the amount went into improvement of the property. In the matter of public borrowings, therefore, there has been no impairment of the margin of safety to the investing public.
The chairman and president informs us that a searching examination of the company's financial structure has been under way during the last year and it is expected that, during the current year, definite proposals having for their object the placing of the company's finances on a sound and permanent basis will be presented. Reference is made to the difficulty of unravelling financial data relating to the host of constituent companies, and an idea of the complicated character of the task may be gathered from the schedule of companies comprising the Canadian National Railway system accompanying the annual report, the capital stocks connected with those companies, the investments in affiliated companies, the securities comprising the funded debt, the loans and advances from the government, the appropriations on account of former government railways, the scores of mortgages involved and the innumerable intercorporate transactions.
The task of simplifying and consolidating the variety of obligations outstanding and of reducing varying financial practices to a uniform basis presents many difficulties. The former government lines were constructed out of consolidated revenue at the expense of the Dominion at large, and there is no capitalization involving interest charges. The Canadian Northern was added; its heavy financial requirements have been supplied in part by the public, and to a greater extent by the government. The Grand Trunk Pacific was next taken over and is still being operated under receivership, with the legal requirements thereby involved. Afterwards the Grand Trunk itself was acquired, together with financial complications as between the Grand Trunk Pacific and the parent organization, and both, as the records show, have required much government assistance, but for which-and this is frequently lo3t sight of-the private investments in both roads would probably have been wiped out. With each of these large corporate entities was brought in a number of subsidiary concerns.
In view of the continued criticism abroad of Canada's action in respect to the Grand Trunk acquisition, and the position of certain Grand Trunk Pacific debenture holders, it
I Mr. Dunning.]
may be stated at this point that the theory that Canada, in taking over the Grank Trank, was acquiring at no cost an immensely valuable property has not been justified by the results which are of record in the report before the House. Heading the unmatured funded debt, on page 28 of the report, will be found the $216,000,000 of Grand Trunk debenture and guaranteed stocks, the interest on which Canada has guaranteed in perpetuity, and which interest amounts to about nine millions a year. In addition, the government has had to provide on Grand Trunk account since acquisition cash loans totalling $118,582, 182, detail of which will be found in the schedule of loans on page 27. In addition to this direct cash aid, $74,899,157 has been provided by guarantee, and $12,000,000 for equipment. Then the Toronto viaduct scheme was a Grand Trunk responsibility which the government has had to assume. For this, around $7,000,000 will be used from the $18,000,000 issue of February 15, 1925. The 4 p.m. foregoing items total $212,481,339, and it will be recalled that the par value of the preference and common stocks of the Grand Trunk, which the majority awrard of the arbitrators declared of no value as at the date of agreement, was $180,000,000. The arbitrators' estimate of the condition of the property in 1920, and of its requirements, has thus been amply sustained by subsequent developments.
In connection with the Grand Trunk, there is a curious echo of the past in the balance sheet-"Governmental grants in aid of construction, $16,280,820." This represents aid to the Grand Trunk in the early days, on which interest was to have been payable when Grand Trunk common stock became productive of dividends. As is well known, the common stock of the Grand Trunk never paid a dividend in the seventy years of the separate existence of the company. The balance sheet item is, therefore, without interest. After recording interest in the public accounts of the Dominion until a charge of more than ten millions had accumulated, the Department of Finance gave up the job of recording interest on this venerable loan. This item of $16,000,000 is additional to the $212,000,000 advanced since the Grand Trunk was taken over.
The loans charged to Grand Trunk Pacific account-page 27 of the report-total $127,862,716, of which $53,576,000 was advanced prior to receivership and $53,768,000 since March, 1919, when the property was abandoned. Since that date, we have also provided more than twenty millions to pay interest guaranteed, much of it by the prov-

C.N.R.-Minister's Statement
inces. And because Canada has not also provided interest for Grand Trunk Pacific four per cent debentures which it did not guarantee, the Dominion continues to be adversely criticized by news writers abroad. This can only arise through lack of information and to supply this deficiency is my excuse for placing the foregoing facts on record in this connection.
Before digressing, I was referring to the present complicated financial structure of the Canadian National system. What is desired is a capital structure which will simplify financial and accounting practice, with consequent saving of expenditures, and which also will ease the burden imposed on the Canadian National system by inheritance from private ownership. It may well be questioned whether it is humanly possible for any railway management to make good the frantic borrowings which overwhelmed the former owners. The former minister, Right Hon. George P. Graham, after considerable expedience with the problem, had this to say last year, in the course of his annual statement :
Under present conditions-and I do not want any person to be disturbed about this-with all this mass of intricacies that nobody has been able to unravel, the Canadian National Railways cannot under any management pay carrying charges if we take into account the amounts advanced by the government. The people of Canada could not stand rates which would be sufficiently high to carry all this under our present arrangement.	[DOT]
The object sought by the present examination is a capital structure reasonably commensurate with the earning prospects of the property. Although the Department of Finance has for years treated the loans and advances by the government to railway companies as non-active assets, with no present, if any, prospect of return, the present form of Canadian National accounts requires the setting up yearly of an immense figure- thirty-one millions odd last year-of interest due the government; and that figure is about half as large as it would be if the practice were consistent to the extent of computing similar interest charges on appropriations of nearly half a billion which have gone into former government lines, and on which no interest has ever been computed, as against the Canadian National lines, by the Department of Finance. Government interest accruals relate to loans and advances to former privately-owned lines only. Although we have taken possession of the security against which the sums in question were advanced, the cor-14011-234
porate accounts continue to pile up interest charges that now form the largest single item of the yearly addition to the railway debt.


An hon. MEMBER:: Wipe it out.


Charles Avery Dunning: As many hon. gentlemen know, there is lack of uniformity even in the computation of interest. As already stated, there are no interest charges connected with former government lines, nor is any interest accrued or unpaid interest due the government, which sum now amounts to about 162 millions. Simple interest only is accrued on government loans and advances, but interest is compounded in so far as it has been necessary to borrow from the public to meet interest charges due the public-which was not the case, I am happy to say, during 1925-26.
I find, also, the accounting system of the Canadian National Railway burdened with the work which an ordinary railway company is not required to attempt. The accounting of the National management is of necessity on a system basis. Then, because of the requirements of certain issues connected with the Grand Trunk, Grand Trunk Pacific, and the Canadian Northern, as well as the Grand Trunk Pacific receivership-and also because the former Canadian government lines must-be provided by the government with cash if the earnings are not sufficient to meet operations-it is necessary to recast the accounts on a corporate basis, all of which entails much costly and otherwise unnecessary book-keeping and accounting.
There is still another somewhat awkward feature of these railway accounts. As hon. gentlemen are well aware, the railway accounts are on a calendar year basis and the estimates and public accounts which enter largely into our railway affairs, are on the basis of the federal fiscal year. This leads to occasional difficulties and misunderstandings in the discussion of railway finances, which would be avoided if it were possible to reduce both accounts to the basis of a common year.
With regard to the estimates, a year ago, parliament was asked to provide $50,000,000 to meet expenditures made and indebtedness incurred by the National Railway during 1925-26. At that time, the immediate outlook for the railways was not very bright. During the early months of the year, indeed well into the summer, their business showed a decline as compared with the previous year. The second half of the year proved to be the very reverse of the first six months. A good crop, and consequent improved business, enabled



C.N.R.-Minister's Statement
the Canadian National Railways to almost double the operating net of the previous year.
It transpires-and we are discussing fiscal year figures at the moment^that of the fifty millions voted a year ago, only ten millions were required of the government, and there were no bond issues, either guaranteed or otherwise. This improved state of affairs appears to have been made possible) by a number of circumstances. As hon. gentlemen will have noted, the railway was itself able to provide 80 per cent of its interest requirement due the public. That supplied the chief reduction in the estimated requirements.
The forty millions, which were not required, are accounted for in this way:
1.	Increase in net revenues	$ 13,700,0002.	Decrease capital expenditures	
7,000,0003.	Discount on proposed bond issue cancelled	
1,600,0004.	Interest on proposed bond issue cancelled	
400,0005.	Reduction in stores purchased.. 8,000,0006.	Cash available from former bond issues.	2,700,0007.	Balance provided from working capital.	6,600,000Total reduction	$ 40 000,000
These figures are, in part, estimated and cover the period from April 1, 1925, to March 31, 1926.
Nothing, perhaps, could be more indicative of the rapidly improving position of the National lines than the fact that a Minister of Railways finds it necessary to explain why forty million dollars voted were not required to be forthcoming. I can assure hon. gentlemen that it is a very much more agreeable task than would have been the necessity to explain why the railways had required 40 millions more than had been estimated.
The budget amount required for the present fiscal year, 1926-27, is $31,000,000, distributed
as follows:
Interest on funded and other debt.. .. $36,540,598 34
G.T. Pacific guaranteed interest	 1,108,000 00
Sinking fund payments	 165,133 33
Equipment principal paj'ments	 7,397,400 00
G.T.R. 4 per cent guaranteed stock.. ..	2,433,333 33
Retirement of capital obligations	 808,000 00
Total financial requirements	$48,452,545 00
Less resources	 34,379,829 00
Net financial requirements	$14,072,718 00
General additions, betterments, including
new equipment	 15,727,284 00
Discount on securities to be issued.. ..	1,200,000 00
Total estimate	$31,000,000 00
The gross capital expenditure proposed is $19,127,284, including Central Vermont. Retirements recoverable through operating account reduce this figure to 815,727,284. This

year's vote for betterments is intended to
provide for the following:
Betterments to road	$13,047,211
New equipment	 1,325,000
Betterments to equipment	 1,500,000
Comm. Telegraphs and	Express	 750,000
Electric lines	 795,000
Hotels	 336*300
Miscellaneous	 637,013
Central Vermont		736,760
Gross capital expenditure	$19,127,284
Less retirements recoverable through operating accounts	 3,400,000
Net increase in investment account	$15,727,284


Henry Lumley Drayton: Is the $736,760
intended to meet a deficit on the Central Vermont?


Charles Avery Dunning: 
Mr. G. B. NICHOLSON (East Algoma):: 
Charles Avery Dunning: Yes.


George Brecken Nicholson: On page 6 of the report over the signature of the president it is stated that there were issued in February, 1925, $17,000,000 Canadian Northern 4J per cent ten year guaranteed gold bonds and $18,000,000 Canadian National per cent five year guaranteed gold bonds.


Charles Avery Dunning: I stated in that connection that I was using fiscal year figures for the moment because I was dealing with the

C.N.R.-Minister's Statement
statement of the Minister of Finance. What I stated was true in relation to the fiscal year. But the issue to which my hon. friend is referring was made before the commencement of the fiscal year.


George Brecken Nicholson: These bond issues are applicable to the period covered by the report.


Charles Avery Dunning: The proceeds might be partly used.


George Brecken Nicholson: If the bonds were issued in February and the statement is that the advances in February amounted to
818,000,000 and $17,000,000 and the retirements amounted to $17,583,780.06, . surely that must be applicable to this report.


Charles Avery Dunning: A great proportion of that is for retirements.


George Brecken Nicholson: The retirements
amounted $17,583,780.06 as I have said. The additions on account of bond issues amount to $17,416,219.94 bringing the total net debit up to $68,860,984.36 exclusive of interest on the Canadian government railways and the Intercolonial railway.
If you refer to the report of 1924-and I will not go into the details of the figures at all-you will find that the same situation prevails. A surplus of $17,244,251.48 is reported and the same items are included in nonoperating expenses that should be included m operating expenses such as non-collectable revenues. Surely revenues that the railways have not been able to collect cannot be looked upon as a non-operating revenue, and the same thing is true of the hire of cars and equipment. If we employ the same calculations the conclusion we come to is that instead of there being a net operating surplus of	$17,244,251.48	there	was	a surplus	of$7,740,251.37, and the gross debit worked out in	exactly the	same	way amounts	to

If you turn back to 1923 you will find that the same situation is presented. From the operating surplus which is given as $20,236,563.09 must be deducted those items that are strictly charges against transportation costs and would amount to $9,086,306.42. This reduces the operating surplus to $11,150,256.67. If you add capital charges and interest on the public debt, the total debit for the year amounts to $124,856,551.33.


Charles Avery Dunning: Is my hon. friend referring to 1925?


George Brecken Nicholson: 1923. In 1924, the debit was $101,761,158.65 and in 1925 the debit was $68,860,984.36.
Coming to the general financial position of the Canadian National Railways, I should like to refer to the original cost at the time the roads were taken over. Let us take first the figures in regard to the Canadian Northern Railway, which are as follows:
Original cost Canadian Northern Railway
System funded debt	$285,795,420	61Equipment trust obligations	
13,526,000	00
Demand and short term loans secured
by collateral	 58,056,961	11
Due to other companies on construction
account secured	
30,502,392	04Current liabilities	
19,408,495	79Accrued interest	
4,730,069	93Reserves for taxes and	insurance.. ..	1,245,038	19Total	*413,264,377 67Added to the above the total amount of 5 per cent income charge convertible debenture stock	
25,000,000 00Making a total of	$438,264,377 67
In addition to this there is the added sum of $10,000,000 for the $60,000,000 of capital stock of the Canadian Northern Railways, bringing the gross total to $448,264,377.67 Against this there are the following assets:
Cash, materials, supplies and accounts
receivable	
$30,759,013	95Insurance paid in advance	
823,708	51Deferred charges	
860,113	95Total of liquid assets	
$32,442,836 41Leaving the net cost of the railway as at September 30th,	1917, as $415,821,531.26,
from that there is to be deducted on account of land assets, exclusive of railway property, $29,044,790.74; leaving the actual cost of the railway as it then stood with all its equipment $386,776,740.52, equalling in round figures $38,677.67 per mile. At the time it was taken over a careful estimate was made of the amounts required to bring the line up to standard. As regards the Canadian Northern I will give the details, but as regards the others I will omit the details. The figures
are as follows:
Rails, fasteniugs and railway ties, on the basis of the difference in weight of rails now in use and those required to bring the whole mileage	up	to	standard..	..	$14,605,000Ballasting, ditching,	etc	
15,000,000Replacement of temporary bridges with stone, concrete or steel construction..	..	20,000,000
Roundhouses, coaling plants, intermediate terminal facilities, way stations, track men's houses, and general maintenance
of way equipment	 13,395,000
Main terminal facilities and interchange
connections	 22,000,000
Locomotives	 30,000,000
Cars of all classes	 55,000,000
Total	 $170,000,000
That is what was required to bring the Canadian Nbrthern part of the Canadian National railway system up to standard, basing that standard practically on that of the

C.N.R.-Minister's Statement
Canadian Pacific. The Grand Trunk Pacific had cash and bond guarantees for which the government of Canada and the Grand Trunk Railway Company were each responsible. These amounted to $127,939,888 and the cash advanced directly amounted to $7,500,000, or a total in the case of the Grand Trunk Pacific of $135,439,888. There is excluded from that bonds guaranteed by the Grand Trunk alone of $69,189,499, bringing the total liability up to $204,629,387. If you add the cost of the requirements to bring the system up to standard namely $46,250,000-and I have the details in my hand but I will not take time to read them-that makes a total capital cost when the system was taken over of $181,789,888. In order that the railways might be taken over into the Canadian National system at a proper valuation there should be written off $73,669,888, leaving a net proper capitalization of $108,120,000.


Charles Avery Dunning: Is that for the Grand Trunk?


George Brecken Nicholson: The Grand Trunk Pacific. The amount should have been written off because of reckless and extravagant expenditure in connection with the construction of the Grand Trunk Pacific.


Charles Avery Dunning: Surely the hon. member knows that we have not taken over the Grand Trunk Pacific, which is being operated under a receivership.


George Brecken Nicholson: Perfectly true. But
is it not also true that the obligations of the Grand Trunk Pacific are included in the statement of the Canadian National Railways? If that be so it follows that, in order to deal with the Canadian National reports intelligently, we must take into consideration all branches of the system.


Charles Avery Dunning: How could we have written that amount off?


George Brecken Nicholson: If my hon. friend will bear with me I will come to that point presently. The amount required to bring the Grand Trunk Pacific up to standard was $46,250,000. The total cost of that portion of the Canadian government railways from Winnipeg east known as the Transcontinental at the time of the amalgamation was in round figures $200,000,000 and of the Intercolonial, $137,184,199. These properties are now carried in the balance sheet at $451,712,483.60 showing an increase of $114,528,284.60. I have not included the $114,000,000 in that $800,000,000 of cash advanced, for the reason that I cannot find anywhere in the railway statement anything to indicate what this sum of money was used for or where it came from, but as a

matter of fact the value has been increased in the books by that $114,000,000. The amount required to bring the Transcontinental up to standard was $26,250,000, the details of which I have here and which may form part of the $114,000,000 added.
Now we come to the Grand Trunk. At the time of the amalgamation we became responsible for the interest on $216,207,141, as the minister has stated, and I shall give in detail the estimate of what was required to bring the Grank Trunk up to standard. I have also the details of the amount expended. Estimate of Amount Required to Bring Roads to Standard Grand Trunk Deferred Maintenance as follows:
Increased weight of rail.. ..	$1,436,400
Ties-25 iper cent of total..	2,700,000
Ballasting, surfacing, etc.. ..	2,250,000
Extension to sidings, spurs,	
etc		1,250,000
Bridges, culverts, etc.. ..	750,000
Roundhouses, machine shops,	
turntables, coaling plants	
and water services		750,000
Miscellaneous, including re-	
pairs to general buildings..	1,000,000
Rolling Stock:	
100 locomotives at $70,000..	$7,000,000
50 locomotives at $60,000..	3,000,000
250 locomotives rebuilt at	
$10,000		2,500,000
250 locomotives repaired at	
$4,500		1,125,000
6,000 Standard frt. cars at	
$3,500		21,000,000
1,200 Flat cars at $2,500.. ..	3,000,000
1,000 Miscellaneous at $3,500	3,500,000
150 Passenger cars at $25,000	3,750,000
500 Service cars		1,500,000
150 Dining, sleeping and	
parlor cars		7,500,000
	$53,875,000
Less retirements as above.. ..	1,250,000

 52,025,000

I should like to put on Hansard a table showing the cost of lines to date exclusive of operating deficits:
Gross cost at date of amalgamation.. $1,075,607,969 14 Betterments and equipments, all lines
to date	
203,774,265	95New construction	
48,134,932	58Branch lines acquired	
8,388,193	66

Add sum still required for permanent improvements and equipment.. ..	101,487,134 05

Deduct amount that should be written off original cost of Transcontinental and G.T.P	 200,364,888 00

Approximately $59,000.00 per mile lor all lines comprising the system.

