1937-02-05

[Stage Direction]
First report of the special committee appointed to inquire into farm implement prices.-Mr. J. F. Johnston (Lake Centre).


Hon. ERNEST LAPOINTE (Minister of Justice) moved:: That the name of Mr. Brunelle be substituted for that of Mr. Girouard on the special committee appointed to study the Dominion Elect.ons Act, 1934, and the amendments thereto, and the Dominion Franchise Act, 1934, and the amendments thereto.


[Stage Direction]
Motion agreed to.


[Stage Direction]
Mr. H. C. GREEN (Vancouver South) moved for leave to introduce Bill No. 15, to provide for appeal to the court of appeal of the province of British Columbia in divorce and matrimonial causes.
Some hon. MEMBERS:: Explain.


Mr. GREEN:: In the province of British Columbia the supreme court, which is the trial court of the province, has been trying divorce cases for many years. Its right to do so is based on the law of England, as of the year 1858, which has been held to have been in force in British Columbia when that province came into confederation. But it has been held also that the court of appeal for the province of British Columbia has no jurisdiction to hear appeals in divorce matters. The result is that the only appeal is to the privy council, and that means, of course, that there is no appeal at all except for the very wealthy people of the province. In every other province of the dominion in which the courts have and exercise jurisdiction in divorce causes there is an appeal to the appellate court of the particular province. This national parliament alone has the power to correct this situation, because by the British North America Act we were given the exclusive legislative authority in divorce matters. The purpose of this bill is merely to bring the practice in British Columbia into line with the practice in the other provinces.
31111-37J


Mr. MACKENZIE (Vancouver):: Is the power of the various provinces by statute or otherwise?


Howard Charles Green: This parliament passed a statute six or seven years ago giving the courts of Ontario power to grant divorces, which I believe has been taken to include the power to hear appeals. Our difficulty in British Columbia arises by reason of legal decisions. It may be that these decisions are wrong, but they come from courts as high as the Supreme Court of Canada; and our present position is this, that there is really no appeal in this serious matter of divorce. The bill aims to set that position right.
Motion agreed to and bill read the first time.



HOME IMPROVEMENT LOANS


[Stage Direction]
The house resumed, from Tuesday, February 2, consideration in committee of Bill No. 11, to increase employment by encouraging the repair of rural and urban homes- Mr. Dunning-Mr. Sanderson in the chair.
On section 2-Definitions.
Hon. CHARLES A. DUNNING (Minister of Finance):	This section was pretty well
discussed the other day.
Section agreed to.
On section 3-Institutions guaranteed against losses.
Mr. STIRLING:: Will the minister explain how the losses are computed and how the dominion government will be protected in the matter of the amount of losses?


Mr. DUNNING:: As indicated in the next section of the bill, the guarantee of the dominion with respect to loss is limited to fifteen per cent of the aggregate losses of the particular lending institution. As I explained the other day, it is not a guarantee of the individual loss nor is it a guarantee with respect to losses in particular areas or related to particular branches of an institution; it is the losses of the institution in its lending operations as a whole.


Grote Stirling: When will they be computed-annually?


Charles Avery Dunning: As a matter of fact that has yet to be worked out-the precise cutoff date-because the measure as at present drawn is based upon a continuous operation with power to the government to terminate at any time the guaranteeing of further
5S0
Home Improvement Loans

moneys. Further on in the bill will be found a clause relating to power of regulation, and among the matters to be regulated are the proceedings in the event of default, which . regulations are now in process of being worked out. The leader of the opposition the other day raised a point with respect to the continuing of guarantee in case of default. That has been looked into since, and in order to make matters doubly sure the Department of Justice has supplied me with an amendment which I think will clarify the point. However, I think we shall reach that later on.


Mr. BENNETT:: 
Charles Avery Dunning: From a practical standpoint I agree entirely with the view taken by the leader of the opposition. Of course, I cannot offer a legal opinion except that of the Department of Justice, but looking at the matter as a practical one it is quite possible for a default by an individual debtor to occur while the lending institution is still lending to new borrowers.


Richard Bedford Bennett: Quite so.


Charles Avery Dunning: Let us assume for the moment that the plan continues in operation for a year. It is conceivable that some of the earlier borrowers at the end of the year may be in default, but at the same time the lending institution is continuing to lend to new borrowers. The manner in which the guarantee shall become effective as between the lending institution and the government has not yet been worked out in detail because of that difficulty. We have endeavoured to leave it subject to future arrangement, but it is important, as the leader of the opposition says, that whatever is done should have sound law behind it. The Department of Justice has said, regarding the matter, that once the debtor has made default the liability of the guarantor arises in the absence of provisions to the contrary in the agreement. The creditor is not bound to request the debtor to pay or to sue the debtor before proceeding against the guarantor. The guarantor, however, cannot be permitted to suffer by reason of any arrangement which has taken place between the creditor and the debtor. The rule is that any material alteration in the terms of the debt which is guaranteed, made by the creditor and the debtor without the guarantor's assent, will discharge the guarantor, and a binding agreement by the creditor to give the debtor an extension of time is deemed to be a material alteration. That is precisely the point my right hon. friend makes. It is important however to observe that the guarantor is not discharged if he agreed in the contract of guarantee or in some other way that time might be given to the debtor with impunity or if he afterwards confirmed any agreement giving time. Mere omission on the part of the creditor to press the debtor for payment will not, if there is no binding agreement to give time, discharge the guarantor even if the debtor subsequently becomes insolvent. By a binding agreement is meant an agreement given for valuable consideration and enforceable by debtor and creditor. The intention is to execute a contract of guarantee with each lending institution. The contract will be made subject to the act and the