C.N.R.-Minister's Statement
Gross present liability including interest due Dominion government on
all lines	$2,336,330,871 66
1,237,027,607 38
Gross debit balance	 1,099,303,264 28
Deduct interest account Trans, and I.C.R	 106,155,000 00
Balance	 $ 993,148,264 28
Deduct all interest due Dominion government	 161,608,374 17
Net debit balance	 $ 831,539,890 11
In addition to interest already paid, $267,763,374.17.
The next statement I desire to give is a summary of the amounts necessary to bring
all lines up to standard:
Can. Northern, Jan. 1st, 19	$170,000,000 00
Transcontinental, Jan. 1st, 19-	 26,250,000 00
G. T. Pacific, Jan. 1st, 19-	 46,250,000 00
Grand Trunk, Jan 1st, 19-	 62,761,400 00

Expended to date	 203,774,265 95
Balance required	$101,487,134 05
I noted that the minister in his statement gave something like $264,000,000 which had been expended on betterments, but according to the details disclosed in the reports there has been expended only $203,774,265.95, leaving yet to be expended on the basis of the original estimate the sum of $101,487,134.05.
I come now to the cash advanced and moneys expended, and taking first the Grand Trunk I must say frankly that the minister's figures are in excess of those I have here. The figures I have were taken from the latest report of the Department of Railways and they show that cash advanced to the Grand Trunk Railway since acquisition totals $190,477,340.95. The minister stated that there had been advanced some $216,000,000. Now, when I made up this total and began to look into it, the question was forced upon me at once: if the sum of $190,000,000 has been advanced to the Grand Trunk, what has been done with it? The total expenditures for 1920, 1921 and 1922 in the matter of equipment less retirements were $25,725,888.30, while for betterments of all classes, in connection with which I shall give the details, there was the sum of $5,837,293.17. On the other hand the gross deficits for the years 1920, 1921 and 1922 amounted to $26,476,173.39, making a total for which we have any details of $57,039,351.94. That leaves unaccounted for $133,437,989.01.
If all the deficits that have been incurred on the Canadian National Railways from the end of that period until the present time had been charged up directly against the Grand
Trunk Railway, that total of $133,000,000 odd would not have been absorbed. The following is a statement of cash advanced to the Grand Trunk:
Cash advanced to Grand Trunk as per report of the Department of Railways and Canals, March 31, 1925..	$190,477,340 05
Total expenditures 1920-21-22:
Equipment less retirements	$ 25,725,888 38
Betterments all
classes	 5,837,293 17
Gross deficits 20-21-22 including interest on Dominion loans.. ..	26,476,173 39
$ 57,039,351 94 Unaccounted for.. ..	133,437,989 01

-equal to $57,100 ,per mile on the entire line.
Also note deficits 1920-21-22 include interest due Dominion government not paid, thus increasing the total of the sum not accounted for.
We come now to the Canadian Northern. The following is a statement of cash advanced
to this railway:
Cash advanced 1919-20-21 shown at
page 10-1921 report	 $251,088,248 88
Cash from Canadian National Railways page 6-report Department of Railways and Canals 1924	
48,202,877	96Loans, 1922-page	1-E-1922	report	..	29,845,010	59Loans, 1922-ipage	1-E-1922	report	..	784,751	10Total advanced	
$329,920,888	53
Gross deficit including interest on funded debt 1919-20-21 .. .. $103,487,706 81 Gross deficit including interest on funded
debt 1922	
18,509,965	84Betterments 1919 to 1922, all Canadian National lines except Grand Trunk	
83,515,096	08$205,512,768 71 Unaccounted for	
124,408,119 82

The question I want to ask is, what has become of all this money? Let us take now the Grand Trunk Pacific. The following table will show what advances have been made, together with the gross deficits:
Cash advanced 1919-20-21 shown at
page 10-1921 report	 $ 82,480,303 68
Cash advanced 1922 to cover deficit and interest on funded debt, page
2-B-G.T.P. statement 1922	 7,693,627 18
Cash from Grand Trunk, page 6 -report Department of Railways and Canals 1924	 15,000,000 00


$105,173,930 84 COMMONS
[Stage Direction]
C.N.R.-Minister's Statement
Gross deficit including interest due the public 1919-20-21.. .. $ 36,712,082 33 Gross deficit including interest due the public 1922	 7,693,627 18
$ 44.405,709 51 Unaccounted for	 60,768,221 33
[Stage Direction]
Now I come to the Canadian National system since the reports were amalgamated. At this point, Mr. Speaker, may I say that it is worth scanning the reports of the Canadian National Railways for 1921 and those for the preceding and succeeding years, because in the report of 1921 you feet details of what was done with that money; but from 1922 on you get no details whatsoever. In a moment I will give a specific instance to show exactly what the position is in relation to the reports that have been issued since 1922. In 1923 there were the following Canadian National bond guarantees and cash advances :
Cash advanced by Dom. govt	 Guaranteed bonds	 Equipment bonds			$ 24,500,000 00 50,000,000 00 22,500,000 00
	1924	
Cash advances	
Bonds issued	
Equipment bonds	1925	10,000,000 00 46,000,000 00 9,375,000 00Cash advanced	
Bonds issued	10,000,000 00 35,000,000 00Less retirements, 1924.. Less retirements 1925..	.. $15,511,973 30 .. 17,583,780 06	$207,375,000 00$33,095,753 36	33,095,753 36Net balance	$174,279,246 64
Cash to Can. Northern .. $48,202,877 96
Deficits 1923-24-25	 53,123,490 02
Betterments, all lines 1923-
24-25	 86,695,988	34
[Stage Direction]
Credit balance	 174,279,246	64
Excess of expenditure.. .. $13,743,109 68
At this point I would ask the House to note that in the Canadian National statement of betterments to all lines are included the Canadian Northern, the Grand Trunk Pacific, the Canadian government railways and the Grand Trunk for 1923, 1924 and 1925,- amounting to $86,695,000 odd. It will also be noticed that from the total of $188,000,000 odd there is deducted a credit balance of $174,000,000

odd, leaving an excess of expenditure of nearly $14,000,000. The details of the expen* ditures are shown as follows:
Betterments	
$21,962,955	31Equipment	
42,339,483	81Radis, Accessories,	etc	
19,212,656	94
[Stage Direction]
In the 1922 report there is no record whatsoever of what was expended on capital account. At least if there is I have not been able to find it.
Betterments	
$19,868,425	23Equipment	
29,060,521	62General	
786,633	67
[Stage Direction]
Betterments	
$20,234,892	75Equipment	
17,125,738	96General	
5,201	27
[Stage Direction]
Betterments	
$15,763,796	43Equipment	
1,291,644	43General	
222,301	83Suspense appropriations	
264,111	05Investment expenditures, separately operated properties	
1,044,708	54
[Stage Direction]
Less adjustments	 621,734 98
[Stage Direction]
The expenditures on the Grand Trunk I am going to give in detail:
1920-Roadway and general deferred maintenance. Page 33	$	1,702,806 62
1920-	Equipment all
classes.. .. $ 1,950,495 34
1921-	Deferred maintenance
ail classes	 2,228,177 70
1921-	Equipment all
classes.. ..	23,135,857	711922-	Deferred maintenance. .	1,906,308 85
1922-Equipment all
classes.. ..	2,899,361	09
*	$ 27 985,714 14 $ 5,837,293 17
Less equipment retired-
1921	....$ 621,708 28
1922	.... 1,638,120 48
[Stage Direction]
 2,259,828	76
[Stage Direction]
Total expenditures equipment and betterments	 $ 31,563,178 55

C.N.R.-Minister's Statement
Now let me give a summary of the expenditures on betterments and equipment:
Summary of Expenditures on Betterments and Equipment
Canadian National 1919-20-21	$ 83,515,096 06
Grand Trunk 1920-21-22	
31,563,178	55Canadian National	1923	
49,715,581	02Canadian National	1924	
37,365^837	98Canadian National	1925	
17,944,828	30
[Stage Direction]
Less estimate of new construction 192324-25	 18,330,258 96
[Stage Direction]
That total is what I gave before.
Now, 1 come to the cash advances:
Canadian National credit balance
brought forward	 $ 13,743,109 68
New construction as shown at page 10 ^
1921 report	 29,804,673	62
New construction Canadian National
1923-24-25, estimated	
18,330,258	96Branch lines acquired, page 13, 1921 report	
8,388,193	66
[Stage Direction]
The following summary is interesting, showing t'he balances unaccounted for:
Balance unaccounted for Grand Trunk. $ 133,437,989 01 Balance unaccounted for Canadian
Northern	 124,408,119 82
Balance unaccounted for Grand Trunk
Pacific	 60,768,221 33
[Stage Direction]
Less credit balance Canadian National. 70,266,235 92
Balance unaccounted for	$ 248,348,094 24
Add land sales	 3,510,635 53
[Stage Direction]
That is, the (statements show what has been advanced to those railways in cash for which no account is given in any statement the railways have issued either by way of deficit or betterments or new construction.
Charles Avery Dunning: What does my hon. friend suggest has become of that two or three hundred million?


George Brecken Nicholson: That is just exactly
what I should like the minister to ascertain.


Charles Avery Dunning: I have not got it.


George Brecken Nicholson: That is perfectly true.


Mr. CAHAN:: You came in too late.


George Brecken Nicholson: We have a statement
given to the public for example, that $216,000,000 new cash has gone into the Grand Trunk railway. The details given to the House in the Canadian National reports show that about $55,000,000 has been expended to piake up deficits in operation and betterments.
.Now I say at once that it is impossible that that sum- of money can have gone into the Grand Trunk railway. It is equal to an expenditure of more than $60,000 a mile on the whole line. We took the system over in the early part of 1922 by arbitration, and all that the original owners were allowed for it was $216,000,000.


Charles Avery Dunning: That is what I said.


George Brecken Nicholson: At the same time the
minister says this afternoon that we have advanced $216,000,000 additional cash.


Charles Avery Dunning: No, $118,000,000.


George Brecken Nicholson: What about bond guarantees?


Charles Avery Dunning: Those amount to $74,000,-
000.


George Brecken Nicholson: That is $192,000,000.


Charles Avery Dunning: And another $12,000,-


George Brecken Nicholson: That gives us a total of $204,000,000.


Charles Avery Dunning: for the Toronto viaduct.


George Brecken Nicholson: Leave that aside for
the moment.


Charles Avery Dunning: But I included that.


George Brecken Nicholson: I take the statement
of the Department of Railways and Canals, that the Canadian people have advanced on behalf of the Grand Trunk railway $190,000,000 odd, or $58,000 a mile for every mile of the system. If you deduct the deficits from that, I say to you it is impossible that that sum of money could have been properly expended either by way of betterments or in new equipment. You can Search these reports from A to Z, and you will not find any detail showing where that money has gone. That is my point. The same remarks apply to the Canadian Northern. I am taking these reports and they show the following details for new construction, which details represent the total amounts spent on betterments and new construction:
1933	
$12,135,591	571924	
12,715,935	931925	
11,807,990	43

And I take one-half of this, or $18,330,258.92. May I say at this point, Mr. Speaker, that the only means by which it is possible to find lin these reports since 1922, what has been spent on new construction is to take one-half of the account under certain headings, shown

C.N.R.-Minister's Statement
as betterments, engineering, new rails, new ties, ballasting, bridges, and so on. Betterments and new construction are lumped together in these reports. Prior to 1922 the details were set out, such as the miles constructed, where constructed and so on, but we have none of such information in regard to more recent construction. In the 1921 report, page 10, I find there was expended $29,804,673.62 on new construction and on branch lines acquired, as shown at page 13 of the same report, $8,388,193.66, making with half of the total I gave for engineering, grading, and so on, for 1923, 1924 land 1925, $36,660,517.93, or $18,330,258.96, an aggregate of $56,523,126.24.
Now we come to land sales; I am not going to give the details, but the total is $3,510,635.53. Then let me take these cash advances once more. The cash and bonds advanced, less betterments, deficits and new construction, according to the report of the Department of Railways and Canals and the reports of the Canadian National Railways, are as follows:
Cash and bonds to Grand Trunk Railway	$190,477,340	95Cash and 'bonds to Canadian Northern Railway	
329,920,888	53
Cash and bonds to Grand Trunk
Pacific	 105,173,930	84
Cash and bonds to Canadian National
Railways	
174,279,246	64Land sales	
3,510,635	53Total	$803,362,042 49


BETTERMENTS, EQUIPMENT AND DEFICITS-
[Stage Direction]
Grand Trunk	$ 57,039,351 94
Canadian Northern		205,512,768 71
Grand Trunk Pacific..	44,405,709	51Canadian National.. ..	139,819,478	36New construction.. ..	48;134,932	58Branch lines (purchased..	8,388,193	66Cash, Canadian National to Canadian Northern	48,202,877	96Total	$551,503,3X2 76 551,503,312 76Balance unaccounted for	
251,858,729 63
If the difference between that $57,000,000 and the $190,000,000 was spent on the Grand Trunk the people of this country, who are the owners of the system, have a right to know what it was spent on, but you cannot find any figures, aggregate or in detail, which will show where it has gone. To spend $190,000,000 on that property, and expend it properly, is an impossibility. It represents $58,000 per mile, and the total capitalization of the Canadian Pacific is just about $60,000 per mile for the entire system. The Canadian Northern was originally taken over at $38,000 per mile 
and the Grand Trunk was taken over at about $60,000 per mile.
If these statements are correct, and $803,000,000 of new cash has been expended, I say again, where has it gone? We cannot find any details. There is a net balance of $251,-
859,000	unaccounted for. I do not know where it has gone; I doubt very much whether anyone can tell accurately, but I at least have the suspicion that the public have not been given the facts with regard to what it was costing to operate the Canadian National system. That is the only answer that can possibly be given. If the public have been given accurate details as to what it has cost to operate the Canadian National system; if the public have been given accurate information as to cash which has gone into the system, as to the betterment and the deficits, then there is a difference of $251,5 p.m. 000,000 which the people do not know anything of, but of which they should be given a full explanation.
I have before me the details with regard to deficits and betterments. The statement is rather long, but the total for 1919, 1920 and 1921 was $140,199,790.13, for the Canadian Northern Railway and the Grand Trunk Pacific. The total gross deficit for the Grand Trunk, 1920-21, was $18,064,442.36, while the total on all lines to the end of 1921 was $178,721,387.80. The Canadian Northern operating deficit, 1922, and interest on funded debt amounted to $1,599,026.45 and $16,910,939.39, respectively. The Grand Trunk Pacific operating deficit for 1922 amounted to $5,352,360.22, while the operating deficit of the Canadian government railways totalled $2,910,657.93. The gross deficit on the Grand Trunk Railway for 1922 amounted to $8,411,734.03. The Canadian National Railway deficit for 1923, less interest to the Dominion government, amounted to $21,539,731.27; for 1924, $21,5S9,376.22 and for 1925, $9,994,382.53; a grand total of $269,370,862.80. The interest due the government totalled $164,788,864.13, making a final total of $434,159,726.93.
There has been absorbed by these railways if the reports are to be relied upon, $89,926,482.96 of surplus earnings, and there is just one item which may possibly be applied against that sum on the Grand Trunk Railway which is unaccounted for. In 1918 they spent $1,126,019.15, and in 1920, $790,000, or a total of $1,916,019.15, although I cannot see how it would be possible to include this amount in the charges against the Canadian people, because the Canadian people had not taken over the lines at that time.

C.N.R.-Minister's Statement
Now, Mr. Speaker, I have before me details of the gross cost of the system to date:
Intercolonial Railway	 $137,184,199	62
Transcontinental Railway, to December
31, 1918	
200,000,000	00Canadian Northern Railway	
386,776,740	52Grand Trunk Railway	
216,207,141	00Grand Trunk Pacific, less unguaranteed obligations	
135,439,888	00Total	$1,075,607,969	14
The cash advances since amalgamation, as I have already said, amount to $803,362,042.49; Grand Trunk Pacific obligations to Grand Trunk Railway, unguaranteed, were $69,189,499; Grand Trunk Pacific loans outstanding at the time of amalgamation, $20,539,357.10; additions to capital, Transcontinental and Intercolonial railways, since amalgamation, $114,528,284.60-and may I repeat that there is nothing to show how that increase was brought about. The 1925 balance sheet, unadjusted debits, $10,721,206.19; miscellaneous balancing items $4,619,138.97, a grand total of $2,098,567,497.49. That is the exact figure set out in the balance sheet for 1925, showing that when the Department of Railways and Canals say that roughly $803000,000 of new money has been put into the system, the Canadian National Railways must be taking that amount into consideration in bringing then- balance sheet out to this figure. In addition there is the interest for government advances to the end of 1924 amounting to $130,157,992.28, and the interest on government advances for 1925 amounting to $31,450,381.87, making a grand total of $2,260,175,871.66, with no interest at all on the Canadian government railways, the Transcontinental railway and the Intercolonial. The minister stated that there was no reason why interest should be charged on that money. There is only one reason why interest should not be charged on it, and that would be the assumption that there was no value produced for that amount of money. Before I get through I intend to show briefly the proportion expended for which no value has been received, but there has been some value given for the money expended on the Canadian government railways, and there is just as much reason for interest being charged on that money as for interest being charged on any property whatever. But we must take the gross cost of the lines to date in order to find their correct value.
Now, the statements show we have spent on these lines approximately $1,335,000,000. To this $1,335,000,000, however, must be added $101,500,000, the sum required to bring the roads up to standard, a total cost of $1,437,000,000. Now, there should be written off for
money that was improperly expended on the Grand Trunk Pacific and the Transcontinental, no less a sum than $200,364,888, leaving the net cost of the National system to-day $1,237,000,000, approximately $59,000 a mile.
I give that figure because I intend to refer before I conclude to the statement of the minister as to the difficulty there was in arriving at a proper financial structure for the Canadian National Railways. The original capital cost of the Transcontinental railway was $200,000,000. The amount required to bring it up to standard was $26,000,000, making a total of $226,000,000 or $125,500 a mile. Its value is about $55,000 a mile, or $99,555,000. The balance which should be written off is $126,695,000.
If I may be permitted to digress for a moment the statement is frequently made- the statement was made this afternoon by the Minister of Railways-that the railway difficulty we are faced with is due to the failure of private ownership in connection with these lines.
Charles Avery Dunning: I hope my hon. friend will quote me correctly.


George Brecken Nicholson: Perhaps I misunderstood the hon. minister, but if he did not say that these roads were taken over when private ownership had failed I did not understand him correctly.


Charles Avery Dunning: That is better.


George Brecken Nicholson: Yes, when private ownership had failed. Let us be honest with each other. Was it private ownership that failed? Was it private ownership that brought about the difficulties that the Grand Trunk Railway found itself in in 1918 or 1920? Was it private ownership that brought about the difficulties of the Canadian Northern Railway? No, it was the mad exploitations of railway building on the part of the Canadian people that brought about the condition with which we are faced, the projection of two paralleling or competing transcontinental railways at the same time when at the very outside one was all the country was capable of taking care of. On top of that there was the expenditure on the construction of these lines of money that was not spent in any proper part of the work of building the railway, for instance approximately $126,000,000 in the case of the Transcontinental. And while we were spending $125,500 a mile in building the Transcontinental railway and while $92,500 a mile was being spent on the Grand Trunk Pacific the Canadian Northern was being built alongside

C.N.R.-Minister's Statement
of it for $38,000 a mile, and the total capitalization of the Canadian Pacific for all of its lines is to-day about $60,000 a mile. The amount that should be written off the Grand Trunk Pacific, exclusive altogether of $69,000,000 of bonds that were issued and guaranteed by the Grand Trunk is $73,669,888, or a total of more than $200,000,000 for the two lines.
Now, Mr. Speaker, if you take the Canadian National railway system as it is to-day. That is to say, if you take the Intercolonial, the Transcontinental, the Grand Trunk, and the Canadian Northern, link them up together, and write off from their capitalization the two sums representing the money misspent in connection with the Transcontinental and the Grand Trunk Pacific, you have a capitalization that these roads will stand. That is the position which they are in exactly.


Mr. EULER:: How much would that be?


George Brecken Nicholson: Approximately $1,250,000,000.


William Daum Euler: Just to get my hon. friend's point clear. That $1,250,000,000 should be the capitalization?