Home Improvement Loans
regulations made under the act, and the regulations will contain the conditions upon which an extension of time will be granted. Thus the lending institutions will have in the contract of guarantee itself the consent of the government to extensions of time, subject to certain conditions.
The question arises whether there is power under paragraphs (b) and (f) of clause 8 to make regulations permitting the lending institutions to grant extensions of time. The Department of Justice, while not admitting that the bill as now drafted is defective in this respect, thought that as the point had been raised it would be wiser to insert a new paragraph (c) in section 8 to remove all doubt. Perhaps I might read that now, although we have not yet reached the section. Paragraph (c) as amended would read as follows:
In the event of actual or pending default by a borrower the extent to which the lending institution and the borrower may, notwithstanding the provisions of paragraph (c) of section 6 of this act, alter or revise any of the terms of their agreement respecting a home improvement loan without discharging the guarantee under this act.
With this amendment the Department of Justice say that regulations could be passed under which the lending institutions would be able to grant extensions of time in certain cases even if some of the instalments were not payable until more than three or five years, as the case may be, after the loan was first made. That is the advice I have on that point.


Mr. GOLD WELL:: Is it the intention of the government to guarantee fifteen per cent of individual loans, or fifteen per cent of the aggregate amount loaned?


Charles Avery Dunning: The aggregate.


Mr. COLDWELL:: Then how are you going to arrive at the condition of default when the guarantee would become operative?


Charles Avery Dunning: As I said just now, the transactions will be continuous. This must be worked out in practice. In a sense it will be a revolving amount. When shall we determine a block of aggregate losses? That is a question we have to work out with the lending institutions. If our experience is similar to that of the United States it will not be a troublesome matter, because the proportion of loss there has been very small. The point must be worked out between the lending institutions and the government in the guarantee agreement, as to when we will assume a cut-off date for the establishment of an
aggregate loss with respect to the total loans made by an institution. The difficulty of course is the continuity of the transactions, the lending of ever more and more money. I cannot say in terms that we would positively make a cut-off one year or two years from the date of commencement of the scheme, but there must be a time agreed upon. I have taken this ground in communication with the institutions that we think in fairness to the government every reasonable effort to colled from a debtor must be exhausted before we will admit that a particular default constitutes part of the aggregate loss of that institution.


Richard Bedford Bennett: That will have to be set by agreement, though.


Charles Avery Dunning: That will have to be set by agreement. We have to work it out. Precisely what the decision is to be is now under consideration.


[Stage Direction]
Section agreed to.
Sections 4 and 5 agreed to.
On section 6-Conditions of loans.
Mrs. BLACK:: Mr. Chairman, paragraph (d) says:
The maximum charge which may be made by an approved lending institution for a home improvement loan shall not exceed a rate of discount of three and one-quarter per centum for a one year loan repayable in equal monthly instalments and proportionate rates for other periods.
I asked the minister the other day if the same rate would apply to Dawson or the Yukon Territory, where normally we have to pay from twelve to twenty per cent interest. Money may be put in the bank, and no interest is paid on it by the bank, but we have to pay to the bankers there the rates of interest I have mentioned. Will the rate provided for by this subsection apply there?


Charles Avery Dunning: No loan can be made anywhere in Canada under the provisions of this legislation at a higher rate than that named in the bill.


Mr. HEAPS:: This is the clause dealing with the limitations, fixing the maximum winch may be lent at $1,000 on certain homes and $2,000 in the case of a duplex. The purpose of the bill is said to be to provide employment. If that is so, personally I should not object if the measure went further than is proposed in this clause. It makes very little difference to a workman whether he obtains work in a small home of a value of three, four or five thousand dollars, or in an apartment block
Home Improvement Loans

worth $50,000. I do not know how far the government might have to go in the way of guarantees if they went beyond the provisions of the present clause, but I believe the maximum is much higher in the United States. Could the minister give the committee some information on that point? I should like to know if there is any objection to extending the scheme to provide for the renovating and remodelling of larger premises than are provided for in the present clause.


Charles Avery Dunning: Under the plan at present in operation in the United States, following their earlier experience they have extended it to include commercial buildings, churches, large industrial buildings and others of the kind. But we feel that we had better start with what we have and gather experience and then see whether it would be wise to extend it beyond the present limitations.


Abraham Albert Heaps: The minister the other day gave an idea of the amount which has already been granted by the banks for the renovating of buildings-


Charles Avery Dunning: Homes.


Abraham Albert Heaps: Well, buildings as covered by the provisions of the bill. Can he give an idea as to the amount that has been requested from the lending institutions?


Charles Avery Dunning: No, we have not that
information.


Richard Bedford Bennett: The average is between $300 and $400.


Abraham Albert Heaps: That is the average amount which is being granted. What I am asking is the amount of money that has been applied for and the amount that has been granted.


Charles Avery Dunning: I cannot give the amount that has been applied for. The only return to the department is with respect to applications for guarantee, and any applications which have been refused of course do not appear in connection with applications for guarantee.


Abraham Albert Heaps: Could the minister inform the committee what this rate of interest, three and one-quarter per cent discount on a loan repaid in monthly instalments, really amounts to?


Richard Bedford Bennett: It is 6-32 per cent.


Charles Avery Dunning: The other day I arranged to supply every hon. member with copies of the literature on the subject, in which we have been careful to publish complete tables for the guidance of borrowers. The actual ; Elective simple interest rate equivalent to
JVlr. Heaps.]
3{ per cent discount for a loan for a year would be 6-32-or 6-23. one or the other. In actual practice, of course, the borrower of $100 receives, instead of $100, the sum of $96.75. He pays back the flat sum of $100, distributed over the period of his loan. That is, he pays $3.25 for the use of $96.75 for a year, but he pays it in advance.


Mr. CAHAN:: Could the minister anticipate the time when he will move amendments and allow us to see a draft of the proposed amendments? None have been published as yet in the votes and proceedings.


Charles Avery Dunning: I shall be glad to do that.


Charles Hazlitt Cahan: In matters of this kind one would like to have a certain time to consider these amendments.


Howard Charles Green: Will the minister say what is meant by "long term lease"? I think in the different provinces a long term lease would be defined in different ways, and there does not seem to be anything in the bill to indicate just what is meant by that expression.


Charles Avery Dunning: That question raises one of the difficulties of trying to qualify the term "owner" in connection with legislation of this kind which does not involve any security being taken on the property by the lender. My hon. friend will understand that if we limited "owner" to the literal meaning of the term "ownership" it would debar a great many people in various sections of the country where the long term lease method of holding property is in force. From the point of view of the present measure it is practically effectual ownership that is meant. At any rate such a long term lease certainly should not disqualify a person occupying a dwelling from what we intend to accomplish. That is why the words "long term lease" have been used. As a matter of fact we are thinking of widening it a little more; we are proposing to add the term "life tenants," because from the point of view of this legislation a life tenant ought to have just as much right to go to the bank and get a loan with which to improve the property of which he is the tenant. Then, in order to be sure that we are not debarring any class of person who ought to qualify, we are proposing to add at the end of (i) the words "and any persons having rights approximating ownership." This question arose in a case involving what in the west we used to call squatter's rights. The person concerned had occupied his dwelling for a long time. There was no title other than that which might obtain under

Home Improvement Loans
squatter's rights, but it was a reasonably substantial home for a working class family. Why should not such a man get a loan if he is able to convince the bank that he can repay it? Why should he be denied the opportunity because he was not the actual owner, or had not a lease?


Richard Bedford Bennett: He was not the registered owner.


Charles Avery Dunning: But he had something
at least approximating ownership, from the point of view of the administration of this act.


Howard Charles Green: Would the minister say
that a loan could be obtained by a person who had a five year lease?


Charles Avery Dunning: No.


Howard Charles Green: That would be a period
two years in excess of the maximum time within which a loan has to be repaid.


Charles Avery Dunning: The ruling we have
already given in the department is this: the owner of such dwelling, for the purposes of the home improvement plan, includes the lessee of such property provided that the lease does not expire until three years after the date on which the last instalment of the loan is required to be paid. That is the regulation at present.


Mr. MacNICOL:: Before the section
carries I would appreciate it if the minister would give me a little information with regard to subsection (a). Do I understand that if a large house is to be turned into a four family dwelling the loan that will be allowed for that improvement will be $1,000 for each family unit plus an additional $1,000, or $5,000 in all?


Charles Avery Dunning: Yes, that is the maximum in such a case.


Mr. TUCKER:: With regard to subsection (f), do I understand it to be the intention that there shall be no guarantee in any case where the bank takes security? If that is the intention of this legislation I submit that this subsection should be worded differently. It reads:
No security by way of endorsement or otherwise shall be required.
If the bank should take a more or less doubtful attitude with regard to a loan; the applicant might produce an endorser and offer his endorsement to the bank, the bank could then say they had not required the endorsement but it was offered to them, and the bank could claim the protection of the act. If it is the intention of the government
that the bank shall not be able to claim a guarantee under the act in such a case I suggest that the clause should read:
No security by way of endorsement or otherwise shall be taken.


Charles Avery Dunning: Certainly if such a loan were taken with security it would not qualify for the guarantee. As to the use of words, I do not like to dispute with my legal friends as to whether "taken" or "required" is better. Pesonally I have no objection to my hon. friend's suggestion. A point has been raised, however, on which I should like to have the view of the committee. We have been considering the addition of the words "so long as the borrower is not in default."


Richard Bedford Bennett: That is the question I was about to raise.


Charles Avery Dunning: I am not very sure as to whether that is desirable, but having regard to the fact that this is a guarantee by public funds should we not be in the position of taking security after default in all cases where security is available? That is the argument. On the other side of the question the difficulty is that in connection with these small loans it is quite possible for a borrower to be in default just a short time, two weeks, three weeks, a month, involving only one or two instalments, and) it would seem to me to be opening the door very wide to put every lending institution in the position of hounding such a man immediately for additional security. Perhaps the committee would express some view on that.


Richard Bedford Bennett: I was going to point out to the minister that there may be a great deal of difficulty in connection with the default on one of these loans if no time is fixed within which you propose to mark the beginning of the obligation to pay. Far be it from me to say anything in behalf of the lending institutions; they will be quite capable of looking after themselves in making the agreements. But if default has occurred, we will say, on the first or second instalment on a $1,000 loan, and they ask for payment as soon, as the default arises, it does seem to me that the guarantor, in the absence of any agreement to the contrary, would have to pay, 'because they are not bound1 to exhaust their remedies against the creditor, as we have said. But the lending institutions will not be willing to wait for eight or ten months more at a discount rate of 3i per cent. They will desire to be reimbursed as far as possible, at least to lhe extent of fifteen per cent of their loan, or to follow the course of collecting from their debtor, unless we do something to mark the beginning of the obligation to pay.
Home Improvement Loans