George Brecken Nicholson: Yes, that should be the capitalization. I will come to the subject again in a moment, but that is just what the capitalization should be. And that brings me to the last point in connection with the financing, or rather the refinancing of the lines, the position which the Minister of Railways said was so difficult to handle. May I at this point say that although the Canadian National, or to be more accurate the Grand Trunk and the Canadian Northern, are made up of a number of smaller lines, they are not different in that respect from any other great railway system. You will find included in the Canadian Pacific system, for example, twenty-five or thirty companies and the method of accounting is exactly the same. All that is necessary is to find out the value of the property, and fix that value at what it is or what it should be. We know the amount that was actually spent in taking over all these lines. If we deduct from that amount what has been misspent on the Grand Trunk Pacific and the Transcontinental we have the valuation that could be placed on these railways and if they are properly operated they should earn a fair interest rate on that amount of money. If the figures in regard to refinancing and outstanding obligations are properly worked out this would be the present position of the National Railways:	The
amount due the public including guaranteed and unguaranteed securities is $931,329,302.74.

The amount due the Canadian people less all outstanding interest is $1,167,238,194.75. The interest charges, including the Canadian government railways, amounts to $267,763,374.15, or a total of $2,366,330,871.66. Now if you deduct the value at $59,000 per mile, which amounts to $1,237,027,607.38, the gross loss to be absorbed is $1,129,303,264.28. Deduct all interest of whatsoever character, which would be $267,763,374.15, and you have a net loss to be absorbed of $861,539,890.13. If you increase the capitalization to $65,000 per mile you bring the net loss down to $736,539,890.13. My own opinion is that if the Canadian National Railways are to be put on a sound basis it would be unwise to increase the capitalization to $65,000 a mile. I think that $60,000 a mile would be a proper limit to put, and on that basis, the net loss to be absorbed by the Canadian people is approximately $861,000,000, in addition to all interest due to date. Is there anything very difficult in connection with that? The railways stand to-day with obligations to the public of $931,329,302.74. The net interest of the Canadian people after absorbing the loss already incurred amounts to $305,698,294.64. That represents our equity in the National Railways on that basis. But that equity will not exist very much longer under present conditions; it will be wiped out unless a change takes place very soon.


William Daum Euler: How so?


George Brecken Nicholson: Does the hon. member not know that? We have spent on these lines now all they are able to carry, and this large sum of $861,000,000 in addition.


William Daum Euler: Does the hon. gentleman include in his statement the building of branch lines which are quite necessary and which will be self-sustaining?


George Brecken Nicholson: The building of branch lines is something entirely different. I am taking the lines as they are, and not increasing [DOT]the mileage. If the House will bear with me (for a few moments, I intend to refer to some method whereby some of the mileage can be decreased and the operating costs reduced. The distribution of the new capital on the basis of a cost of $65,000 per mile would be: Securities held by the public, $931,329,302.74. Net interest of Canadian people $431,698,294.64; total $1,363,027,597.38. If you increase the capital charges to $65,000 per mile you simply increase your equity, but my own opinion is that it would be unsound financing, so far as the Canadian National Railways are concerned.

C.N.R.-Minister's Statement
In connection with this I would point out that there are $69,000,000 of outstanding obligations of the Grand Trunk Pacific Railway which are not included, as I understand it, in the outstanding obligations to the public, and in any plan that may be advanced or adopted for re-financing these railways the question as to what is to be done with this $69,000,000 must be taken up. I take this position: Notwithstanding the fact-and there can be no question whatever about it-that those responsible for the construction of the Grand Trunk Pacific literally wasted the money, threw it away and never put it into the railway, the railway was constructed: with the approval of the Canadian people, the Canadian government, and those securities were sold on the market to the public. The innocent investor, with the endorsement, if not the guarantee, of the Canadian people bought these securities, and in my judgment the Canadian people cannot afford to repudiate those obligations. It is a grave question whether the Canadian people can afford' to repudiate the $69,000,000 of securities issued by the Grand Trunk Pacific in view of the conditions under which that road was 'being constructed, being a joint undertaking between the Canadian people and the Grand Trunk Railway. That agreement was fatal to both parties, there cannot be any question about it. But are the people who put up their money to suffer? That is the point which some day the Canadian people will have to decide.
I am going to give figures in regard to the cost of the Grand Trunk and the Canadian Northern. The Grand Trunk cost $74,000 a mile and the Canadian Northern, with all betterments and equipment to date, cost $54,000 a mile. The Grand Trunk can properly Stand a higher capitalization than the Canadian Northern, because it is a double track line, and the capitalization is not excessive. In this connection may I point out that the earnings of the Canadian National Railway per mile of their line are practically the same as the earnings of the Canadian Pacific Railway, but when you turn to the operating cost of the Canadian National you will find there is a marked difference. Maintenance of way cost the Canadian Pacific Railway, $1,698 per mile but it cost the Canadian National $2,050 per mile. That is the operating cost. If the Canadian National maintained their lines on the same basis as the Canadian Pacific they would save $7,350,000 a year in operating cost. In transportation the Canadian National would save $9,050,582.15. Transportation costs the Canadian Pacific Railway 35 per cent of their earnings, and costs the Canadian National 43.7 per cent of their earnings.


Mr. MANION:: Do the Canadian National Railways take in the Grand Trunk?


George Brecken Nicholson: Yes, all Canadian
National lines. The earnings, of all Canadian National lines are practically the same as the earnings of the Canadian Pacific Railway, but when you get to the operating costs the figures are different. The transportation costs of the Canadian Pacific Railway in handling their freight traffic are 81 per cent less than the Canadian National and in maintenance of equipment their cost is 1.7 per cent less. The general expense is $6,421,807.28, and miscellaneous cost $528,549.65. On these four items, if the Canadian National were operated on the same basis as the Canadian Pacific Railway, they would save $23,929,960.


William Daum Euler: Does the hon. member not
*think it is fair to say that the Canadian National Railway consists to a fairly great degree of what are known and described by the minister as colonization lines. Those lines cost a good deal more to operate than the Canadian Pacific lines which were built more as business lines. The Canadian National Railway consists of a number of systems not built for business, but which must be operated as part of the system.


George Brecken Nicholson: My point is that if it ,can be shown that the gross earnings on the mileage of the Canadian National railway is less than the earnings on the Canadian Pacific railway, the argument holds good. But if the gross earnings per mile of the Canadian National railway were equal to the gross earnings of the Canadian Pacific railway, then what one gains in one place is offset by what the other gains in another place.


William Daum Euler: Gross earnings per mile?


George Brecken Nicholson: Yes, you will find that in 1924 the gross earnings per mile on the Canadian National were higher than on the (Canadian Pacific railway. In 1925 the gross earnings per mile were practically the same, (but the difference in operating cost on maintenance of way was the difference between $1,698 and $2,050. In transportation cost the Canadian National could save 81 per cent and in maintenance of equipment 1.7 per cent.
I am not going into details, but anyone who desires to get the information for himself can obtain it by referring to the operating statement of the Canadian National Railways for 1925 in which year the showing was better than usual, but what do you find? You find that it was in some degree due to the fact that they allowed their equipment to run down, *because they had less rolling stock in service at the end of 1925 than at the end of 1924,

C.N.R.-Minister's Statement
.indicating that a considerable part of their rolling stock was out of repair and could not ibe used.
In connection with the matter of proper freight charges, my hon. friend referred to the much debated point as to whether we were handling traffic in some parts of the country at less than cost. The fact that the railways earn more money in the last three months of the year than in the first, second or third three-month periods, indicates, it is claimed, that the major part of traffic they handle during the last three months is the most profitable kind of traffic they have. Turn to the operating expenses, and hon. members will find that for maintenance of equipment the Canadian National Railways spent $47,902,092.16 and for maintenance of way $43,006,813.70, a total under these two items alone in round figures of $90,000,000 spent for maintenance of way and maintenance of equipment. When is that money spent? In the first place, there is a heavy traffic on all lines in Canada in the last four or five months of the year, commercial as well as grain traffic-very much greater than in the first half of the year. The equipment begins to be retired at a very early period in the new year, and sent to the repair shops to be put into condition for the fall operations and at least 75 per cent of the $47,000,000 for the maintenance of equipment is spent in the first half of the year.
Anyone who knows anything about maintenance of way costs on a railway knows that those costs take place in March, April, May, June, July and the first half of August. Maintenance of way costs are reduced to a minimum beginning with the middle of August or the first of September. I am making this statement simply in order to show how easy it is by taking group figures to reach a fallacious conclusion in relation to the operation of these railways. Approximately 30,000 cars must be gathered in western Canada to move the grain crop and these cars are sent west commencing with the first of the year. On either the Canadian Pacific or the Canadian National you will find to-day long strings of empty equipment being sent to the west. The operating charges for moving this empty equipment to western Canada are applicable to the day the equipment is moved. Those empty cars are set out on side tracks and they remain idle for the time being. Another point in connection with the movement of this seasonal traffic is that those 30,000 cars are used almost exclusively for the movement of the grain crop. This situation is not peculiar to Canada; the same thing is true in the United States, both in the west in connection

with the grain crop and in the south in connection with the cotton crop. The crops must be moved when they are ready to be moved, so that the railways must have a large quantity of rolling stock which they otherwise would not require. On the Canadian railways at least 30,000 freight cars could be abandoned altogether if the total freight movement was distributed equally over the twelve months of the year. Those 30,000 freight cars mean an investment of $90,000,000 and the capital charges must be kept up in addition to the equipment being maintained in proper condition. I refer to that, not from a controversial standpoint, because transportation is the question before the Canadian people to-day that must be solved if we are going to get down to a sound industrial and economic basis. There are in my opinion commodities both east and west that must be moved at a minimum of cost. We must find a means of moving the surplus grain crop out of western Canada and the coal and iron of the east to central Canada at a minimum of cost.


William Daum Euler: What does the hon. gentleman mean when he speaks about a minimum of cost? Would he base his rates on cost, or less than cost, or more than cost?


George Brecken Nicholson: That is a question
that must be determined, but I will answer my hon. friend in this way. I am not averse to saying that in order to develop western Canada by assisting in the movement of the surplus grain crop to the markets of the world, and particularly through Canadian ports, it might be, and I believe would be, a wise policy for Canada to carry that grain crop at less than cost if necessary.	-


William Daum Euler: Would the hon. member
bring that policy into effect by a reduction of rates or by means of a subsidy?


George Brecken Nicholson: I will come to that,
if my hon. friend will allow me. In order to develop industry in eastern Canada, particularly in relation to coal and steel, I believe it would be wise for the Canadian people to consider moving that traffic for less than cost. How are we going to make up the difference? There are only two ways in which this may be done. One is by direct cash subvention, and I do not believe that is necessary or wise, because in the first instance it would be a difficult matter to determine what the cash subvention should be. The other way is to distribute the reduced cost of handling the traffic of the far west and the traffic of the east over the other classes of traffic that are handled in the more densely populated parts of Canada. How can we accomplish that?

C.N.R.-Minister's Statement
There is just one way in which it can be done, and this is a point that is being entirely lost sight of. We should first establish an equitable rate structure for all commodities for all parts of Canada. I understand that the matter has been referred to the Board of Railway Commissioners. While they have the matter before them, what do we find? We find that special commodities are being taken and special rates . applied, making it utterly impossible for the Board of Railway Commissioners, I care not how expert they may be, to establish an equitable rate structure in this country. We must first start with the Canadian National Railways and determine the capital cost that should be applied to it. Then we must put in charge men who will operate it so that it will earn enough money to pay operating expenses and interest on capital costs. We have not made a start at doing that yet. After that is accomplished we must ask the Board of Railway Commissioners to establish what will be equitable rates.
Another reason why equitable rates cannot be established at the present time is because of the unfair competition that exists owing to the fact that the Canadian National Railways are not called upon to earn the money necessary to operate them. So long as that condition exists neither the Canadian National nor its competitor can reach a point where it can stand the application of an equitable rate. To put it in plain terms, so long as the Canadian Pacific is subjected to the form of competition that can be applied against it by a system of railways that is not called upon to earn its operating costs and to pay a return on the money invested in it, the Canadian Pacific cannot bear the application of an equitable rate structure. That is the point.	.
In that regard may I say one further word and I will conclude? We have heard a great deal in the last two or three years with regard to getting- rid of duplicate services; it is said that the two railways should get together; that unnecessary trains should be taken off here and there. We must start first with the Canadian National Railways itself:	let us
begin by eliminating some of the duplicate lines. If we eliminate 1,000 miles of unnecessary lines of the main line of the Canadian National Railways we shall save on the item of maintenance of way and transportation alone $5,000,000 a year. In addition we shall get all the material on these lines to build branch lines in western Canada. Can anyone tell the House or the country why the Canadian National Railways should have two lines of railway starting at the city of
Montreal and paralleling each other from there to the town of Sudbury, running side by side and competing with each other for business? Just a short time ago I went with a member of this House to an Ontario town on the Canadian National Railways. I went to the Canadian National ticket office to make a reservation and I made a reservation to go out on a night train. The man who brought me to the station took me to another station entirely. I said:	"You must be
making a mistake; this must be the Canadian Pacific." He said: "No, this is another Canadian National system." It was a beautiful station, all lit up with electric lights, with a ticket agent, telegraph operator, baggage express man, and so on, but it was not the station at which this train came in at two o'clock in the morning. I said: "Do you mean to tell me that the Canadian National Railway has two stations in this town each competing with the other for business?" He sand: "Why, certainly. One is the Canadian Northern station and the other is the Grand Trunk station." This was on the Grand Trunk double track line, the best piece of railway in the country, with the Canadian Northern line competing with it. The same thing is occurring all over the country.


Charles Avery Dunning: No. .


George Brecken Nicholson: What about the stretch between Winnipeg and Brandon?


Robert Forke: Those lines serve local purposes.


Charles Avery Dunning: That is the point.


George Brecken Nicholson: They serve local purposes, my hon. friend says. When two trains leave the terminal at Winnipeg side by side and you stand on the observation platform of one, how much of the line is there from which you cannot see the other train? You would see mile upon mile the other railway track running almost parallel. As a matter of fact, for miles they are within a hundred yards of each other.


An hon. MEMBER:: No.


George Brecken Nicholson: I beg your pardon; it is so between Winnipeg and Portage la Prairie.


Robert Forke: Both lines run into Portage la Prairie.


George Brecken Nicholson: Yes, and the only
trouble is that the two lines cannot be used as a double track. If the rails of the one were taken up and laid alongside the other, so that the two might be used as a double track, some purpose would be accomplished,

C.N.R.-Minister's Statement
but as it is now there is a duplication of service along the main lines. However, I will not labour that point. It is certainly most unfortunate that there should be such keen competition for business in the various towns in which one sees two ticket offices vieing with each other for public business. The policy is absolutely unsound and the first thing for us to do if we are to make any progress in the direction of solving our railway problem is to eliminate this unwarrantable duplication of service.
The minister has referred to the construction of branch lines. So long as Canada continues to develop we shall need to build branch lines to meet the demands of that development, but our first aim should be to reduce to the very minimum the duplication which at present is so costly to our transportation system. The minister also expressed the opinion that the solution for our railway problem is to be found in an increase in population. I agree with him. And, let me add, the solution for that problem is, in turn, the inauguration of a sound industrial policy in this country, a policy which will render such an increase in population possible.


Mr. W. F. MACLEAN (South York):: Another Daniel has come to judgment, for the hon. member (Mr. Nicholson) now confesses that there is an altogether unnecessary duplication of railway service in this country. As one lone individual in parliament, and outside as well, I have been emphasizing this fact for years,_ and now I am glad to see that in all quarters it is receiving increasing recognition. This morning I read in one of the Montreal newspapers, in an article dealing with this subject, the opinion that some arrangement must be made looking to the settlement of our railway problem. We have thousands of miles of unnecessary lines of two great systems competing with each other, adding tremendously to overhead costs, and we have competition in telegraph and express services as well. Then, again, there are hundreds of unnecessary stations scattered throughout the country in places where one station would better serve the purpose than two.
Unless parliament deals with this question the people of Canada will deal with the men whom they have sent here and who are sidestepping the issue; for this is going to be the issue in this country from now on. There is altogether too much partyism in Canada in connection with our railway problem and the people themselves will insist upon their representatives coming to parliament with a determination to find some satisfactory solution for it. Only this morning I was talking

with a young man of about thirty-five who said while the young men in his community were not quite conscious of. what was wrong with Canada they were determined, so far as lay in their power, to get rid of party politics. He said, "Unless you old timers do something we will find new and younger men who will undertake to solve this problem, among others." I repeat, we are simply sidestepping this issue to-day as we have been doing all along. The presentation of the Minister of Railways (Mr. Dunning) this afternoon offers no solution. I thought that he would introduce some new proposal in which there might be some ray of hope. I have not of course had time to study the statement he has made, and while there may be some promise in it, I do not think that the minister has really touched the problem. The duplication in headquarters staffs and in various branches of the railway service still exists. We have engaged on the railways of Canada 30.000 or 40,000 men with whom we could dispense. If we consolidated the two systems we could pay these men $1,000 each a year until they were able to find other occupations and still we should save hundreds of millions of dollars. We are simply wasting money to-day, and we shall continue to waste money until we tackle the problem in real earnest. Neither the Prime Minister (Mr. Mackenzie King) nor his government has taken hold of it, and I regret to say that the opposition offers no real constructive policy. Some people tell us that time will settle the question. Yes, time will settle it. Time will settle the politicians who refuse to deal satisfactorily with it. I have gone up and down this country and have been sick at heart to see the rivalry between our two railways. We have duplicate trains running between Toronto and Montreal and Toronto and Ottawa, and the same thing is true throughout the country. We know that the Canadian National Railways to-day have 70 per cent of the railway strategy in Canada, while the Canadian Pacific Railway has an equal advantage in regard to steamship lines. The president of that system I was reading to-day, is going to England on a mission in connection with this service, and I take this to be an indication that the Canadian Pacific is getting ready for some form of co-operation or consolidation.
We must remember that transportation is not confined to the railways alone; in its broadest sense it includes water service and motor and bus transportation. The passenger business on our railways is declining. Yesterday I was at Niagara, one of the most

CJ\.R.-Minister's Statement
glorious parts of the country, and I saw vast numbers of automobiles-an evidence of the falling off in railway passenger service.
Another formidable competition which our railways have to face is water transportation. As soon as the St. Lawrence waterways are completed, perhaps with the completion of the Georgian Bay canal, we shall see ocean ports on the Great Lakes, up to Duluth, Fort AVilliam and Port Arthur, and the competition which will ensue will be a very serious matter indeed for our railways. It will then be imperative for them to eliminate unnecessary competition to the utmost, if they are to pay half their costs.
It is regrettable that the government has not the courage to propound a policy looking in the direction of co-operation and consolidation. If they would only make overtures towards that end I hiave no doubt that the Canadian Pacific would lend a sympathetic ear. The government should make some step in this direction; otherwise the country will express its opinion in no mistak-able terms. [DOT]	.
To-day for the first time the new Minister of Railways has addressed the House as a meeting of shareholders. I am here to-day as a shareholder in this railway representing
50,000	citizens of Canada, and some hon. -gentlemen represent even a greater number. Well, I do not know how I am going to face my electors and explain to them why this unnecessary, this unwise, this scandalous competition between our two great railway systems is allowed to continue. We cannot keep it up. The government are going to bring down the rate structure, and they are going to tell the people of the west, who are greatly concerned in freight rates, that they will be able to give them lower rates. But I say you cannot have lower freight rates in this country while this unnecessary competition is allowed to continue. You can reduce the freight rates only by consolidating your two great transportation systems covering water transportation and transportation by rail. By such a consolidation we will reduce operating and other expenses, and it is only by this economy of operation and management that you can give what the Canadian farmer is calling for-lower freight rates. There must be a merging of these two railways with their steamship services. We must also provide for airway transportation and link it up with this consolidation.
I wonder if hon. members have any conception of the high-class service that the United States government is maintaining for the transfer of money and mails in that great MOl 1-235
country. It is a splendid service, and I am told that saving in interest alone by rapid transfer of money pays the cost of operation. We must be prepared to inaugurate a similar service in conjunction with a fconsolidated railway and steamboat service. We cannot afford to sidestep the issue any longer. The present unnecessary duplication is costing this country an annual waste of about 1300,000,000. This is not efficiency. One of the greatest improvements possible under a consolidation such as I have urged will be improved re-routing of all traffic. Any traffic man will tell you what a great saving and what a great improvement in service this will bring about. There is something in the suggestion of bringing about a new capital structure, but that is not the way to achieve the purpose we have in view. The people of this country, especially the western people, want lower freight rates, and they are not going to get them unless we consolidate our transportation facilities. We must stop spending more money in trying to run these two great railway systems; we must consolidate them. That is the keynote of the situation. I am glad to that the Minister of Finance (Mr. Robb) is listening to me. He must know that it will be a problem for him to go to the people and say:	I am still a
party to this mad competition in railway service. He cannot face his electors, nor do I believe that half of us in this House can face our electors and justify that mad business. Go where I will I find the people are responding to what I have said in this House with regard to this vital question. They are glad to see me, and they are even beginning to ask me to address meetings on the subject. While I have been scarified in some quarters because I had the courage to say the other night that this House ought to appoint a committee to deal with the question, and that once an agreement was made between the whips of the respective parties it ought to be carried out, while I was said to be a "bad Conservative" for having so expressed myself, yet I am content to disregard those attacks and to go on the platform and justifiy my action. I am not going to talk on any minor issues if there is an appeal to the country-and I warn the House again that there is every prospect of a general election in a very short time.