I do not see how we can get along with this loose-and I must call it an extremely loose -way of expressing it. I do not wish to be critical, but I believe the minister made it clear the other day that he was endeavouring to use terms general enough to permit of every case falling within it, because this is a measure not only to provide employment but to improve homes. I agree with that, but it seems to me that the terms cannot be so general as to leave them open on the one hand to abuse or on the other hand1 to fault finding on the part of the lending institution, which would place the unfortunate creditor in the position just now mentioned by the minister, namely that of being hounded to death. It seems to me the observations of the hon. member for Rosthern (Mr. Tucker) as to whether we should use the word "taken" or "required" would apply to the question of the taking of security, to which the minister has just referred. One means the act of the lending institution; it is a discretionary right. The other is a prohibition. That is the difference between the two. When we say "shall be required" we mean that they shall not ask him for security; but if he volunteers to give it, because of the general attitude of mind of the bank manager or the lending institution manager, that is the end of it- if he gives it. But if we say it "shall not be taken," then you have a positive enactment against it. On the other hand, the point the minister has just made, and concerning which he said he wished the opinion of the committee, is the one which arises there. We say they shall not take security, and they do not take security. There is default in the first payment, and then they say, " We want security for this loan, or we will sue."


Charles Avery Dunning: That is my difficulty.


Richard Bedford Bennett: Of course it is. And
it is not imaginary; it is a very real one.


Charles Avery Dunning: Absolutely.


Richard Bedford Bennett: Moreover I do not think there is power under section 8 to make regulations to meet the situation. The first part of the statement of the Department of Justice was almost identical with the words I used the other day. I can put it this way to the minister: I do not conceive that it is possible for the department to provide regulations to meet these cases, unless section 8 is broad enough in conferring power upon them to do so. I cannot believe that as it reads now it has any power to deal with those things, which look very small, to which I have referred. For instance, why is it the government never likes to take bonds for
(Mr. Bennett.]
contracts? Because in almost every case there is a lawsuit as to what the bonds mean, and as to whether or not a man has done everything he should under it. We find cases going to the courts, and they say, "You did not advise us; you did not do thus and so; you did not enforce your remedy"-


Charles Avery Dunning: In other words, did not read the small print.


Richard Bedford Bennett: Yes; and our supreme court has said that in this day it must be taken that every man reads the contract he signs. My point is that section 8 is not broad enough to cover the various phases of the situation to which reference has been made.
As to section 6 there are only two points I wish to mention, one of which has already been dealt with by the hon. member for Rosthern. However, there is paragraph (e), which reads: "no service or insurance charges shall be made," and so on. I should like to go further and say: "no service, insurance or other charges of any kind shall be made." It would then read:
No service, insurance or other charges of any kind shall be made by an approved lending institution and as long as the borrower is not in default no other additional charges of any kind shall be made.
The alteration would put the first part of the section on the same basis as the second part, because in the second part we find the expression "as long as the borrower is not in default no other additional charges of any kind shall be made." The first part covers what I conceive to be the initial charge, and I believe it should read "no service, insurance or other charges of any kind."


Charles Avery Dunning: "Or other charges of any kind"?


Richard Bedford Bennett: I suggest that wording. I do not say that those should be the exact words, but I should like to have it made abundantly clear that in no case can the borrower be called upon to pay more than the government have arranged the lending institution should be paid. But that does not cover the case after his default-the point to which the minister has directed attention.


Charles Avery Dunning: Would the inclusion of the words "no service, insurance or other charges" cover the point?


Richard Bedford Bennett: Yes. I do not wish in any sense to undertake to suggest how the section should be drafted. In fact I am careful not to do that because if I did, it would immediately be voted down. All I desire to suggest is that the last words would seem

Home Improvement Loans
to cover the point. I do not believe the section as it now reads is quite wide enough.
I take it the words "no service or insurance charges shall be made by an approved lending institution" refer to the initial payment that is made when a person goes to get the money.


Charles Avery Dunning: Yes.


Richard Bedford Bennett: Yes, that is what it means. Then the paragraph goes on to say, "and as long as the borrower is not in default no other additional charges of any kind shall be made." These words contemplate, I should think, that when he is in default other charges may be made.


Charles Avery Dunning: Yes, exactly.


Richard Bedford Bennett: It should be made clear that when the money is borrowed in the first instance a person cannot be charged more than is provided in the measure. I think the minister should consider that. I confess I do not know what the attitude of a lending institution may be, but as it reads to-day it certainly is an invitation-or shall I go further and say it is an intimation that the lending institution will charge more when there is default.


Charles Avery Dunning: Of course my right hon. friend will see immediately that when the loan is based upon a fixed rate of discount a charge after default is quite fair. In fact any other procedure would be distinctly unfair.


Richard Bedford Bennett: Quite.


Charles Avery Dunning: Because the individual would have the use of the money, without charge, after default, having paid his discount in the first instance. The regulation at present provides for a maximum rate of interest on default not exceeding seven per cent simple interest.
Having regard to the constructive suggestions which have been made, and which I appreciate, could we arrange to get along with the bill as far as possible in committee, and then keep it in committee while I go over with the officers of the Department of Justice the various points which have been raised? Everyone is cooperating to make this a reasonably good piece of legislation, and while it is important to have it passed as soon as possible the rush is not so great that we cannot afford to take time to have it done properly. If we could agree to have the sections passed in committee we could leave the bill at that stage in order that the Department of Justice may give further consideration to the suggestions on points which have been
discussed this afternoon, and which have come from various members of the committee.