Mr. LAPOINTE:: You are wrong about
that.


William Findlay Maclean: No, I am not
wrong, my brother; perhaps you are looking the wrong way. I am confident that something is likely to force the government

CJtf.R.-Minister's Statement

to go to the country, and then this and other problems will have to be presented to the electorate, and we shall have to defend or condemn this mad rivalry we are now maintaining between express companies, telegraph companies and railway companies. By a consolidation of our great transportation systems we would get much greater efficiency and we would get real service both by rail and by water, and we would be also prepared for that formidable competition which our railway systems will have to meet as soon as the St. Lawrence route has 'been deepened to allow ocean-going vessels to reach Port Arthur and Duluth. With the competition from that quarter and from motor transport there will be no future for two competing railways in this country. In fact even to-day there is only room for one consolidated system which will include transportation by water and transportation by rail. This, as I say, will permit of better routing of the roads, and in this will be found the real salvation of Canada's transportation needs, rather than in a reduction of freight rates. Stop this mad competition, start re-routing your lines, and you will see a great improvement in the railway service of this country. The Minister of Railways has told us about establishing a new capital Structure for the Canadian National Railways, but I tell him we have got to have a new capital structure of all our commitments in connection both with the Canadian Pacific and the Canadian National. When that is brought about it will be easy to create a system of transportation which, while giving the people what they desire, will stop the extravagance which prevails all over the country to-day.
At six o'clock the House took recess.
After Recess
The House resumed at eight o'clock.


Charles Hazlitt Cahan: Mr. Speaker, with other members on this side of the House I listened with a great deal of pleasure and attention to the instructive address of the Minister of Railways (Mr. Dunning) this afternoon. I congratulate him upon having presented his case in a very lucid manner. He has the advantage, of course, of the expert advice and assistance of the officials of the Canadian National Railways, and also of their expert accountants. It would be somewhat more satisfactory to the House, I think, if from time to time those who are in actual control of the Canadian

National Railways should appear before hon. members in committee in order that a clearer understanding might be had of some of the points which are beclouded by the public discussions of the day. I have not had the assistance such as the Minister of Railways has had, but a few salient facts are before me which I should like to present for the consideration of the House.
I will not go back to 1867, when the construction of the Intercolonial was undertaken at the expense of the government, or to the time when the Prince Edward Island railway was commenced. However, in order that we may ascertain the present financial obligations of the country with regard to railways I should like to present a few statistics running back to the year 1903, when the government undertook the construction of the eastern division of the National Transcontinental line from Moncton to Winnipeg, on the understanding that it was to be taken over by the Grand Trunk Pacific under lease and operated in connection with the western section of that road. In 1914 further obligations were assumed by the government of the country when the Canadian Northern Railway Company began to collapse, and large loans or advances were necessary in order to keep that road in operation at the outbreak of the war. In 1917 further obligations were undertaken when the Canadian Northern railway lines were taken over by the government. Going -back for two years before that, on the failure of the -Grand Trunk Pacific to operate the eastern section of its road the government was compelled to include the eastern section of the Transcontinental railway in its railway system. In 1916 I find that the Grand Trunk Pacific Railway began to ask the Dominion government for loans and advances; and finally, in 1918, the government was compelled to take over that line and assume its obligations. In 1919, I think it was, the Grand Trunk railway was taken over, and since that time has been operated as part of the Canadian National system. I have had a schedule prepared. It is not very lengthy but it shows from year to year since 1903 the increasing mileage of the National Railway system. Then the second column shows the total long term indebtedness of that system, being the amount of money expended by the Dominion government, together with securities bought and held by the people of Canada, and other countries, for all of which the government is really liable. In the third column there is shown the increase of government liability from year to year, which is represented by the difference between

C.N.R.-Minister's Statement
the total expenditures made upon the system and the total received from operation. The .fourth column gives the annual fixed charges, being the annual fixed interest charge which the Canadian government will have to pay to the holders of Canadian National Railway securities and Dominion government securities issued to raise loans made by the government to the Canadian National system. This is to be paid for all time or until the securities are redeemed by the income of the government realized from taxation of the people of Canada. I would like to place this short statement on Hansard:
Canadian National Railways
Railway Obligations of Canadian People, Incurred Since 1903
Year ending Dec. 31	Mileage	Total Long Term Indebtedness	Annual Increase in Liability	Annual Fixed Charges*	$	$1903. . .	1.542	76,290,546	1904. . .	1,551	78,870,281	2,579,735	1905. . .	1,670	84,193,801	5,323,520	1906. . .	1,751	88.454,383	4.260,582	1907. . .	1.759	88.667.217	212.834	1908. . .	1,759	95.273,779	6.606,562	1909. . .	1,760	95.714,248	440,469	1910. . .	1,760	100,738,439	5,024,191	1911. . .	1.760	101,497,231	758,792	1912.. .	1,772	103,434.118	1.936,887	1913.. .	1,782	105,929,173	2,495.055	1914...	1,774	111,956.203	6,027,030	1915. . .	(1) 3,760	271.520,393	159,564.190	1916.. .	3,830	283,778,308	12,257,915	1917. . .	3,830	296,375,477	12,597,169	1918. . .	3,874	318.026.229	21,650,752	1919.. .	(2) 19.239	1,048,027.305	730.001,076	(3) 29,035.4021920.. .	20.730	1,629.000.072	580,972,767	45,402,1501921...	20,900	1,761,921,327	132,921,255	55.442,7691922.. .	20,880	1,881,249,146	59,327,819	59,565.2001923. . .	20,646	1,937,282,332	116,033,186	65,199,3241924. . .	(4) 20,665	2.056.181,516	118.899,186	69,632,7471925. . .	20.984	2,119,811.644	63,630.126	71,888,617(1)	Eastern section of Transcontinental included.(2)	The Canadian government assumed the liabilities of the Canadian Northern system in September, 1918, became receiver of the Grand Trunk Pacific in March, 1919, and assumed control of the Grand Trunk Railway in May, 1920.(3)	Interest on funded and unfunded debt C.N.R., G.T. R. and G.T.P.(4)	Includes 60 miles of Inverness Railway and Coal Company taken over under lease, April 1, 1924.
This statement shows, as the Minister of Finance stated, that on December 31, 1925, there was a total long term indebtedness, which was an indebtedness primarily of the Canadian National Railway but equally an indebtedness of the Canadian government and the Canadian people, amounting to $2,119,811,644. I have excluded the amounts owing on ordinary revenue accounts of the year. I have simply taken the long term obligations of the Canadian people in this respect, and I find that this annual increase in capital liability has been continued from year to year. When we took over the liabilities of
14011-235i
the Canadian Northern in September, 1918, there was an increase in liability made up from that source and others of $730,000,000. It was $580,000,000 in 1920 and $132,000,000 in 1921.


William Daum Euler: Is my hon. friend right in saying that we took over the liability of the Canadian Northern in 1918? Was it not the Grand Trunk?


Charles Hazlitt Cahan: I said the Canadian government assumed the liability of the Canadian Northern in 1918.


William Daum Euler: Is my hon. friend correct in that?


Charles Hazlitt Cahan: There may be some mistake about it.


William Daum Euler: Was it not the Grand Trunk?


Charles Hazlitt Cahan: The government became
the receiver of the Grand Trunk Pacific railway system in March 1919 and assumed control of the Grand Trunk Railway in May 1920. I have taken from year to year, with the assistance of an expert accountant, the annual increase in liability since that date down to December 31, 1925. There were increases in liabilities as follows:
1921		 $132,000,000
1922		 59,000,000
1923		-	 116,000,000
1924		 118,900,000
And in 1925 I find an increase of long term obligations of $63,630,000, Naturally with this large increase in capital obligations the annual fixed charges of the Canadian National Railway have increased from year to year. In 1919 I find that the annual fixed charges for interest amounted in round figures to $29,000,000. In 1925 I find that they amounted to $71,888,000, showing that the railway loans had been extended, and as their obligations had increased it resulted in a large annual increase in the fixed charges payable by the Canadian National Railway lines in respect of those capital obligations.


Charles Avery Dunning: Will my hon. friend tell me whether that $63,000,000 increase which he speaks of for 1925 does not include the amount due the government for interest, $31,000,000? That I presume is true of all the other years.


Charles Hazlitt Cahan: Certainly that is so, and that is an obligation, is it not? I do not agree with the hon. member's suggestion that when the government advances money to the railway from time to time the interest accruing to the government is not an obligation of the National lines; and if.'it is not paid of course it is an increase in the obligations

CJV.fi.-Minister's Statement
of the National lines for which the people of this country are directly and indirectly responsible. As I progress I will make that perfectly plain. Dealing with the question of interest, I noticed a statement of Mr. J. L. Payne in the London Free Press in July last, in which this matter is discussed pro and con. He deals with the fixed charges for the year 1924, and I think there is a great deal to be said for the contention he makes in the Free Press. He says:
How much are those fixed charges? The official announcement placed them at $69,632,747, but beyond the possibility of doubt that is not the correct amount.
He is dealing with 1924. The statement continues:
It is merely the sum set down against the Canadian Northern, the Grand Trunk Pacific, and the Grand Trunk; and in these cases it does not allow for unpaid interests on a compound basis, as standard accounting would require. Interest charges on the capital liability of the Intercolonial, the Prince Edward Island, the Quebec bridge, and all eastern branch lines, representing at least $1,000,000,000 are omitted. The excuse, certainly not the defence, for such irregular accounting, is that such liability is incorporated with the National debt. That is true, but it also very distinctly and properly is a part of the railway account. If it were brought into the railway statement, as it should be, fixed charges would reach a total of considerably more than $100,000,000 per annum.
The statement is frequently made in respect to the extension of colonization roads that these roads simply pass the interest upon the amount expended upon them during their construction. In the case of a private company or a privately owned utility company there is an additional cost to the aggregate cost of construction, a cost resulting from the interest charges on the amount expended in the construction until the road is in a condition, if it is a private utility, to pay its operating costs and its fixed charges. That is as much a cost on capital account in respect of the road as money actually expended on construction. According to the report of Mr. G. A. Bell, Deputy Minister of Railways and Canals, which is now published and circulated as a government return, I find that the long-term funded indebtedness of the Canadian National Railways amounted on December 31, 1924, to $2,056,181,516 and on December 31, 1925, it had increased to $2,119,811,644. That is how I ascertained my increase for the year 1925, the difference showing the increase in liabilities of $63,630,128 as I stated.
I cal this long term liability because I am not dealing with any amounts owing on current account or petty banking accounts or for materials bought in for the operation of the road. I am leaving this out of account and

this amount, of $2,119,811,644 would, I think, be somewhat increased if I took into account these other smaller amounts which are changing from month to month during the year's operations.
Of this amount the security held by the public amounted to $931,329,303. Loans from the Dominion government made directly to these companies, not including the old loans made with respect to the Grand Trunk railway t.o which the Minister of Finance referred, but loans recently made within the term with which I am dealing, amounted in actual cash to $572,685,535. That does not include interest on Dominion government loans or the appropriation account of the Canadian government railways. The appropriation account of the Canadian government railways amounted to $453,935,303 and no interest has ever been charged, and possibly properly so, in the account of the National Railways as accumulating from time to time on this appropriation account. But interest is charged on loans recently made by the Dominion government, which interest has accrued and is unpaid amounting to $161,861,503. This comprises the total amount of $2,119,811,644 to which I have referred. That amount of $453,935,303 is, I repeat, the appropriation account of the Dominion government in respect of the former Canadian government railways, and in dealing with the account of the Canadian National Railways that amount is taken as not bearing interest at all; no interest accumulates from year to year in the accounts of the Canadian National Railways with reference thereto.


Charles Avery Dunning: It never did.


Charles Hazlitt Cahan: I am not talking about what happened before; I am trying simply to get the fact before the House so that there will be no misunderstanding that the $161,861,503 of interest due and unpaid has nothing to do with appropriations formerly made by the Dominion government for the construction of railway lines. It has solely to do with interest accrued and unpaid on recent loans or advances made in cash in respect of those lines which now form a part of the Canadian National Railways. There is ground I suppose for the contention that this item of $453,935,303 represents money which the Dominion government has put into railways apart altogether from the lines which originally made up the Canadian National railway system and which failed, as the minister said, by reason of the failure of private ownership.

C.N.R.-Minister's Statement
But let me go a little further. Exclusive of this item, that is, exclusive of every dollar that the Dominion government has paid out from 1867 to the date of the organization of the Canadian National Railway system, there are obligations which are dire'ctly due to the Canadian National lines. Of these, as I said before, securities held by the public amounted to $931,329,303. On Dominion government account there is a funded debt urn-matured and receiver's certificates of $86,816,865, and loans from the Dominion government of $485,86S.000, making a total of $572,685,669 for which the Dominion government is directly liable. Accrued but unpaid interest on loans amounts to $161,861,503, so that all this represents an aggregate liability of $1,665,876,340 owing by the Canadian National Railways for principal and interest, exclusive of every dollar expended by the government on Transcontinental and eastern lines.
As the Minister of Finance stated, the inr terest on securities hald by the public amount to $40,438,235 and interest on loans from the Dominion government to $31,450,381 or a total interest accrued in 1925 of $71,888,616. But the Minister of Finance, if I may refer to his statement in his absence, in introducing the budget, said that for the year ended March 31, 1926, there would be a reduction in the public debt of Canada of $22,353,000, and he added:
May I again emphasize, Mr. .Speaker, that this reduction is net clear of everything?
But the Minister of Finance in dealing with the matter took into account only a lioan of $10,000,000 to the Canadian National Railways during the past fiscal year, although the liabilities of the Canadian National Railways, which are a debt of the Canadian people, increased from December 31, 1924 to December 31, 1925, by $63,630,000. So that, exclusive of the $10,000,000 to which the Minister of Finance (Mr. Robb) referred, after allowing for that sum so as to avoid any possible duplication, there was an increase of the obligations of this country, reckon them how you will, fix your bookkeeping how you will, put it in one account or in the other, amounting to $53,630,000.
The Minister of Finance, in referring to this item when presenting his budget, also stated that the annual interest charge on the Canadian National Railways was $71,800,000, in round figures, of which $40,400,000 consists of outstanding securities in the hands of the public, while the balance of $31,400,000 payable on loans made by the Dominion government to the Canadian National Railways he- set
aside as a mere book-keeping entry and not as a cash item. But the loans made by the Canadian government to the Canadian National Railways were cash items, and the interest paid by the government upon its outstanding bonds and debentures, a part of which was used for this purpose, is a cash item. Therefore, as regards the interest payable to the Dominion government by the Canadian National Railways in respect of the actual cash loaned to the railways and owed by them to the government, I cannot conceive any imaginable reason for not regarding this as a cash item unless you wish to call it a bookkeeping item for the purpose of beclouding the public mind as to the real facts of the case. In any case the entries are made in the accounts and the interest is paid in cash out of the government's receipt of taxes. It is taken from the people of Canada andi devoted to the payment of interest on obligations of the Canadian people in connection with the Canadian National Railways.


Mr. CAHILL:: In computing the increase
in the national debt-on which point my hon. friend differs from the Minister of Finance- does the hon. member contend that the national debt has been increased to the extent of the $31,000,000 of interest due the government by the Canadian National Railways?


Charles Hazlitt Cahan: I was not dealing with the
national debt.


Frank S. Cahill: A moment ago.


Charles Hazlitt Cahan: I was dealing with obligations of the National Railways which are necessarily obligations of the government. I quite realize that if there had been received from the Canadian National Railways the interest which was due and payable to the government in respect of government advances, it would have gone into the treasury and have been used either to reduce the national debt or, possibly, to reduce taxation.
Now with regard to the past year, and indeed every year, the Canadian National lines have failed to pay a dollar of the loans made by the Dominion government and have failed to pay one dollar of the interest upon those loans. As a matter of fact the officials of the company and of the government have become so accustomed to dealing with what they call net operating income, and to congratulating themselves and the country upon certain increases in that income, that they have entirely lost sight of the fact that these railways have never so far paid a dollar on interest account due to the federal government. The Minister of Finance indeed, proceeded to set off the $33,000,000 of net oper-

CJV.R.-Minister's Statement
ating income of the National Railways against the $40,400,000 of interest paid to the holders of outstanding securities, and then he naively remarked that there remained a shortage of $7,400,000 which represented the actual cash loss to the railways in the fiscal year.


Charles Avery Dunning: I made it five.


Charles Hazlitt Cahan: The Minister of Railways in making it five did not distort the figures to the same extent as did the Minister of Finance. It happens that since his colleague has spoken the Minister of Railways has discovered an increase in income during the first four months of this year and apparently hastens to take advantage of it.


Charles Avery Dunning: That is wrong.


Charles Hazlitt Cahan: I beg your pardon: you
were taking it up to March 31, that is to say, the first three months. Now, this certainly is a very quaint, and if it were parliamentary I would say, so far as the public is concerned, a very deceptive way of dealing with the railway accounts. The railways, it is true, according to the figures of the Minister of Finance, . did not earn sufficient, within $7,400,000, to pay their liabilities in connection with interest accrued during the year upon the $931,000,000 of securities outstanding in the hands of the public. I give my hon. friend this credit, that he did not glide over it so smoothly as did the Minister of Finance. He has not learned that happy knack yet.