Richard Bedford Bennett: Might not section 6
stand, then?


Charles Avery Dunning: In the meantime we can settle a couple of points with respect to section 6. In the light of the amendment to which I referred to section 8, paragraph (b) of section 6 might be amended so as to eliminate the proviso, which will not be necessary. I would ask my colleague the Minister of National Defence to make a motion to this effect.


Ian Alistair Mackenzie: I move accordingly.


Charles Avery Dunning: We will eliminate the proviso in paragraph (b). Then, could I have consideration of the amendment to paragraph (f) incorporating in it the suggestion of the hon. member for Rosthern, changing the word "required" to "taken," and adding the words "as long as the borrower is not in default." With these changes the paragraph would read:
(f) No security by way of endorsement or otherwise shall be taken as long as the borrower is not in default.


Ian Alistair Mackenzie: I move accordingly.


The CHAIRMAN:: The question is on the amendment to section 6, paragraph (b). It is moved that the paragraph be amended by deleting the proviso thereto.


Mr. NEILL:: Would it not be better to define the words struck out than simply to refer to the proviso?


Richard Bedford Bennett: Yes. We could use the expression "all the words after the word 'made'."


Charles Avery Dunning: So long as the chairman strikes out the words, the result will be satisfactory.


Frederick George Sanderson: The amendment would then read:
That all the words after the word "made" in the twenty-first line be struck out.


Ian Alistair Mackenzie: Yes.


[Stage Direction]
Amendment agreed to.
Frederick George Sanderson: There is another amendment moved by Mr. Mackenzie (Vancouver), as follows:
That paragraph (f) of clause 6 of the bill be struck out and the following substituted therefor:
(f) No security by way of endorsement or otherwise shall be taken as long as the borrower is not in default.
Home Improvement Loans


Richard Bedford Bennett: If I were rewriting that paragraph I would leave out the words " by way of endorsement or otherwise."


[Stage Direction]
Amendment agreed to.
Leslie Gordon Bell: There is one point upon which I am not clear. In reply to a question asked by the hon. member for Winnipeg North (Mr. Heaps) the minister indicated that loans on larger properties were not contemplated. Then in reply to a question asked by the hon. member for Davenport (Mr. MacNicol) I understood the minister to say that loans would be made on multiple dwellings to the extent of $5,000 for four families, the idea being $1,000 over the total number of families. Suppose there were six families, would that be all right?


Charles Avery Dunning: That is all right.


Major James William Coldwell: The absolute amount is not $5,000?


Charles Avery Dunning: Tha't was just an illustration. The distinction we are trying to make is between buildings which constitute homes, and buildings of another kind. As I mentioned the other day, it is difficult to frame regulations as to buildings used partly for home purposes and partly for business purposes. The intent of the law is to make it apply with respect to homes.


Abraham Albert Heaps: In order that there may be no misunderstanding, will the minister indicate whether the owner of an apartment building containing twenty or thirty apartments would be entitled to come under the provisions of this bill?


Charles Avery Dunning: Certainly, if he can convince the bank that he will be able to repay the loan.


Mr. McGREGOR:: Could the owner of an apartment building containing twenty apartments borrow $20,000 with which to build an addition?


Richard Bedford Bennett: Each $1,000 would have to be referable to a unit.


Charles Avery Dunning: I am afraid I am getting into rather deep water in attempting to answer questions such as that. My hon. friends are asking me hypothetical questions with reference to matters which may come up in a practical way. This is one reason why we must have regulations. It must be remembered that this bill will not mean that the man who owns an apartment can get money; he must qualify in other ways. We are merely indicating that if the lender is satisfied with the character and the ability of the [The Chairman.]
borrower to repay, the lender may get a guarantee from the government up to fifteen per cent.


Charles Hazlitt Cahan: The minister has suggested that certain sections of the bill should be held in abeyance pending consideration by the Department of Justice of criticisms which might be offered in this discussion. In view of that understanding I should like again to call attention to the criticism offered by the hon. member for Yale (Mr. Stirling) as to the ascertainment of loss under the guarantee given by the government to the lending institution. I looked through the bill quite carefully, but I was unable to find anything which provides for the ascertainment of loss of any lending institution in the discretion of the government. If it is not in the discretion of the government as to time, then it certainly is not adequately provided for.


Charles Avery Dunning: Has my hon. friend
looked at paragraph (b) of section 8?


Charles Hazlitt Cahan: That reads that the minister with the approval of the governor in council may make regulations:
(b) in the event of default by a borrower, the measures to be taken and the procedure to be followed for the collection of the amount outstanding of the home improvement loan and the method of determining the amount of loss, if any;
That is a regulation which may be imposed by the governor in council upon the lending institution in connection with its dealing with the borrower, but I suggest that that paragraph (b) does not apply to differences which may arise between the government and the lending institutions as to the determination either of the date or the amount of the losses sustained by the lending institution. I suggest with deference that there is nothing in the bill to enable the government to make such a provision in the terms of the guarantee which it gives and which the minister referred to as the agreement of guarantee.
If the chairman will permit me to refer [DOT]back to a section already passed, I should like to refer again to section 4, which provides that the liability of the government in respect of guarantees shall not exceed fifteen per centum of the aggregate amount of home improvement loans made by any such approved lending institution. How is that fifteen per cent to be ascertained? Will the lending institution go on for a term of five or ten years before the losses are computed and ascertained? Must a certain period elapse before it is possible to determine that a. loss has been sustained as between the lending institution and the government? I think there should

Home Improvement Loans
be clearer phraseology than is here used. I am simply suggesting that the minister take the opinion of his legal advisers with regard to the matter before the bill finally passes committee.