Charles Avery Dunning: I must object to that
expression. I have under my hand just what I said. I said in one place, "interest payable to the public" and in another place "interest charges due the public." There was no attempt to glide over anything. There was a clear distinction drawn between interest due the public and interest due the government.


Charles Hazlitt Cahan: I admit that both the Minister of Finance and the Minister of Railways emphasized the amount of interest due the public, but they slid quietly over the fact of there being some $31,400,000 due to the government. My hon. friend did not slide over it quite so smoothly as did his colleague.


Charles Avery Dunning: I object again. I stated and restated that there was $3:1,000,000 of interest due to the government. There was no sliding over anything and my hon. friend is mistaken.	.


Charles Hazlitt Cahan: Perhaps I should have said "slipped over". The Minister of Finance in his budget statement made no announcement whatever of the fact that of the aggregate interest in like manner accrued, payable and

due to the government on December 31, 1925, amounting to $161,861,500, not one dollar had been paid by the Canadian National Railways, although every dollar of that enormous deficiency had been made up by taxation of the Canadian people.
But the hon. Minister of Railways-and I will refer to my notes for fear I may again misquote him, which I would not willingly do; he was so charming this afternoon that I should like to treat him with all courtesy- the hon. minister said, according to my notes, that owing to the excellent earnings of the Canadian National lines during the last year he had a great deal of confidence for the future. I am not giving his exact words, but that is their effect. He said that our railways are excellent barometers and reflect in accurate measure the trade and commerce of the country. With respect to that, I have also prepared a statement showing how the revenues and expenses of the National Railways compare for the years 1923, 1924, 1925. I should like to place it on Hansard.
This is the statement referred to:
Gross earnings	
Operating expenses	C.N.R. 1923 .. $253,135,487 .. 232.704,838	C.P.R. $192,827,930 155,040,207Net operating revenue.. .	. . $ 20,430,649	$ 37,787,722Gross earnings	
Operating expenses	1924 .. $235,588,182 .. 218,343,931	$180,796,044 143,258,643Net operating revenue.. .	. . $ 17.244,251	$ 37.537,400Gross earnings	
Operating expenses	1925 .. $244,971,202 .. 212,706,787	$183,356,005 143,201,299Net operating revenue.. .	. . $ 32,264,414	$ 40,154,705
That comparison is taken from the financial statement presented to us by the president of the National Railway system, and does not seem to me to support the conclusion that the prosperity of the country has very greatly increased during the past three years if we are to take the returns of these railways as an accurate 'barometer of the country's condition. Those returns do not show that more freight and passenger traffic was being carried than in 1923, in fact not as much, nor that the domestic trade of the country was largely expanded in 1925 over 1923 and 1924. The total revenue of the Canadian National Railways as shown by those returns, which was over $253,000,000 for the year ending December 31, 1923, decreased to less than $245,000,000 for the year ending December 31, 1925; as between those two years, a decrease

CJf.R.-Minister's Statement
of over $8*000,000 in the aggregate annual revenue. Between those same two dates the net liabilities of the system increased $182,500,000 on capital account, and the fixed charges thereon increased by $6,900,000 per year.
Sir Henry Thornton's latest report shows that as compared with 1923, for instance, the freight earnings in 1925 were $4,758,000 less, the passenger earnings $3,366,000 less, and the miscellaneous revenue $750,000 less.' The number of passengers carried decreased from 23,683,781 in 1923 to 22,707,880 in 1924 and to 20,675,239 in 1925. If there was such an assured increase in the business and commercial condition of the country, it is difficult to see how it is shown in a passenger traffic decreasing year by year to the extent of millions as compared with 1923.


Charles Avery Dunning: What about 1924?


Charles Hazlitt Cahan: I gave it. I will repeat the figures. In round numbers, 23,600,000 in 1923,
22,707,000	in 1924 and 20,675,000 in 1925-a continual sliding down the scale.


Charles Avery Dunning: If my hon. friend will
permit me, I think his information differs from mine. He says 20,675,000; my figures are 21,675,000 passengers.


Charles Hazlitt Cahan: If my hon. friend has the
accurate figures of 21,600,000 odd, I must have made a mistake in taking mine from the returns. But even so, admitting that the correct figure is 21,675,000 passengers-


Charles Avery Dunning: There is still a decline.


Charles Hazlitt Cahan: -it is still less than 1924,
and 1924 is less than 1923. Probably in getting my statement typewritten by the stenographers at hand some inaccuracy may have arisen. I am glad you have the correction.
Now, as compared with 1923, the Canadian National Railways last year carried 2,500,000 tons less freight, although the total tonnage was 2,500,000 more than in 1924. I have prepared a comparative statement of the revenue tonnage carried by the Canadian National lines in 1923, 1924 and 1925, which I should like to put on Hansard. The impression seems to be prevalent in certain districts, and in the minds of certain hon. gentlemen on this side as well as on the other side of the House, that the traffic tonnage of the Canadian National lines is chiefly made up of agricultural products, and that these products consist almost wholly of wheat tonnage from the provinces of Alberta, Saskatchewan and Manitoba. But this statement shows that in 1923 the products of agriculture carried by the Canadian National system amounted to
11.600.000	tons-I am allowing the odd figures to go because they are confusing at times;
11.769.000	tons in 1924, and 11,624,000 tons in 1925. In fact the tonnage of agricultural products carried over the National lines in 1925 was less than in 1924 and also less than in 1923. Then the products of the mines also ran down from twenty million tons in 1923 to seventeen million in 1924 and eighteen million in 1925. The products of the forest, including pulp, paper and that sort of thing, remained practically the same. Of a total tonnage carried by the railways in 1923 amounting to 57,248,338, only 6,008,725 tons were of wheat from any part of the country; in 1924, of 52,498,614 tons carried, only 5,317,519 were of wheat, and in 1925, out of 54,999,257 tons, only 5,682,992 were of wheat.
I hope thg Minister of Railways will some day, before the close of the session, be so kind as to enlighten our ignorance as to the real cost of carrying wheat over the National lines. There was a return brought down in this House showing that in 1923 wheat was carried at a loss of about $6,000,000 by the National lines, and that in 1924 the loss was approximately the same. I find that in his evidence before the Board of Railway Commissioners at a hearing in March, Mr. F. J. Watson, of the Canadian National lines, repeated this statement under oath. I therefore think it is expedient, in order that we may thoroughly ascertain the real facts, that the Minister of Railways should give us the best information available from the officials of the railway company with regard to the cost of carrying wheat and the revenues derived therefrom. But in any case the Canadian National railway lines in 1925 carried 416,000 tons of wheat less than in 1923. They did carry 365,000 tons more than in 1924, but inasmuch as the wheat tonnage carried was only about one-tenth of the total tonnage, there is little to sustain the contention that the prosperity of the Canadian National Railways is largely or almost entirely dependent upon the 9 p.m. transportation to the seaboard of the wheat production of the central west. The following is the table referred to:	[DOT]
Revenue Tonnage of Canadian National Railways Tons carried	1023	1924	1925Products of	agriculture.	11,638,819	11,769.288	11,624,809Products of	animals	..	1,677.526	1,583,761	1,571,114Products of	mines..	..20,115,185	17,420.522	18,097,528Products of	forests..	.	9,851,666	9,154,706	9,515,143Manufactures and miscellaneous... 13,964,042	12.564,337	14,190,663Total tons	
57,248,338	52,489.614	54,999,257
Tons wheat included
above in agriculture.. 6,008,725	5,317,519	5,682,992
CJV.R.-Minister's Statement

The prosperity of these lines in the west is to a large extent bound up with wheat production at present. I am not saying and do not intend to say one word against giving every possible assistance to encourage wheat production in western Canada; I am not advocating any increase in the tariff on wheat in any new rate structure which may be devised; but the Minister of Railways says that the difficulty surrounding the National railway lines will never be solved except by an increase in the traffic over these lines. That is perfectly true, and I say to the minister that he need never look to the production of wheat in the west and its transportation at present rates to solve these difficulties and make the Canadian National Railways selfsustaining. The difficulty with the Canadian National lines and the reason they do not show an increase in tonnage is because of the fact that the domestic production of industry in this country is being demoralized and destroyed from year to year, or if not destroyed, curtailed in every possible way. If you look into any increase in tonnage of this kind, in every case it will be found to be a short haul from some American city to a Canadian city across the border.


Robert Forke: Would the hon. gentleman allow a question? Does he not think the production of about $900,000,000 worth of new wealth through wheat and other products of the west will have a great deal to do with railway improvement?


Charles Hazlitt Cahan: It will, if you pay the cost of transportation.


Robert Forke: The circulation of $900,000,000 of new money.
Mr. CAHAN. We do not obtain from the northwest $900,000,000 worth of new wealth. If my hon. friend will take the entire agricultural production, then the cost of that production, he will get down to the net wealth.


Robert Forke: Say the net wealth, then.


Charles Hazlitt Cahan: The net wealth is a good deal less than the amount suggested by my hon. friend. That, I say, is a very great advantage to this country, but so far as the Canadian National Railways are concerned this production does not supply in tonnage one-tenth of the total carried by these lines at present, and rather than look solely to an increase of the one-tenth from the west, if the government would look to an increase of the remaining nine-tenths-


Robert Forke: I do not like to interfere too much, but I would like to point out-


Some hon. MEMBERS:: Order, order.


Robert Forke: If the hon. member does not wish me to interrupt, I will sit down. Has he taken into consideration the return traffic westward provided by wheat?


Charles Hazlitt Cahan: I am quite willing to grant that. There are 2,000,000 people in the three central western provinces, I believe, and of this number I think from 250,000 to 300,000 are growing grain in considerable quantity. I will admit that the consumption of these
2.000.	000 people gives a considerable traffic to the railways, the larger part of that traffic being a short haul north and south across the American border. But hon. gentlemen have forgotten altogether that there are seven other millions of people in this country; that we have in British Columbia, which is not a wheat growing country, and in Ontario, Quebec and the Maritimes, 7,000,000 people who consume, man for man, woman for woman and child for child, quite as much as the per capita consumption of the people who reside in the central west. If these
7.000.	000 people &re encouraged, if they are allowed to earn a sufficient income to live well, they will give quite as much per capita employment to the National railways as will the supporters and friends of hon. gentlemen opposite in Saskatchewan, Alberta and Manitoba. That is all I am saying. I am not disparaging at all our wheat production. You have never heard from me intentionally any word of disparagement. I am simply trying to point out to hon. gentlemen, if I may use a vulgar phrase, that they are not "the only pebbles on the beach" in this country; there are some other interests which must be considered.


Charles Avery Dunning: Will the hon. gentleman permit a question just for the sake of clarity? In arriving at the figures he used relating to the proportion of wheat tonnage- I think wheat was the commodity he spoke of-did he take merely the gross tonnage of the railroad, or did he take a standard of comparison per ton mile? In other words, did he take a ton mile or the gross total? There is a very important distinction to be drawn there.


Charles Hazlitt Cahan: I dare say there is. I was simply taking the returns brought down by the hon. gentleman and laid on the table of the House respecting the number of tons carried.


Charles Avery Dunning: I may point out that
my hon. friend was speaking of the short haul. If he was just taking the gross tons carried, a ton carried between two stations counts just as much in those figures as a

C.N.R.-Minister's Statement
ton carried from the head of the lakes to the Atlantic seaboard, or from some point in the west to Vancouver, and the picture drawn is consequently not a correct one.


Charles Hazlitt Cahan: I know that a ton carried
between two stations means just as much per ton as the carriage of a ton of wheat from the entire west to the seaboard. I had occasion to look into the matter the other day in connection with this question of freight rates, and a friend of mine, who is engaged in sending salt, dried and smoked fish from Nova Scotia to the west, pointed out an interesting fact. What did he find? He found that the fisherman in Norway can send his salt, smoked and dried fish from a Norwegian port to Vancouver, up to Calgary and on to Medicine Hat, at a less rate than it costs to send exactly the same article from Halifax to Medicine Hat, or to Calgary, if you please. It is this whole freight structure that is so discouraging to many people in the east. I agree that in the case of the long haul great consideration must be shown. But some consideration must also be shown to the people who send their products over the short haul. Now, Sir Henry Thornton in his report says:
The decrease in short haul traffic is no doubt due to general business depression during the earlier months of the year.
That general depression is shown by the fact that the industries of this country have not been able to produce and to put on the
cars, in the case of many factories, so
large a tonnage as they had been doing during the last ten years, or even during the last three or four years.


Charles Avery Dunning: Have you looked at the earnings for the first four months of this year?


Charles Hazlitt Cahan: I will deal with the earnings of the first four months of this year in a moment. I am dealing now with the fact that hon, gentlemen opposite have undertaken to make it appear to this whole country that the railway tonnage of 1925 showed a remarkable increase of prosperity throughout this county, and I am showing by their actual figures, which are available to me down to December 31, 1925. that they do not indicate such a general increase in domestic prosperity, especially when one bears in mind the seven millions of population who reside outside of the three wheat producing provinces.
To what, then, is due the improvement in net earnings? It certainly is not due to the carrying of more tonnage over the National lines. It certainly is not due to any considerable increase in the freight revenue as compared, for instance, with 1923. It is not due to any increase in manufacturing products and the miscellaneous assortment of goods carried. And here I should like to put a comparative statement on record in that connection, showing revenue and expenses under different heads for the years 1923, 1924 and 1925.
The statement is as follows:
Canadian National Railways
Freight	
Passenger	
Mail 	Revenue 1923 $185,240,896 71 39,285,318 14 3,543,078 11	1924 $171,045,297 S9 37,233,998 44 3,595,261 61	1925 $180,482,543 54 36.618,481 66 3.554.200 23Miscellaneous	25,066,194 65	23 .713.624 61	24,315,977 18Total	*253,135,487 61	$235,588,182 55	$244,971,202 61Mantenance of ways and structures.. .. Maintenance of equipment	
Traffic	
Transportation	
Miscellaneous	
General	
Transportation for investment credit.. ..	Expenses $ 44,778,445 45 52,176,320 13 5,792,928 06 120,302.450 60 2,304,105 65 8,063.390 52 712.801 88	$ 44.039,965 51 47.972,444 24 6.892.751 22 110.085,033 62 2,381,469 56 7.633.834 05 661,567 13	$ 43.006.813 70 47.902.092 16 6.726,472 90 106,477,437 08 2.253.050 54 7.223.773 87 882.852 43$232,704,838 53	$218,343,931 07	$212,706,787 82Net operating revenue	$ 20,430,649 08	$ 17,244,251 48	$ 32,264,414 79
It will be noted that the total income from freight in 1923 was $185,000,000, in round numbers. It decreased in 1924 to $171,000,000. but increased in 1925 to $180,000,000, still $5,000,000 less than in 1923. The freight passenger traffic ran down from $39,000,000, in round numbers, in 1923 to $37,000,000 in 1924 and $36,000.0010 in 1925, showing that in freight and in passengers the revenue was not increasing. How was it the Canadian

C.N.R.-Mmister's Statement
National Railways apparently made so favourable and satisfactory a report during the present year? It is due to the fact that expenses were cut down in certain particulars. For instance, maintenance of ways and structures are down by about $1,770,000. Now the expenditure on maintenance of ways and structures may be brought down by a million or two million dollars, but the real matter of interest is whether ways and structures are kept up to the proper standard on those lines. I do not pretend to have any technical or expert knowledge about the matter, but certainly the Canadian National Railways must prepare, in renewing their trestle work and their bridges, for an expenditure not only of tens of millions but running up to at least one hundred millions or more within the not distant future.


An hon. MEMBER:: It is about due now.


Charles Hazlitt Cahan: And before I am satisfied that in the year in which there was a great election campaign that reduction in maintenance of ways and structures was justified, I want to know whether the ways and structures were kept up to a reasonable standard during the year, and in dealing with these railways we wish to know-


Charles Avery Dunning: Will my hon. friend permit me to answer now?


Charles Hazlitt Cahan: Certainly.


Charles Avery Dunning: The expenditure on maintenance of ways and structures last year by the Canadian National amounted to $43,000,000, as compared with $35,000,000 expended for the same purpose by the Canadian Pacific. The decrease on the Canadian National was $1,033,000; the decrease on the Canadian Pacific was $1,800,000.


Charles Hazlitt Cahan: Yes, but does my hon. friend ever go over these two lines? I have gone over them time after time, and there is no comparison between the two systems.
Sir HENR\ DRAATON: The whole question of comparison is of course the rate per able expenditure in connection with maintenance of way and structures. I have the igures, and perhaps the hon. minister would like to hear them. They are as follows:
Canadian Pacific Canadian National
1924	 12,042 per mile	$1,984 per mile
	 1,862 per mile	1,942 per mile
The Canadian National is by a little the greater this year.


Charles Avery Dunning: That is my whole point. I did not happen to have the statement and I am glad my hon. friend has given the figures. They show that an effort is being made to keep up the property.


Charles Hazlitt Cahan: With all due deference to the present Minister of Railways and to the ex-Minister of Finance, no man who has lived with engineers at his elbow, as I have done; who has sat on the rear end of trains going over the two lines, observing the tremendous amount of trestle work on the Canadian National railways on the section through the mountains, can fail to realize that the expenditure in keeping up the trestle work to any standard must be very much greater per mile on the Canadian National line than upon the Canadian Pacific railway. That is the point I wish to make.
Now there was another decrease in the maintenance of equipment, from $52,176,000 in 1923 down to $47,972,000 in 1924, and further down to $47,902,000 in 1925. Any shareholder or director would want to have detailed information before he would be able to ascertain whether or not those decreases were justified. According to the notes I have of the statement made by the Minister of Railways, we are now to make large appropriations for equipment. I notice one of his statements of principal payments on equipment gives an amount of $7,397,000 during the present year, and on betterments and equipments another capital expenditure of $1,500,000. I do not say it is so, but there is good ground for the inquiry as to whether, during the last year, maintenance of equipment was not kept down with a view to very considerable larger expenditures during the present year upon equipment.


Charles Avery Dunning: That matter can be dealt with by the committee. I hope my hon. friend will see that the committee makes every inquiry with regard to it.


Charles Hazlitt Cahan: I am not on the committee. I hope they will look into that matter, because there are very pertinent and relevant questions that should be asked by the members of the opposition. I would also suggest that the committee should ask certain questions in regard to transportation costs. As between 1923 and 1925 there was an increase, as shown by the returns, of something like $11,-
800,000	in net operating revenue, and yet I find that transportation costs have been brought down from $120,000,000 in 1923 to $106,500,000, in round numbers in 1925, showing that more than the entire increase in net operating

C.N.R.-Minister's Statement
revenue comes out of the reduction in transportation costs. That is a matter with respect to which obviously the House should have some explanation, either -from the Minister of Railways or from the. officials. I am not suggesting for one moment that the Minister of Railways should necessarily be in a position to explain this matter. I think he did excellently in presenting his report to-day, and if he continues in office for another year probably we will have more expert evidence from him personally in this matter.
Sir Henry Thornton does not give credit to the improved commercial condition and increased prosperity of the country for the improvement which he makes in his net operating. He says:
In the face of the decreased business which obtained during the greater ipart of 1925, every effort in the direction of economy was put forth and maintained throughout the whole of the year.
He certainly has failed, so far as the report goes, to find any evidence of greatly increased domestic prosperity. I am prepared to give him all credit for that, so far as credit is due,. but before the House and the country can form any accurate opinion as to whether credit is due, we certainly should have full explanation with respect to these items before the special committee that, is to hear the evidence and then report to this House.
I have not the pleasure of the acquaintance of Sir Henry Thornton. I believe he is a very expert political propagandist. I judge that from what I see in the press. Whether he is a thoroughly competent railway manager is yet to be proved, but this House and the country is prepared to give him every reasonable opportunity to disclose his ability in this direction, and if the government will only assist in promoting the general industrial prosperity of these eastern provinces, I for one feel sure that no matter how extravagant the operation of the Canadian National lines may be, this country in prosperous times would give such increased tonnage and increased passenger traffic to those lines that they could wipe out the annual deficit with which they are now overwhelmed.
Last year, as compared with the year ending December 31, 1924, the products of agriculture carried by the Nationel lines decreased by 144,479 tons, and animal products decreased by 12,647 tons. The products of the mines increased, as did the products of the forest, but the increase in products of the mines was largely due to increased importations from abroad. While the total of manufactured products and miscellaneous items increased, I find that this increase was largely
due to importations of petroleum and petroleum products, bar and sheet iron and structural steel from abroad, household goods and second-hand furniture which Canadian emigrants were carrying with them out of the country; and, in addition, our increased export of wood pulp which might under a proper regime be manufactured into paper products in this country. From the detailed examination I made I could find nothing to indicate any considerable increase in our domestic trade, -which is relatively of far more importance to Canada than our foreign trade can ever possibly be.
Dealing with revenue freight on the Canadian National lines, I find, that it decreased from 18.500,000,000 ton miles in 1923 to 16,-
900,000,000 ton miles in 1924, a decrease of 8-J per cent, and that it again increased to
18,000,000,000 ton miles in 1925, or about 500,000,000 ton miles less than in 1923.
There is one other matter which I would like to mention and then I will close. The Canadian National Railways own more than two-thirds of the stock of the Central Vermont Railway, which in itself operates about 500 miles of railway in the United States. I can see no reason why the statement of the Central Vermont line should not be included in the annual statement of the Canadian National Railways. It is as much a part of the Canadian National railway system as any of the roads mentioned in this report, and yet this annual report for the year .ended March 31, 1925 may be read through from beginning to end without disclosing to the reader or to the country the fact that the Canadian National railway system owns and controls 500 miles of railway in the United States which is operating at a deficit of some $800,000 a year, a deficit which must be borne by the Canadian National railway system. It is only fair to the House and to the country that in future the statement of the Central Vermont railway should be included in the annual report of the Canadian National railway system.
I have moved for a return in connection with the Central Vermont railway prior to December 31, 1925, and I have not yet obtained it, but in answer to a question the Minister of Railways and Canals disclosed the fact that the net income deficit of the Central Vermont Railway for the year ended December 31, 1925, amounted to $822,755.29. That amount must be added to the deficit shown in the report of the Canadian National railway system. For the year ended December 31. 1924, its deficit amounted to $897,062.51 or a little better, it is true, than for the year
C.N.R.-Minister's Statement

ended December 31, 1923, when its deficit was SI,081,675. As I say, I see no reason why these deficits should be excluded from the report of the Canadian National Railways, especially in view of the official statement of the Deputy Minister of Railways in his report of September 15, 1925, to the effect that:
The practice of bringing down separate statements of operation of component parts of the system will, after the issue of this report, in all probability be a thing of the past.
I hope in future that can be said in truth and in fact. The country demands to know the truth and the whole truth. The country must, at an early date, make up its mind upon the various suggestions, plans, proposals or schemes advanced for dealing with the Canadian National railway system, and in order that it may come to an intelligent decision either upon the proposals which the Minister of Railways will bring down at another time or upon other proposals which we find set forth in the press, it is necessary that we have the whole facts in as clear, concise and intelligent a form as it is possible to give them.
Dealing with the Central Vermont Railway, I find that its funded indebtedness on December 31, 1924 amounted to $32,176,023. That is not included in the statement of the Canadian National Railway. I find that its accumulated deficits on December 31, 1924, amounted to $4,292,854. I have not the returns for the present year ended December 31, 1925, but the total annual deficit of the Canadian National Railways, including the Central Vermont Railway, is shown by the last report of the Deputy Minister of Railways to be $52,779,350 in 1923 and $44,757,481 in
1924.	Taking the answers made by the Minister of Railways, to my recent questions, I find that the net income deficit of the Canadian National Railways and the Central Vermont Railways for the year ended December 31, 1925, aggregated $42,267,519. In view of statements which have gone to the press showing that we are growing out of our railway deficits and gradually solving our railway problem by the improvement, it is stated, in the general prosperous condition of the country and by cutting down of certain expenditures for the past year, the people of the country have been led to believe that we are nearly surmounting our difficulties. They do not realize that this railway which is on our hands in the United States and the Canadian National railway system in Canada had together an aggregate deficit of more than $42,000,000 last year.
	,


Charles Avery Dunning: I understood my hon.
friend to charge me with a lack of frankness. I placed on Hansard this afternoon complete details of the whole matter.


Charles Hazlitt Cahan: I have no doubt the minister did. I have not had an opportunity to examine his figures, but I am expecting him to be more candid than some of his predecessors, and I hope he will give to the country full information with regard to these matters so that there may be no misunderstanding whatever.
In dealing with the financial reconstruction of the road, the hon. gentleman suggested, in keeping with the report of Sir Henry Thornton, that the indebtedness due to the government in respect of accummulated interest and for part of the loans made by the Dominion to the railways should be cut down. It was a great pity, it seemed, that the Canadian National Railways in their annual reports should be forced to tell the truth, even though it were not the whole truth, with regard to their financial condition! I would suggest that it does not help the railways nor does it help the country to transfer these liabilities from one account to another where they may be overlooked and probably forgotten. In the pharmacies, as we know, when certain medicines are retailed, the druggists are compelled by law to place upon the label the figure of a skull and crossbones, and I think it would be well for this country if the skull and crossbones of these expenditures, some of them very unfortunate, which have been incurred by Dominion governments in the past, were kept in mind by the Canadian people in order to obviate the pursuit of similarly reckless courses in the future. My hon. friend suggested that even he might be compelled to make some expenditures of that nature. He suggested that certain colonization roads should be considered separately from those Canadian National lines where there is a greater density of traffic.


Charles Avery Dunning: I did not make any such suggestion.


Charles Hazlitt Cahan: I think I am mistaken in
my notes; the suggestion was made by another hon. gentleman. At any rate, there was a suggestion to that effect and I may as well discuss it. The suggestion is that certain roads which may be considered as performing the functions of colonization railways should not be expected to earn their operating expenses for many years to come, and that the deficit created by interest accruing on capital expenditures in connection with

C.N.R.-Minisier's Statement
the construction of these roads, and the deficit in connection with ordinary operating expenses, ought not to be stated so clearly and definitely in the public returns. We must, it is said, expect deficits of that kind. Now I submit that until this country is in a more prosperous condition industrially, and in a better position to bear the burden of taxation which now rests upon it, we should place a limit upon the further construction of colonization roads and of extensions to the Tailroads already built. In my opinion, under present conditions, such colonization roads and extensions thereto should within a reasonable time, say within five, six or seven years after construction, offer a reasonable 'prospect of paying operating expenses. In ibis country we should certainly reduce these -capital expenditures until we are on our feet again. I would not eliminate all extensions, -some of which may be necessary; there are *extensions which undoubtedly will pay. But the extensions to existing roads which in the present financial condition of Canada hold out no reasonable promise of paying their way within an appreciable term of years or even within the present generation, should be cut out entirely, until in population, in industry, in commerce, and in trade we have caught up with the railway structure which we have at The moment from the Atlantic to the Pacific.


Mr. JOHN EVANS (Rosetown):: The
Teports of the railways for the year 1925 show a tremendous increase in the trade of the [DOT].country.


Some hon. MEMBERS:: Oh, oh.


John Evans: Hon. gentlemen laugh at that, 'but it is a well established fact; indeed, our railway earnings constitute a sound barometer >of the trade of the country every year. But this advance, like other trade increases in Canada, is shown to have been due chiefly to the prosperous state of agriculture during the past year. The Canadian Pacific Railway statement, like that of the Canadian National system, is proof that the profits earned by the railways have resulted from the hauling of the wheat of western Canada. A study of the two railway statements should be an effective answer to those who have made the erroneous statement that $60,000,000 more could have been earned by our railways in the hauling of Canadian wheat, and the public [DOT] will surely realize that there is still some room for a reduction in rates, even both ways. There is no doubt that the Crownest rates on wheat and flour should have come into full force last year, as they were intended to.
After paying all dividends the Canadian Pacific Railway had a surplus of $6,567,690, and their accomulated surplus is now $35,000,000. This, in conjunction with the reports of earnings month by month, will prove beyond question that the carrying of western wheat is the most profitable business our railways are engaged in. I have here a list of the monthly earnings of the Canadian National Railways and of the Canadian Pacific Railway. In 1925 the lowest gross earnings for any month were $11,786,710 in the month of February; in the month of January they amounted to $11,896,513, and in May, $12,467,612. The largest earnings of any month last year were those of December, $19,818,544; October came next with $19,569,188. The net earnings are in proportion mostly with the gross earnings, those for the month of October being $7,444,027, as compared with January, $583,768. This surely is conclusive evidence that the moving of the western crop is the most profitable business that the railways engage in. I have also the figures for 1923, and they are relatively very much the same. The greatest earnings were in October, $23,769,733, with net earnings of $8,160,938, while the lowest were in January, only $720,000. I repeat, this is conclusive evidence that the railways are not losing money hauling western wheat eastward or westward. Indeed in the report of the Canadian Pacific Railway, the president has this to say:	.
The relatively small increase in gross earnings is largely accounted for by the depression which existed in Canada during the first part of the year, the effects of which on general traffic were only overcome by the excellent harvests, to which is largely due an increase of $10,354,946 in .the gross earnings during the last half of the year.
Then again, in the report of the Canadian National Railways wdiieh we have before us the management also emphasize the crop conditions as the means by which the earnings have been made:
The movement of the large western crop made itself felt towards the end of the year, with a consequent increase in gross revenue of 3.9 per cent for the year.
I do not like to hear hon. gentlemen making statements which are calculated to set one part of the country against the other. In fact the member for Kent (Mr. Chaplin), speaking in this House on May 11, stated that the Canadian National Railways had earned over $32,000,000, but, he added, not one cent of this was earned by hauling the western wheat crop. His words can be found at page 3303 of Hansard. What is a statement like that calculated to do, but to set one part of the country against the other? And there is no foundation whatsoever for such a statement.

C.N.R.-Minister's Statement
There is another feature of the railway problem to which I want particularly to address *myself. One of the most prominent planks in the Progressive platform for many years has been the nationalization of public utilities. In 1910, when the farmers of five provinces visited Ottawa, public ownership of public utilities was one of the things they asked for, and at that time public ownership of terminal elevators wa3 a live question. The railway situation as we have it to-day has long been foreseen by the organized agriculturists of the Dominion; at least years ago we warned the country that our railway system could not be left in private hands and made to serve the best interests of this Dominion, particularly the interests of the primary producers It is a plank in the Progressive platform to-day that all railways and their subsidiaries, such as telegraphs and express, should be owned and operated by the government in the interests of the people. We have never yet had reason to change our attitude on this question. The railway situation to-day is such that it carries with it a serious menace to the permanent prosperity of this country. Indeed, it is not too much to say that the time is at hand when the pubiie will demand something better than we are now getting year by year.


William Findlay Maclean: Hear, hear.


John Evans: We are in such a slough at present regarding railway transportation that only by an unprecedented prosperity extending over a^number of years shall we be able under the present railway arrangements to keep the railways, and perhaps the country, solvent. It is true that 1925 has seen a great improvement in the earnings of the National Railways, but we must not forget that if was an exceptional year in wheat production, and we cannot expect suwh a condition every year. If a series of adverse years came, such as we have experienced m western Canada more than once, railway earnings might be impaired to the extent that even the solvency of tlhe Canadian Pacific might be threatened. Then the country would be called on to shoulder the burden of taking over that system in its adversity as we had to do the Canadian Northern and Grand Trunk railways; and the former at one time threatened to drag down into insolvency one of .the strongest banks in Canada, if not in the whole world. To do that at a time when this country would be hard put to it for money for administrative purposes, to meet maturing loans-the payment of which we keep putting off from time to time-for the National Railways might cause us serious concern. It would be better

to do this on a rising tide of trade and prosperity than in a time of commercial depression and adversity.
When we survey the British Empire w-e find that all the overseas dominions except Canada own and operate their railways. It is to this fact I think that we can attribute the close competition that some of our sister dominions are giving us in natural products to-day. Every year our railway problem increases in intensity, until now' it is seriously handicapping the primary industries of the country. I am sure it will be admitted that the live stock industry even in Ontario cannot be profitably carried on under present conditions, to say nothing of hoping to keep up an export cattle trade from western Canada and pay the rates we are now paying.


George Brecken Nicholson: If my 'hon. friend will permit a question,-how do the rates in Canada compare with those of the government-owned railways in Australia?


John Evans: I have not the figures before me, but 1 do not see that my hon. friend's question has much to do with what I am now discussing. One of our great systems is today earning dividends of 10 per cent and 12 per cent, besides each year adding a large sum of money to the accumulated surplus, while the people have to tax themselves to make good the deficits of their own system. I do not think that is a very desirable condition.


George Brecken Nicholson: Are not the rates the
same?


John Evans: The rates are the same but the conditions are not the same. No one knows better than does the hon. gentleman that much of the Canadian National system is scattered in a way the Canadian Pacific system is not, and that many more colonization roads are kept up by the National system. But the foolish competition and duplication which we are tolerating to-day is unceasingly increasing the debt on the National system, on which interest must be paid. Indeed, unless trade increases tremendously, the nearer the National system comes to paying its way the harder wilt the privately owned system 'be put to it to pay its 10 per cent. Under our present arrangement one system cannot prosper except at the expense of the other, unless and until our agricultural production is increased to a much greater degree, which at present is very largely prevented by high freight rates.
The present report is good, but we must bear in mind that last year we raised over

C.N.R.-Minister's Statement
400,000,000 bushels of wheat which had to be transported. When we consider the purchasing power throughout this country of a good crop, it is not to be wondered that we are facing this year a more favourable situation than formerly obtained. A total sum of about $76,000,000 has been earned on the two systems this year, and indeed it is not too much to say that with a Saving in operating expenses, which might be expected by amalgamation, and the elimination of all duplication, a favourable rate of interest might have been paid on all capital expenditure.
When our railways are run in a manner becoming to a democratic country there is no doubt that all rates on both long and short hauls can be lowered, and our exports increased because of the easy movement to the seaboard of what we have to sell. Industry - really depends on the ease with which our products can move to the markets of the world.
Belgium has owned and operated her railways from the beginning, and there is no sign of a desire to change. Government ownership of the railways dbtains to-day in some of the most diverse countries and among some of the most diverse peoples. Turkey, Russia, Switzerland, Austria, Germany and India all own and operate their railways; they realize that railways, like highways, should be owned, operated and controlled in the interests of the people rather than for private gain. Indeed, to me it would be just as reasonable for the province of Ontario to turn its splendid system of highways over to private individuals, to be maintained and operated by them for gain, as to have our railways in private hands. We have loaded our people with a scattered, over-capitalized concern, putting them as well under the disadvantage of competition from a privately owned enterprise.
Another feature with which we have to contend, with half our railways privately owned and half government owned, is the intrigue carried on in the interests of the privately owned company. We have seen branch line bills passed by this House and thrown out by the Senate, and to-day we can point to extensions of the privately owned concern which have been constructed practically on surveys first laid out by the Canadian National system. So I say that our present railway situation cannot be considered as permanent. It will be better to make an amalgamation now than to wait until circumstances are intensified, or until we are forced to take that Step.
There are several fundamental things to be considered in our railway problem to-day. It
is a basic economic necessity that the people should retain control of the machinery through which they are subject to taxation. In this respect the railways serving this commonwealth should not be considered, as I said before, differently from the provincial system of highways. To provide and maintain a nation's means of communication is a function of sovereignty; it is an economic blunder, then, to permit private individuals to exploit the people through a public or national utility. Along with the Canadian National deficit, the excess earnings of the Canadian Pacific Railway cannot be considered other
10 p.m. than as a supertax on the people, wrung from the necessities of the nation, and there is no reason why this should be so. There is no better time than the present to bring both systems under government ownership and control, when means can be taken to cheapen transportation, and permanent economic methods of operation may be adopted.


Mr. R. S. WHITE (Mount Royal):: Mr. Speaker, I hope the House will not think the members for Montreal are endeavouring to monopolize the early discussion of .the railway question, for I can assure the House that I will be on my feet but a very few moments. Those who are familiar with the Bible, as I presume some of you are, will remember that in the book of Exodus Moses said to the Lord, "I am slow of speech, and of a slow tongue," and he suggested that Aaron, who was more fluent, should carry the messages. I am a Moses in that respect, and it is somewhat comforting to know that the House is not lacking in Aarons. I desire to join in the felicitations extended to the Minister of Railways (Mr. Dunning), on the occasion of what I suppose it is fair to call his maiden speech, for the temperate tone of that speech and the absence of acrimony an I of anything of a partisan nature. It does not, in my opinion detract from the merits of the minister's speech that he followed closely the annual report of Sir Henry Thornton.
I do not intend to go into any analysis of the earnings of the railway or of the Character of its traffic. We know that the first six months of 1925 were lean months, and that the second six months, in consequence of the very abundant harvest, were fat months, and that the railway emerged from the year in considerably better financial condition than in 1924. The hon. member for St. Lawrence St. George (Mr. Cahan) has, in considerable detail, analyzed the financial
C.N.R.-Minister's Statement

statement, and I am bound to say that I was impressed by the assertion of the hon. member for East Algoma, (Mr. Nicholson) that in estimating the items chargeable against operating expenses several that should fairly be taken into consideration had been omitted. But if the basis of comparison for the last three or four years has been .the same I would pot attach a very great deal of importance to that point. Noir am I disposed to discuss the question of public ownership alluded to by the hon. member who has just spoken. I am one who firmly, and I fear unalterably, supports the principle of private ownership under government control. I thought when a recent Conservative government acquired what is now the Canadian National railway .system a mistake had been made-that those roads should have been allowed to go through the hands of a receiver, and that their capital should undergo reorganization by that process. I do believe that not one mile of necessary railway in Canada would have ceased to be operated had that method been adopted. But it is fair to remember that if we have in the Canadian National railway to-day a white elephant upon our hands-though Sir Henry Thornton predicts that it may become somewhat different in hue-the policy of acquiring the various systems that now comprise the Canadian National Railways would never have become necessary but for the .mad, insane,- aye criminally insane,-policy of the Liberal government in promoting and constructing thousands of miles of railway in excess of the requirements of Canada. We have heard a great deal of the failure of private ownership in the case of the Canadian Northern, of the Grand Trunk Pacific, of the old parent Grand Trunk if you like. But it was not private ownership that .failed in the case of the Canadian Northern or the Transcontinental. It was the imbecility of the government that caused the failure of these roads. Had the Liberal government contented' itself with the single Transcontinental in competition with the Canadian Pacific there would have been reason to believe-indeed I think a strong probability-that the one road would have succeeded in spite of the difficulties that arose out of the war.
I am willing to accept the figures, and not go behind them, as to the net earnings of the Canadian National railways in 1925 amounting to some thirty two and a quarter million dollars. One of the reasons why I have attempted to address the House on this subject is my fear of an early effort being made to write down the capital charge of the