Charles Avery Dunning: I can tell my hon. friend as to how we intend it to work; I cannot say whether the draftsman has made the phraseology fit the method. Section 8 (b) provides the method of determining whether a loss has occurred. Then the lending institution has the right to ask the government to make good that loss. The amount of the loss will be charged up in the books of the treasury, signifying that such and such a lending institution has received so many dollars. No lending institution will be able at any time to receive a greater amount than is represented by fifteen per centum of the amount they have loaned under this plan. I intend that it shall be possible to deal with individual ascertained losses and to pay the guarantee once the government has ascertained that a loss has actually occurred with respect to a particular case.


Richard Bedford Bennett: I think the minister will
find it difficult to do that in view of what he said the other day, that the aggregate of the losses of every one of the lending institutions must be ascertained before you determine what j'ou have to pay. Therefore each case cannot stand on its own merits.


Charles Avery Dunning: I am sorry; if I said
that I was wrong.


Richard Bedford Bennett: I think the minister
said it in reply to the hon. member for Argenteuil (Sir George Perley).


Mr DUNNING:: What I intended to
convey was that the guarantee was with respect to the whole of the loans by an institution.


Richard Bedford Bennett: Yes, that is right.


Charles Avery Dunning: And that the guarantee
applied to the institution, not to all institutions cooperatively-


Richard Bedford Bennett: Oh, no.


Charles Avery Dunning: -but to all of the
branches of one institution considered as a whole.


Richard Bedford Bennett: Yes.


Charles Avery Dunning: I anticipate that there
will be isolated cases under section 8(b) where it is dead sure that a loss has occurred. What should be done? In that case, under the provisions of the guarantee in section 4, the amount of the loss can be paid but the
aggregate paid of such losses cannot exceed fifteen per cent of the amount which that institution as a whole lent. That is the way in which we want it to work. If the draftsmen have not conveyed that meaning I am sorry.


Charles Hazlitt Cahan: I merely suggest, following the hon. member for Yale (Mr. Stirling) that section 8(b) does not cover the exigency which the minister has stated. The section says that the governor in council may make regulations in regard to-
.	.	. the measures to be taken and the
procedure to be followed for the collection of the amount outstanding of the home improvement loan and the method of determining the amount of loss, if any.


Charles Avery Dunning: That is it.


Charles Hazlitt Cahan: Certainly that should be
clarified if clause (b), in connection with regulations as to the procedure to be taken for the collection of the amount outstanding, is to be united with regulations for the method of determining the amount of the loss as between the government and the lending institutions. I suggest that for the consideration of the legal advisers of the minister. I do not wish to discuss it prematurely.


Mr. QUELCH:: I should like to know if
I have understood the minister aright. Take a case such as this. A lending institution lends to one hundred persons. Eighty-five per cent of them pay their loans in full; that leaves fifteen per cent. The fifteen per cent represent losses; does the government make up the fifteen per cent loss so that the lending institution gets one hundred per cent?


Charles Avery Dunning: My hon. friend is subdividing the matter into persons. I assume, if I caught the remarks-


Victor Quelch: One hundred persons get
loans; eighty-five per cent of them pay their loans in full; fifteen per cent of the whole are entire losses. Does the government make up that fifteen per cent so that that lending institution secures one hundred per cent of its loans?


Charles Avery Dunning: In such a case that would be the way it would work out. Of course my hon. friend states a hypothetical case which could not occur in actual practice.


Victor Quelch: Oh yes, it could.


Charles Avery Dunning: There will be many thousands of loans made by the same lending institution, and there will be differing degrees of default. That is to say, there will be many cases in which a proportion has been paid back by the borrower, but there will be all
Home Improvement Loans

sorts of variants. The principle is simply this: the government is standing back of fifteen per cent of the total loans by any institution as a whole, and that institution cannot receive from the government under any circumstances more than a sum equivalent to fifteen per cent of the amount of its loans. Its losses may be greater or may be less, but the maximum amount it can receive from the government is fifteen per cent of that which it has loaned.


Leslie Gordon Bell: If less, that is all the government guarantees, I suppose?


Charles Avery Dunning: The government does not guarantee any more than the actual loss to a maximum of fifteen per cent.


Mr. LOCKHART:: In order to be brief, I will refer only to section 6, clause (e), which states that no service or insurance charges shall be made as long as the borrower is not in default. Turning to section 8, clause (b), I find nothing that particularly defines the powers of the lending institution in the event of default on the part of a borrower. I have some experience in connection with the building industry, and I have in mind the fact that a man may become temporarily in default for a small amount, but within a period of two or three months thereafter he recovers and becomes in good standing with the lending institution. Is the matter of the penalty to be imposed upon the debtor to be left entirely in the hands of the manager of the lending institution?


Charles Avery Dunning: No.


Norman James Macdonald Lockhart: There is nothing, in my opinion, which defines the point. I am not suggesting that there are Shylocks among the managers of lending institutions, but I know of cases where conditions following a temporary default have been exacted of men who have borrowed money from banks which have made it very difficult for them to make repayment. I merely point that out to the minister with the idea that a direction in that connection might be given to the lending institution.


Charles Avery Dunning: Power is given to the governor in council to make regulations covering such points as that raised by my hon. friend.