Canadian National railway. Sir Henry Thornton in his report for last year-as he also did, as hon. gentlemen will remember, in his report for 1924-alludes to that question. He says:
During the year a searching examination of the company's financial structure has been under way. . . . The work is being performed effectively and it is expected that, during the current year, definite proposals having fox their object the placing of the company's finances on a sound and permanent basis will be presented.
What sounder basis could the finances of the Canadian National Railways have than the credit of the Dominion of Canada? The Minister of Railways hinted at the probability -I do not say the desirability, perhaps possibility would be the better word-at the possibility of such readjustments of the finances of the Canadian National Railways being made as would involve a writing down of the capital charge. Now my point is that if you wrote down the capital account of the Canadian National Railways-presently upwards of 12,000.000,000-if you wrote it down to a dollar you would not save the taxpayers of Canada one single copper. What you would do is this and this only-you would transfer the item from the railway accounts to the accounts of the Dominion of Canada, but every liability of the railway whether to the Dominion government-which is a bookkeeping item-or to the investors in Canada and elsewhere who hold the bonds, every charge arising would still have to be paid by the taxpayers of this countrj'. What I fear, and greatly fear, is this: That our friends to the left, known as the Progressives, and others, not merely in the western provinces but in other "parts of Canada, having the capital of the road written down, we will say to $500,000,000, and an annual statement of receipts and expenditures showing that interest on $500,000,000 had been earned and that a substantial surplus of five or ten million dollars had accrued over and above that charge, would immediately and incessantly demand that the carrying charges be reduced because of these circumstances. We know already from the events of the present session the power of the Progressive party over this parliament. And if the government so manipulated the finances in connection with the capital charges of the Canadian National railway that an apparent surplus was produced in the operation of the road, I am as satisfied as I am of my own existence that that party would say to the government, "You must have no surplus on government railways, but you must reduce the rate to the point where income and expenditure balance.'' But all
37 IT

C.N.R.-Minister's Statement
the while the taxpayers of Canada would be required to pay precisely the same amount as they are paying to-day.
I fear our western friends are sometimes prone to forget that in connection with the organization of the Canadian National railways. the eastern provinces did not get a square deal, and I will explain what I mean by that. If my memory serves me rightly, the Minister of Railways this afternoon stated that something like $170,000,000 of guarantees in connection with the construction of the Canadian Northern and the Transcontinental bad been given by the four western provinces. The province of Quebec and the Maritimes did not give one single dollar, yet when the Dominion acquired this system all the liability attached to those guarantees fell upon the people of Canada at large. If the proper course had been adopted the liability would have fallen where it belonged, upon those who gave the guarantee, namely, the western provinces. I do think it is only fair that our friends of the party to my left, when they are criticizing what they think is a lack of generosity on the part of people in the central provinces, should remember that fact.
I am unable and have always been unable to understand why the Canadian government should operate unprofitable railways in the United States. The case of the Central Vermont was cited by the hon. member for St. Lawrenee-St. George. The people of Canada last year had to meet a deficit in operation in respect of that road, over And above interest charges, of upwards of $800,000, in order that the people of the United States, where the larger mileage of that system is located, might have rates so low as to be unprofitable. Take the Island Pond and Portland branch of the old Grand Trunk railway, which is now operated by the Canadian National, and consider the inconsistency and the anomaly of the policy of the government in respect to that piece of road. The Minister of Finance announced in his budget-and the statement was received with applause on both sides of the House-that hereafter the preferential tariff would apply only to goods imported direct into Canadian ports. In doing that he struck a blow at the Portland end of the Canadian National Railway system. I do not complain of tihe government's policy in the encouraging of trade through our own Maritime and eastern Canadian ports. On the contrary I entirely approve of it, and I would go so far as to say that not only should imports through our own ports be encouraged, but that exports also should be encouraged. But if we could succeed in a national policy of that kind; if we had strength enough in Canada to stand 14011-238
up for Canada alone, what would become of that section of the Canadian National railway between Island Pond and Portland? That railway is the property of the people of Canada, Why should we continue to travel with this old man of the sea on our back in the shape of an unjirofitable road? I complain that there does not seem to be courage or activity enough on the part of ministers of the crown to grapple with questions of that kind and apply to them the Canadian doctrine and the Canadian doctrine only.
These are the two points that I desire to present to the House. I emphasize the danger of writing down the capital of the Canadian National, which danger will become a menace when a surplus upon a fictitious capital compels a reduction of railway rates to a point below service at cost. While I hold no brief for the Canadian Pacific Railway, I say that no proper consideration of the railway problem in Canada can be given if we disregard the services that the Canadian Pacific Railway have rendered the people of this country.


Right Hon. ARTHUR MEIGHEN (Leader of the Opposition):: Mr. Speaker, I could
not use the time to any advantage to carry through a further analysis of the figures contained in the annual statement of the Canadian National Railways. Such analysis would be worthless, because it has already been well done by the hon. member for East Algoma (Mr. Nicholson) and the hon. member for St. Lawrence-St. George (Mr. Cahan). I do not wish to reflect at all on the fairness or the care with which the minister himself presented the figures which are embodied in the annual report. My only comment of an adverse character, if it may be called such, would be this: that his statement to-day was too much a compilation of the figures which already appear in that report, contained too much in the way of mathematics and too little in the way of illumination. While we are blundering or burrowing through the trees and the underbrush we are apt to lose sight of the woods, and I am afraid the House, during the statement of the minister, lost its conception of the great big outlines of the situation in a mass of necessary, but at the same time not very useful, details.
I take a very keen interest in the annual railway discussion because it has to me an historic aspect. I watch with curiosity the conduct of members of the government and their supporters while the colours are being painted of the progress of the National system. This system has a history; we became its owners after a series of fatalities of a dimension unprecedented in history of a



C.N.R.-Minister's Statement
country the strength of ours, railway fatalities which shook the very foundation of our finances and clouded our future. Out of the chaos of it all emerged the present great system.
I am in accord wholly, or almost wholly, with what has been so gracefully said by the hon. member for Mount Royal (Mr. White). As to the cause of those calamities there can be now no question whatever; each and every system which came to its crash came because of blunders of public policy to which those systems became a party. The only feature in which I must differ from the hon. member from Mtaunt Royal is this, that of the alternatives more or less ghastly which presented themselves, the only one that after very thorough review seemed to be acceptable at all was that of amalgamation under government ownership. He seems to feel that we might have preferred the alternative of liquidation. In respect to one of the systems we did accept the alternative of liquidation; I refer to the Grand Trunk Pacific, which seven years ago last March fell into, the hands of the receiver. Who was the receiver? Who was there standing around ready to receive? It was in a position where it had to be operated; there was no alternative in our control except operation. Towns and cities were built along its lines; other industries depended upon it; but there was nobody on the horizon ready to take the position of receiver, provide the money and run it. The Dominion of Canada was the guarantor of millions of its bonds, and if anybody was to suffer by the reorganization of its finances we of course would be the first, [DOT] if not indeed almost the only sufferers. Consequently, we became receivers; we are receivers to-day; the system is in liquidation yet. I would like to suggest to hon. members that we have not saved any money by the process of liquidation; nothing has been gained by the step. Supposing we had applied the same process to other systems; supposing we had applied it to the Canadian Northern; who would have taken up the Canadian Northern and operated it? Where was the philanthropic organization or corporation lying in wait ready to assume that responsibility? No voice was heard at that time, and if anyone had applied, the millions which first would have been squeezed out would have been the millions of the people of Canada, because we were guarantors of the Canadian Northern and we were compelled to become guarantors in order that the system might be rescued from a state of incompletion and worthlessness and brought to a state of completion and use.
The next was the case of the Grand Trunk.
fMr. Meighen.]
Why did the Grand Trunk approach a state of liquidation? What was the reason that the Grand Trunk, in the words of its president, "reached the end of its tether"? The reason was that the Grand Trunk was guarantor of the defunct Grand Trunk Pacific. The guarantees of the Grand Trunk to the Grand Trunk Pacific were so enormous that under them the Grand Trunk could struggle no longer. Of course it might have gone into liquidation also but what would have been the result? Those guarantees would all have been wiped away; somebody else would have owned the assets and the liabilities would have been removed. The Grand Trunk Pacific, the white elephant, would have been on our hands with no support for it at all. Who would have owned the assets? I pause to see if there is any suggestion from any hon. member as to who could have been the purchaser at the liquidator's sale. Is there any corporation in the mind of any hon. member? What other railway corporation was there in this Dominion? There was only one left. Whether that one would have purchased or not we do not know. If anyone can suggest anybody else who would have been the purchaser of the system as such under those conditions, undoubtedly his imagination and retrospect are powerful indeed.
We had a system truncated in western Canada with two lines protruding away into the east, ending nowhere, not connected in eastern Canada in such a way as to furnish any traffic to the railway at all. Would it have been the part of business for us to permit the only hope of gathering traffic in eastern Canada to go "on the liquidator's block to be sold to the rival corporation? Those things need only to be stated to be understood. This was the only option. We were not anxious to rush into additional responsibilities; our responsibilities had already become terriffic at this time without further railway obligations, but circumstances were beyond our control. Those circumstances had been set going by the follies of ten years before; those circumstances were such that we had to deal with them, and in dealing with them we had only one course to pursue. The matter was one not of choice, but of the inevitable.
But the curiosity of the history does not end there. Though this situation was forced upon us, hon. gentlemen now members of the government pictured the step which we were taking as one of madness leading directly to financial chaos in Canada. Government ownership suddenly became not only a folly, but a crime; we were painted not as having crushed the life out of the poor British stockholder or bondholder, but rather as

C,N.It.-Minister's Statement
having conferred a great favour upon him and wasted millions of the money of the taxpayers of this country in unnecessary philanthropy to those British stockholders. A general election came on and not all hon. gentlemen opposite but the majority of them who were elected were elected because of denunciation of the step which we took one year, two years and three years before. They were elected on a platform of direct antagonism to government ownership in every form. The dire consequences of the folly, as they described it, which the late government had perpetrated was pictured in language lurid and memorable. I remember at that time being in Montreal when the billboards of that city were plastered with advertisements of Liberal candidates in the metropolis. One of these advertisements clings to memory very firmly. It was one prepared by the late member for St. Law-rence-St. George. His manly photograph was its principal feature. He was pictured with his arms folded, and below that picture there appeared this simple text:	"I am against
government ownership." Upon this declaration was he elected, and thus was the whole array elected. What has been the story since? I congratulate hon. members of the government upon the thoroughness of their conversion, and I congratulate them upon the fact that years of experience in office or of responsibility have not been in vain. And now this child whom they buffeted and beat, this child they took to their bosom. Of its parentage they boast and they proclaim it to be the hope of the country. They stand up now and in language of eloquence defend the whole principle and practice of government ownership.
I am glad to see anything that looks like a betterment of conditions in the Canadian National railway system. I believe the last year had something of improvement over the year before. I believe that, with the exception of one reverse, there has been a pretty general improvement ever since 1920-indeed, ever since the end of the year 1919. Large outlays were for some time essential. We took one road in complete dilapidation and another in semi-dilapidation; we took roads which were disjointed, never having been made to be operated together. And the process of conjunction necessarily was more or less difficult. It meant that sums had to be spent in resuscitation and improvement. New life was seen at the end of 1919, from which date up to the present time the system has progressed. And never was the progression so rapid as it was in the years 1920, 1921 and 1922. At the same time it is well to recall-for I have heard some 14011-236*
remarkable utterances made in this House
even during the present session still more remarkable statements in the course of the campaign-just how this process of amalgamation was effected. I have heard the late member for Regina declare that this government found the roads in a state of chaos and of severance one from another, with three or four different managements, one management overlapping the next; and that in the exercise of its great genius for organization the present administration had worked out a plan which had brought the railways together, this having accounted for the improvement noticeable to-day.
Well, what are the facts? Are hon. gentlemen opposite really responsible for any amalgamation at all? Is any alteration whatever in the railway policy of this country due to anything they have done? Have they done anything more than sedulously to pick out the footsteps of their predecessors, forgetting that they had reviled them and to try to follow them as carefully as possible? The whole plan of amalgamation was worked out by the late government; the whole legislation was put on the statute books by the parliament which preceded the election of 1921. And that legislation stands unchallenged to this hour. That legislation provided that the moment it could be done each and every system owned by the government should be brought into one great unit; and at the time the late government went out of office the execution of that legislation was all but complete, all branches of the railways now constituting the National system having been gathered in, with the single exception of the Grand Trunk. In respect of that exception a clause was there in the legislation which had been passed providing that, at the first opportunity which offered, the government should by order in council take steps to bring in the Grand Trunk. Why had it not, been brought in before we went out of office? For the simple reason that this could not be done pending, not only the completion of the. arbitration proceedings, but the execution of the arbitration award. This took place during that fall. There was an appeal, and that appeal had necessarily to be disposed of before the Grand Trunk could be brought into the National system. That appeal was not finally disposed of tuntil shortly after or about the time this government came into power. They waited for another ten months before passing the order in council under (the legislation which had been on the statute books for years providing for the incorporation into that great system of this last outstanding unit.

C*N.R.-Minister's Statement
This is the history of the evolution of what is now the Canadian National Railways. We are glad to see any evidence of betterment, because betterment in the National Railways means betterment in the condition of the Canadian people. The National system is just another phase of the national activities of Canada, it is just another account on our national balance sheet. But while we are glad to see any improvement in our railways we do not want to be deceived merely bv appearances, nor do we want to be misled by cunningly wordfed sentences.	I am afraid we are not in so
much better condition as so many hon. gentlemen imagine. I am impressed by the analysis made by the hon. member for St. Lawrence-St. George, who pointed out that while we provided last year only $10,000,000 we find that the National Railways owe this year some $63,000,000 more than they owed, a year ago. That is to say, at the end of 1925 they owed about $63,000,000 more than they owed at the end of 1924, and this in the form of funded, that is, long distance, liability. If one takes the other liabilities one finds that there was a still greater increase in the debt: the exact figures would be $65,798,349.62, taking into account some $2,000,000 extra of increase in other liabilities over other assets as compared with the year before. This is a serious increase in the public indebtedness of Canada-because it is public indebtedness. It does not matter whether the government as a committee of parliament or as an executive council has guaranteed the indebtedness or not; it is our indebtedness. Our representatives borrowed the money and we, standing behind those representatives, have to see that money paid. It is just as much our indebtedness as if we had borrowed it on the bonds of Canada and put it into the national treasury. This fact must be borne in mind.
Hon. members will recall that in the budget statement it was claimed-and for the present I do not dispute it-that the national debt account proper was reduced by $22,000,000. Very well. This phase of the national debt is increased by $65,000,000. I know that of that $65,000,000 $10,000,000 is loaned by the Dominion; therefore it has to be added to the first account, and1 it cannot be added to both. Deducting it we have $55,000,000 left. So that with $55,000,000 of an increase in one place and $22,000,000 of a diminution in another we have a net addition to the Canadian burden of $33,000,000. And we are so proud of the accomplishment of being $33,000,000 more in debt that we throw our hats

in the air, kill the fatted calf, place an order with the liquor commission and reduce our taxes 1
It is just possible to become too enthusiastic over the situation that confronts us, especially when we analyse the cold facts. I know the increase of the debt is not as much as it was the year before. I listened with some admiration to the skill with which the Minister of Railways informed us with enthusiasm that the increase in the debt was not as great this year as last, or last year as the year before, that we were almost improving-were not getting worse as fast as we had been. That is what it means. The' year before the increase was $118,000,000; the year before that $116,000,000. I do not want to be taking credit where credit is not due. but I would certainly like to think that some lesson had been taught by the debates in this House last session, that the wild reign then prevailing in the National Railways was somewhat checked, and that now we are at least not going at the pace in capital expenditure that we were then. Still, it is serious enough. This country, with a debt so tremendous as that under which we groan, and adding to it this year on railway account $65,000,000, should not become over-enthusiastic and feel that money is water.
I do not think you can ever run a railway without some capital expenditure, but undoubtedly after the road was rehabilitated and put in the condition it is in to-day we ought to be able to get on with substantially less capital expenditure than we made last year. We are told: Oh we voted $50,000,000 for the railways last year, and they only needed $10,000,000. I could not help pausing in admiration of the finely palatable verbiage used by Sir Henry Thornton in connection with this matter. It is to be found at page 6:
In the Appropriation Act for 1925 the sum of $50,000,000 was voted for Canadian National purposes during the (Dominion) fiscal year ending March 31, 1926. It has only been necessary to obtain $10,000,000 of this amount from the government. Payment of the balance has not been required, partly because of increased resources due to larger gross and net earnings than were expected, and partly as a result of substantial reductions in the purchase of materials and supplies, also partly by use of working capital.
Those of us who are outside the holy of holies of railway finance will be greatly impressed by that language. Let me read the next paragraph and see the light it throws upon that statement.
In February 1925 there were issued $17,000,000 Canadian Northern 4i per cent ten^ear guaranteed gold bonds and $18,000,000 Canadian National 4i per cent five-year guaranteed gold bonds. The $17,000,000 issue was practically speaking a refunding of two Canadian

C.N.R-Minister s Statement
Northern issues, namely, $6,000,000 which matured in December 1924, and $11,000,000 which matured in March 1925.
The $18,000,000 was for new construction. In other words, we are first told' that we did not need the $50,000,000 but only $10,000,000, the reason being improved conditions, increased resources, higher net earnings and the use of working capital. In the next breath we are told that $35,000,000 more was borrowed. In a word, we did not need the $50,000,000, we needed only $45,000,000; we borrowed $10,000,000 from the government and $35,000,000 from somewhere else. This is the residuum from the paragraph.
Now, Mr. Speaker, I ask you, on what security did the Canadian National borrow that $35,000,000? Are we to fold our arms and feel quite secure and indifferent to the whole situation because they borrowed it without the express guarantee of the government of Canada? Does anybody believe that the Canadian National could borrow the price of a used tie except on the security of the Canadian people? Did anyone ever hear of a corporation which does not pay, and cannot pay, one-half of its fixed charges going out into the money markets of the world and borrowing money at 41 per cent? Did anyone ever hear of it in the world's history? The reason they were able to borrow the money was because the money lenders of the world knew that the Canadian National Railways represented the people of Canada, and that the people of Canada had to see that debt paid. It is our debt? So the result of this whole paragraph is simply what I have stated:	We did not need the $50,000,000, we
only needed $10,000,000 because we borrowed $35,000,000 somewhere else.
There is another paragraph which mystified me at first and afterwards amused me. It is on page 7, and I suggest to the minister that he never try to "paint the lilj','' that he never try to improve on the smoothness and the beautiful coating of the language of this report. When reserves of fuel or of ties are reduced, one would think it was something to be admitted in the report. If those reserves are reduced by a million dollars, it just means a million dollars more appears in the earnings account; if by two million dollars, why it means that there are two million dollars more to the credit of net earnings. This year we have an increased credit of net earnings, but we find in this paragraph that $7,876,460 of that amount was secured by selling off fuel, rails, ties and so forth. I do not say it was wrong to sell them, but I know that if we increase the net earnings
by selling those stocks, it is only a fictitious increase. Now, one would think that would be stated in the report by way of admission, but wait until I read the beautiful diction in which this admission appears:
Expenditures on this account were considerably less-
That is, purchasing and stores.
-in 1925 than in 1924. During the year there was
but little fluctuation in the price o-f materials. A determined effort was made to reduce stocks by close supervision and the development of improved methods. The Quantities of material and supplies on hand, including ties, fuel, rails, and so forth, at the end of the year amounted to $7,876,460.79 less than in 1924.
I do not think I ever knew a virtue to be made of necessity more skilfully than that.


William Daum Euler: Does the right hon. gentleman state seriously that earnings are increased by reason of the sale of stocks on hand, or any other assets?


Arthur Meighen: It says so. Of course,
they would be one of the expenses of running the road.


William Daum Euler: You are merely changing
that asset into another form.


Arthur Meighen: But it certainly is
reflected in the increased net revenue.


William Daum Euler: That is different from earnings, though.


Arthur Meighen: When you are b hasting
of net revenue you have to remember that you have $7,876,000 less coal.


William Daum Euler: There is a difference
between earnings and revenue.


Charles Avery Dunning: Not coal.


Arthur Meighen: Well, ties, fuel, rails.


Charles Avery Dunning: Yes.


Arthur Meighen: That is what I am pointing out. We must remember that we have that much less on hand, and it is because of that fact that our earnings are so much more. But, Mr. Speaker, there was one slip in the composition of this report. I look at page 8 and wonder where the skill of the draftsman passed to. He says frankly:
Passenger earnings decreased by $615,516.78, as compared with 1924 earinngs. The number of passengers carried showed a decrease of $1,032,641.
Why such a bald, crude statement as that? In accordance with the plan adopted in the rest of the report that passage should have read about like this. "The management was very much impressed with the extravagance

C.N.R.-Minister's Statement
of t'he general public in indulging in unnecessary passenger traffic, and a determined effort was made to curtail the propensities, especially of the poor, in this regard. The herculean efforts of the directorate met with great gratification, and S615,516.78 was saved to the Canadian public." Had this clause been worded as I have suggested this would have been in line with the plan adopted in the remainder of the report.
It is true that the earnings of the company were substantially increased over those of 1924, but compared with 1923 they are not as good; the result is some millions, 1 have not figured it out exactly, less than the result of 1923. Consequently it is not something to lose our heads over, and especially is that so when we read this most significant sentence, found on page 8:
The Dominion government estimate for all grains in the Canadian grain crop for the calendar year 1925 was 1,126,113,100 bushels, an increase of 33.5 per cent.
That is an increase of more than one third in a single year. This is a phenomenal year; this is the year out of which these results grow. I know that the entire result could not have been expected to be reflected in the railway statement of 1925; it is reflected in the four months of this year which the minister quoted as well.


Charles Avery Dunning: There was less grain moved in 1925.


Arthur Meighen: There was a great deal more wheat, although a little less grain; wheat is the long haul, which accounts for the increase in 1925:- Nevertheless the stimulus which that -crqp gave was such that the total increase in earnings is certainly not something we should go wild over. We had no very great result, but (I hope this year will show a much better result and a much finer reflection of the abundance of last year's harvest than has been seen so far.
Hon. gentlemen have sought to argue that we are getting on just splendidly; that the rates are all right, and everything is fine. But I notice that the minister said we could not possibly pay our interest, and we canno't pay our interest right out in western Canada, the very place we are getting all this grain. The minister says there are guaranteed 4i per cent Grand Trunk Pacific debentures, and we have to let these bondholders go without their interest, as we have done since I don't know when, with the exception of the year 1923. Well, we are not paying these debts; this 
interest really is not our debt in the sense that we have not guaranteed it, but it 11 p.m. is the debt of the railways we are running, and while we cannot pay it we should not lie throwing our hats into the air and saying how well we are getting on.
I do not know that I understand exactly the reasoning of the government in relation to these 4J per cent debentures. I am quite in agreement with the government that the holders of the Grand Trunk securities have no complaint whatever as to their treatment at the hands of the Canadian people. I am not going to make the statement that the holders of the Grand Trunk Pacific securities have no shadow of complaint, neither am I going to say that they have, but I must say that I am somewhat troubled about it. As ] understand the situation the Grand Trunk Pacific among its other securities Issued these 4j per cent debentures, the interest of which: was undertaken to be paid by ithe Grand Trunk Pacific, together with the principal at maturity. The interest was guaranteed as well by the Grand Trunk Railway, -the parent company, but the Grand Trunk Railway limited its guarantee to the excess of its earnings over its own interest responsibilities. If it had no earnings over and laibove what it had to pay on its own debentures, it was not liable. The minister says that contingency has not, arisen; the Grand Trunk is not earning more, than the interest on its own outstanding liabilities. I accept his word, but I know that that is still a debt of the Grand Trunk Pacific. There is no condition there; the Grand Trunk Pacific agreed to pay it, with no reservation whatsoever. I know the Grand Trunk Pacific is iq liquidation, and there is some distinction; there is certainly a wide legal distinction because of the fact that it is in liquidation. But are we quite sure that the distinction is enough? How long are we going to keep the Grand Trunk Pacific in liquidation, using the fact of that liquidation as an excuse for not paying its debts? It has now been in liquidation for seven years, and should surely be liquid enough by now. There may be some reason for continuing it; I do not know at the moment what it can be, but unless there is some reason of which I have not heard so far,
I would ask the minister to take up seriously the question of making some arrangement in respect of these debentures. I have never been approached by one of these debenture holders; I have spoken personally to

CN.R.-Minister's Statement
Sir Henry Thornton about the matter, but
I think 1 have never discussed the subject with anyone else outside this House. But I do not like the idea of this country running a railway and refusing to pay the debts of that railway.
There is another application of a different character; I do not think it is on so strong a footing, but it is worth mentioning. The Canadian Northern Railway has what is known as income debenture stock, amounting to about -S25,000.000. These bonds carry interest at 5 per cent, but this interest is not payable unless it is earned. Strange to say, these debentures sold at above par; the purchasers bought them believing that the Canadian people would charge themselves such rates as would enable them to pay the interest on the money which built the road. Now the management say, "We have not earned the money". I do not say they have; I do not know, but it must be remembered-and I ask the hon. member for Rosetown (Mr. Evans) to keep this in mind-that these debentures are a charge on those very railways of which he spoke most. And they are only a second charge; added to the first charge they make only a very small capitalization of the whole Canadian Northern system in the west. They have nothing to do with the Ontario branches nor with the others in the east, but are a second charge on the great branch line system of western Canada, upon which the entire development of over half that country depends. We have not paid a cent of interest since 1914, not a nickel. And while we refuse to pay one cent of interest we stand up and boast in this parliament that we are getting along just uproariously, and our rates are plenty high enough. I do not know that it is a very manly boast. I am not saying that legally we are bound to pay, but if we are in the position that we are not legally bound because of our poverty, do not let us be heralding to the world that we are wonderfully prosperous because of our low rates. The two claims do not harmonize at all. I ask the government to consider both of them. The first is on the stronger footing-much stronger, it seems to me. We should not be content to rest on our oars and boast that we are doing our duty and paying our way when as a matter of fact we are using the money of others and refusing to pay a nickel of interest upon it.
Now, Mr. Speaker, I do not care to make any further comment at the present time save this: I wonder did the minister, before he made his statement this year, read the
statement of the Minister of Railways last year? If he did he could not have missed certain prophecies of reform with which the minister furnished the House just a year ago. Why, the speech at that time was charged with a certain prophetic illumination. Great things were going to come. The minister was against monopoly-but not so very much, you know. He wanted it only when other remedies were exhausted. The phrase "No monopoly by land or sea " had not then been born; but the word "co-operation" was in constant use. The minister kept telling us that he had compelled the president of the Canadian National Railways and the president of the Canadian Pacific Railway to get together, and to find some way of remedying the evil of duplication and the tremendous expense it was to the Canadian people. He told us that he was determined on this policy, that he was determined to get somewhere [DOT]with it. His language will be found at page 2921 of Hansard of last year. He is reported there as saying:
I am going to ask the railways to see if they cannot devise some plan by which savinigs can be effected in this respect, because I frankly confess that at the present time I am not in favour of a monopoly on the part of either private or public ownership. If that cannot be done-and this is not a threat at all-I shall consider advisedly the question of asking the Railway comimisaion or its chairman to sit in on the job to see if some satisfactory arrangement cannot be arrived at. One hon. gentleman said the other day, quite rightly, that in his opinion if the problem is to be settled it must be by means of a friendly agreement. But if a friendly agreement cannot be reaeched then I am going to suggest that by some method the Board of Railway Commissioners be allowed to have some say in outlining a plan that would bring about the desired result without injury to either of the railway companies.
We did not bear very much about the harvest from these efforts in the speech of this afternoon. Have all these woids vanished into air? Are all these prophecies forgotten?


Charles Avery Dunning: I may say that considerable progress has been made along that line by the heads of the two railway corporations. It is true I did not deal with the subject this afternoon, because the details were not immediately available with respect to the actual services curtailed. But I am informed that progress has been made in that direction.


Arthur Meighen: It would have been a
fair subject for information to the House if anything had resulted, and it would have been additionally interesting for the reason that I am sure none of us have been able to observe anything in the removal of duplication.

C.N.R.-Ministers Statement


Charles Avery Dunning: I may inform my right
hon. friend that I have received very serious complaints from many sections of the country during the short time I have been minister on the reductions in train services which have been effected in connection with this agreement. That is the way in which I know something has been done, because there is complaint about it from the people affected.
Mr. MEffGHEN:	There has been a reduction in train service in certain places, I know that, but I think the minister will have some trouble in showing that it is the result of any agreement. I think he will have some difficulty in explaining to this House what the nature of any specific agreement is. At all events if there is such an agreement the House should have known it, because it was led to believe last year that the government had some really virile intentions in this respect, that it was going to get something done; and if I recollect correctly, although I have not the speech before me, the Prime Minister at Richmond Hill foreshadowed that they were going to extend the powers of the railway commission; that we already had railway commission control of rates, and he could not see why we could not have railway commission control of services too. What has been done in this regard? Nothing, of course; absolutely nothing, for the reason that at that time we had just as much railway commission control of services in Canada as we had railway commission control of rates. At the time the Prime Minister spoke the control of the railway commission over the one field was just as ample as its control over the other. But the alluring phrase was good for a public speech; it seemed to be a necessary part of the manifesto of the campaign, and the state of the law did not matter at all.
Now I ask the government to let us know before the debate closes something of what has been accomplished by this process of co-operation. Let us know just what Sir Henry Thornton agreed to and what Mr. Beatty agreed to, just where the consensus came in, what the two presidents agreed upon, if they really agreed upon anything; and if they have not, is the railway commission to be called in or is it not? In a word, let us know something of the governments intentions as to the future. Let us know something of what the government propose to do in the way of public policy. Let us have something which will indicate that we are going to hold the reins tightly in respect of expenditure- both capital expenditure and, so far as our influence can go, operating expenditure; but that we are to be content, so far as any rail-

way possibly can, with the capital structure that we have got to-day; that we shall not multiply the expenditure while our country, in point of population, remains practically at a standstill. Let us have assurance that there is going to be some real control of the headlong pursuit of capital investment in the Canadian National Railways.
Motion agreed to and the House went into committee of Supply, Mr. Duff in the chair.
Civil government-Railways and Canals-Salaries, $222,155; contingencies, $38,000.


Henry Lumley Drayton: I observe that some matters which have been talked about and which were to be arranged do not seem bo be progressing very quickly. One of these was the statement that there would be a big change in the personnel of the department of Railways and Canals, now that the work of running the railways disappears from the government entirely. What does the minister say in regard to that?


Charles Avery Dunning: I have no information of any commitments in recent years with respect to further staff reduction, I am informed that the work of the department is now substantially the same as it has been for a number of years past, and the staff remains approximately the same.


Henry Lumley Drayton: That is exactly my point. We had' the idea that when the government did not have to run the railway they would not require as big a staff, and others had1 the same idea. It was thought that when we went out of the railway business we would not still require a staff of expensive experts, accountants and the like.


Charles Avery Dunning: My hon. friend probably forgets that the great bulk of the civil government with which we are now dealing is for the purpose of the administration of the canals. There never was any considerable staff in the railway department directly related to railway operation. The staff connected with the operation of government railways was charged with the railways, even when the government operated them as government railways. The great bulk of the staff now in operation is connected w:th the canal service and only such supervisory and auditing work as is required by reason of the expenditure of the railway appropriation through the department.


Henry Lumley Drayton: I do not know whether it is fair to expect my hon. friend to have gone into the matter very much as yet. I know it has been thought-and this

Supply-Railways and Canals
thought is not confined to one party-that the proper thing to do just as soon as we got rid of the railways'-and we are now rid of them- was to transfer the canals to the department of Public Works and wipe out the railway department. Does the minister know any real reason why that department should not be wiped out now?


Charles Avery Dunning: I can only say I am finding plenty to do, and I am reasonably sure that the officials of the department are in the same position. I do not think the Department of Railways and Canals is one of those that the Prime Minister or the government generally ever contemplated merging with another department.


Henry Lumley Drayton: I notice also
that we have two new employees. Why is that?


Charles Avery Dunning: One engineer was transferred from an outside post to an inside post. There is one new appointment, and one extra typist.


Henry Lumley Drayton: Will the minister be good enough to go through the list and give us those who have to do with engineering work and tell us what their work has been in the past, so that we can get some idea of it? The list is practically the same as when we were carrying on a great deal of activity in connection with railway work, when we had right of way agents and the like.


Charles Avery Dunning: We have one now.


Henry Lumley Drayton: What do we
want them for?


Charles Avery Dunning: We have purchased a
large amount of land for a right of way on the new Welland canal. We must have a right of way agent.


Henry Lumley Drayton: It is a bad
name for it. It looks very much like railways and not like canals. There has been no attempt whatever to do the right thing by the people of Canada in connection with the compilation of that list. No attempt whatever is being made by the government, in connection with this department to take advantage of the cessation of railway activities to effect some belated economies for the public. The ratepayer is overlooked altogether.


Charles Avery Dunning: The violence of my
hon. friend's statement is surely out of proportion to its importance. Is it not the most natural thing in the world that the man who
is looking after the rights of way of canals should also look after rights of way in the jurisdiction of the department? We have government railways, and in many respects the administration relating to such matters as rights of way still has to do with the department. There is just one railway right of way agent, and I shall be pleased to call over every name in the whole list of ninety-one employees and tell my hon. friend which ones are connected with railway work and which with canal work. The deputy minister is engaged with railways-


Henry Lumley Drayton: Very largely
both.


Charles Avery Dunning: Yes. Then we have the following officers:
Chief engineer-Canals.
Assistant chief engineer-Canals.
Counsel-Railways and Canals.
Comptroller-Railways and Canals.
Secretary-Railways and Canals.
Assistant deputy minister-Railways and Canals. Right of way agent-Railways and Canals.
Senior electric engineer-Canals.
I should also say that the senior electric engineer is adviser to the railway commission. Senior hydraulic engineer-Canals.
Bridge engineer-Canals.
Assistant comptroller-Railways and Canals.
Senior office engineer-Canals.
Chief clerk.
That is the chief clerk of the department.
Departmental accountants.
That is self-explanatory. Advances made to the Canadian National and so forth have to be taken care of through the departmental accountants.
Secretary clerk-Canals.
Hydraulic engineer-Canals.
Departmenttal purchasing agent-Canals.
Traveilling auditors-Railways and Canals.
It should be remembered that the federal aid to highways is under the jurisdiction of the Department of Railways.


Mr. FOSTER:: What else do the auditors do?


Charles Avery Dunning: They audit the grants to the provinces in respect of highways and receipts and disbursements in connection with canals. Any advances made under certificates to the Canadian National Railways are also audited by these two auditors.
Senior assistant engineer-Canals.
Principal draftsman-Canals.
Departmental accountant-Railways and Canals. Departmental purchasing agent, grade 1-Canals. Departmental accountants-Canals.
Supply-Railways and Canals

Translator-Railways and Canals.
Principal clerks-Canals.
Principal file clerk-Railways and Canals.
Division hydrocmeitric engineer-Canals.
Junior hydrometric engineer-Canals.
Secretary to executive-Railways and Canals. Draftsman-Canals.
Senior law clerk stenographer-Canals.
Then follow clerks from there to the end.


George Eulas Foster: There follows a list for 1925-26 but they are not in for 1926-27.


Charles Avery Dunning: That is on account of the reclassification by the Civil Service Commission and the grading is different. There is no .distinction in numbers.


George Eulas Foster: Do they come in lower down on the list?


Charles Avery Dunning: There are thirteen classified as clerks in the 1926-27 classification, whereas they are strung out in the 1925-26 classification.


George Eulas Foster: Are they the same employees?


Charles Avery Dunning: Yes.


Henry Lumley Drayton: Can the minister now t.ell me what it costs just to look after the bookkeeping of this department alone? Now that the railways are out of his hands there are just the canals to be looked after.


Charles Avery Dunning: I have not the information with me to-night but I can get it. My deputy has not the departmental file with him. I have just my own file.


Henry Lumley Drayton: Then I would
suggest that the committee rise and report progress.


Charles Avery Dunning: May we not pass this one item? I am not asking the committee to pass any other.


Henry Lumley Drayton: No. We feel that there is extravagance in connection with this department and it should be stopped.


Charles Avery Dunning: 
Henry Lumley Drayton: What is the total cost ?


Charles Avery Dunning: One would have to pick that out separately from the other information which I gave my hon. friend.
Sir HENR'V DR.AA TON: I think my hon. friend would like to know what his department is costing. Surely he wants to know what he is paying for bookkeeping in his department before he asks us to vote this item, or is he going to approve everything like a rubber stamp? Surely he -wants to know whether it is costing just as much to look after the bookkeeping of his department to-day as it did when there was a great deal of business to be done. I had an idea my hon. friend was the sort of man who would want to know what he was doing.


Charles Avery Dunning: Yes. I think my hon. friend does not regard me as of the rubber stamp type.


Henry Lumley Drayton: I do not.


Charles Avery Dunning: I endeavour to deal with first things first. I am not yet convinced that there is less work in this department now than there was previously. In fact I have found that there is a great deal of work in connection with the present relationship with the railways; and more especially, with the work of the Welland canal going on, a certain amount of co-operation is entailed between our department and others. The responsibility is also very largely thrown upon this department with regard to the St. Lawrence waterways question and other allied matters. I am however prepared to look into the question further. As my hon. friend is evidently not disposed to allow this one fairly simple item to pass to-night I will therefore move that the committee rise and report progress. I shall endeavour when I come before the committee again to have this information for my hon. friend who, I have no doubt, will find that there is some other information which he will require and which I may not have on that occasion.

Questions


Mr. GEARY:: Will the minister give me some information too?


Charles Avery Dunning: Yes.


George Reginald Geary: Is the staff personnel the same in 1926-1927 as it was the year before, or has anyone dropped out causing a vacancy? If there is any such vacancy has any attempt been made to fill it?


Charles Avery Dunning: There may have been an odd vacancy in the case of a junior but there lias been no important change. The hon. member understands, of course, that all vacancies are filled by the Civil Service *Commission.


George Reginald Geary: Yes, but some need not be Riled at all.
iMr. DUNNING: I should have observed to my hon. friend (Sir Henry Drayton) that in the Highways branch we are contracting [DOT]every year as the necessities diminish.


Henry Lumley Drayton: That follows as .a matter of course.
Progress reported.
On motion of Mr. Mackenzie King the House adjourned at 11.35 p.m.
Wednesday, May 26, 1926