Mr. TAYLOR (Nanaimo):: I should like to refer to section 6, clause (f) as now amended and put a supposititious case before the minister. A borrower receives a sum of money from a bank or other lending institution for alterations which he proposes to make in his
[Mr. Dunning.l
home. He contracts for the making of those alterations and the contractor fails to make good. The mechanics file liens, and a new situation develops. What is the position so far as this measure is concerned, and what is the position of the government in regard to that new situation?


Charles Avery Dunning: I shall have to ask a legal friend to reply to that. I do not think the bill touches it at all. The bill deals with the borrowing of the money. A borrower's troubles with respect to securing work for his money are his business, and I assume, would fall within the laws of the province relating to such matters as mechanics' liens. I cannot give the legal answer to my hon. friend.


Victor Quelch: Section 6(c) of the bill reads, in part:
Home improvement loans shall be for a term not exceeding three years if the amount of the loan is one thousand dollars or less,
I fancy that a good many small-salaried home owners will apply for some assistance. In case any such man should find himself without an income, say two years after he took out the loan, would there be any attempt on the part of financial institutions to refinance the balance over another three years? Would that be permitted, or not?


Charles Avery Dunning: That can be covered in the regulations.


Mr. FAIR:: Section 6, clause (d), reads:
The maximum charge which may be made by an approved lending institution for a home improvement loan shall not exceed a rate of discount of three and one-quarter per centum for a one year loan repayable in equal monthly instalments and proportionate rates for other periods;
Two nights ago we found on our desks an attractive little pamphlet, and1 I became interested in what it contains. I find in it statements with regard to the organization of certain committees. One of these is the financial committee. The statement reads:
The financial committee raises whatever necessary money may be required for advertising and other local expenses. One of the functions of that committee is to investigate the number of possible homes in the community where improvement might well be carried out. In order that the various supply houses, contracting firms, building organizations may get a clear idea of rvhat the market for improvement is in that locality, and see at a glance its value to them, the financial committee should be ready to advise all of these supply houses as to how to approach the householder, estimate the work to be done and arrange-if necessary- for the householder to be accompanied to the bank when the loan is arranged. In some parts of the United States it was found that the contractors and supply houses (such, for

Home Improvement Loans
instance, as those manufacturing paints, heating and plumbing supplies, roofing materials, etc.) were the great gatherers-in of the people and their loans. The financial committee, ho%vever, might be reminded that this movement is for the improvement of people's houses and not a movement to induce people to borrow money from the bank. The bank borrowings are simply a convenient form of accomplishing the main objective, which is to get men employed through improvement of the home.
There seems to me to be some conflict there. Next we come to the women's committee, and we find:
They exercise the greatest amount of influence in persuading the family to spend the family dollar for improvement of the home. The national women's organizations are interested in the project and whatever branches of these national organizations are located in the municipality might well be used. It is not necessary to emphasize the importance, therefore, of choosing a chairman who is sympathetic with this plan, as well as representative of social and welfare work.
Under the heading "Trouble Committee" we find the following:
As a general thing, the chairman should be one of the most solid business men in the community, who enjoys the confidence of the banks, who is sympathetic with this idea, and who has broad human sympathies.
I have been wondering whether there is very much cooperation there. As I understood this bill the other day, before you can get a loan you must satisfy the lending institution. The lending institution must have perfect confidence in you; you must be of good character and you must have a job with an assured salary and a home. The man without a salary or without a home is not in on this deal at all, but only the man whose salary is assured, who has a home and has sufiicient credit to go ahead on his own. But 1 would refer to a particular type of man who might come under this legislation, the man who receives a salary just sufficient to get by on and to pay his taxes or his rent as the case may be, and whose home is also mortgaged. In a bank the other day I was told that possibly seventy-five per cent of the people under this plan have mortgaged homes. Under this plan no security is needed, but there is no guarantee whatever that as soon as the improvements are made and the loan is repaid the mortgage company, if the man defaults, will not take the house after it has all been fixed up and the payments have been made to the financial institution. There is no cooperation whatever as far as the lending institutions are concerned.
Borrowers may obtain money at a discount of 3i per cent. I think it might be better to put it the way people are accustomed to see it stated-an interest rate of 6.32 per cent.
That does not show any cooperation, because it is very little below the legal rate at which the banks may lend money. I suggest that instead of the 3i per cent the discount be reduced to 2 per cent; the banks would thus be given an opportunity to cooperate in a practical manner. If this is not satisfactory, then I suggest that the country's credit might be used, and we might make use of the Bank of Canada in this regard. This would be far better business than following the sound money policy which is adhered to in this plan.


Walter Adam Tucker: There are three points which I wish to draw to the attention of the minister. The definition of home improvement loan is given in paragraph (b) of section 2:
(b) "home improvement loan" means a loan or a purchase of obligations representing loans and advances of money made for the purpose of financing repairs, alterations and additions to rural and urban homes.
It may be rather late to suggest any change here, but I would ask that the minister consider the possibility of amending this definition so as to include the building of small homes. I have in mind some people in Rosthern who might build small homes that would cost say $1,500, which would provide as much labour by an expenditure of the same amount in improving an old home. But they cannot come under the scheme if they want to put up new houses. I suggest that some consideration be given such people.
There is another point namely with respect to default. When there is default and the bank calls upon the government to make good, what becomes of the debt? There is no provision in the bill to enable the government to collect later on if the debtor should become able to pay. I submit that the bill should contain some provision in that respect, because there might be a doubt.


Mr. ILSLEY:: It would be recovered by
process of law.


Walter Adam Tucker: There might be some doubt about it, and I do not see that there is any harm in making provision for it in the regulations.


Charles Avery Dunning: What about paragraph (b) of section 8?


Walter Adam Tucker: I submit it does not cover the point at all in the event of default and the payment of the guarantee by the government. In my opinion the government's position is not secured by paragraph (b) of section 8, and I submit that it should be madJe clear.
The third point to which I wish to call attention is this. I understand, from para-
Home Improvement Loans

graph (e) of section 6, that no service or insurance charges shall be made by a lending institution at any time, and as long as the borrower is not in default no additional charges of any kind shall be made. That section is not worded very clearly. I assume the intention is that no service or insurance charges are to be made at any time, whether the borrower is in default or not, but that after the borrower is in default some charges other than for service or insurance may be made. What I think the government must have had in mind1 is that an interest charge be made. I understand from the minister that there is a clause in the regulations providing that interest may be charged not exceeding seven per cent. The difficulty is that there is no provision in section 8 for fixing that interest charge.


Charles Avery Dunning: In section 8 provision is made with respect to the form of note, and what shall be in it.


Walter Adam Tucker: Well, there is nothing in section 8 that says it very definitely. If it is the intention to restrict the lending institutions merely to charging interest, to keep them from piling up other charges, there should be something put in to the effect that when the borrower is in default no additional charges of any kind shall be made except interest on the amount overdue at a rate not exceeding that fixed: by regulation under section 8. That would make it certain that they could not charge anything but interest, and would give the minister power to fix the rate. Those are the three suggestions I offer.


Charles Hazlitt Cahan: There is one observation I was about to make before the last member spoke. This guarantee is given by the government but it is not a guarantee against default. The guarantee has really no exact relationship to default.


Charles Avery Dunning: To ultimate loss only.


Charles Hazlitt Cahan: The guarantee is against ultimate loss. Before the ultimate loss of the bank in respect of any single loan can be determined the bank must exercise all its legal rights in respect to the collection of that loan. I suggest that the bank would find it necessary to bring suit, to obtain judgment, and to execute the judgment upon whatever property the borrower may own. Therefore no liability arises on the part of the government until the bank has made a loan, there has been default by the borrower, and the bank has exercised all its legal rights for the collection of the loan, and after exercising all its rights of recovery it has been ascertained that there is a definite specific loss.


James Lorimer Ilsley: Is not the hon. member ignoring the provisions of section 8 (b), which states that the minister may, with the approval of the governor in council, make regulations governing the method of determining the amount of loss? The hon. gentleman assumes that there is to be an action and judgment, that the loss has to be determined in a certain way. But I should think from the wording of this provision that the minister with the approval of the governor in council may provide that a loss may be determined by a method shorter than or different from that outlined by the hon. member.


Mr. THOMPSON:: Suppose a borrower
goes to a lending institution, and his proposal to borrow a sum of money is accepted, will he get the money and be able to take it awTay with him, or will the money be paid by the institution only when he produces receipts showing it was expended as it was supposed to be? Suppose the property is an apartment house containing twenty apartments. If the owner could borrow' SI .000 on each and go out with the money in his hand, what guarantee has the lending institution that the money will be spent as it was the intention it should be?


Charles Avery Dunning: That is the business of the lending institution in determining the credit-worthiness of the person who borrows the money. I cannot say anything other than that.


Mr. HOWDEN:: But the government undertakes to make good some of that money. That point has been worrying me. I assume the lending institution would protect itself, but at the same time in case of loss the government would be out a certain amount of money. It seems to me the government should have some way of knowing that the money actually goes into the enterprise.


Richard Bedford Bennett: The answer is that the lending institution has an eighty-five per cent interest as against a possible fifteen per cent on the part of the government.


Charles Avery Dunning: We have penalties, but that may not be considered much protection. The chief protection, after all, is the fact mentioned by the leader of the opposition (Mr. Bennett), that the lending institution, assuming there is a one hundred per cent loss, will lose eighty-five per cent. And in the event of any crookedness, you could not assume that after something improper had been done the man who did it would repay eighty-five per cent. Any policing in the manner suggested by the hon. member for St.

Home Improvement Loans
Boniface (Mr. Howden) would, I am sure, cost more than would be practicable. This scheme involves hundreds of thousands of small loans. As I said the other day, the average loan so far is $380. To contemplate the setting up of inspection machinery to ensure that an average loan of $380 is spent precisely for the objects for which it was granted-it is unthinkable.


Richard Bedford Bennett: They might have to appoint inspectors under the civil service commission.


John Power Howden: That is not the whole
point. There is still the question not only of the money not being repaid but of its not going into the enterprise for which it was borrowed.


Richard Bedford Bennett: There is that possibility.


Mr. BROOKS:: It occurs to me that since the bank is guaranteed up to fifteen per cent it will make every effort to collect the eighty-five per cent. But has the government any guarantee that it will make the same effort to collect the remaining fifteen per cent? I ask that in view of the reputation which has been given to the banks in this house in the last three or four weeks; it causes me to doubt whether they would exercise the same care in collecting money for the government as they would for themselves.


Richard Bedford Bennett: It seems to me the first
question to decide is whether or not the power to prepare regulations is extensive enough to enable the regulations to be prepared, and, second, what kind of regulations shall be prepared.


Charles Hazlitt Cahan: And what is their effect.
They have no legal effect under this bill.


Richard Bedford Bennett: If the first point is
dealt with adequately, the second also will be dealt with adequately. The first question that suggests itself to me is: What are the provisions of the agreement between the lending institution and the guarantor, the government, as to what is to be the result of default; (a) as to granting further time- that has been covered by what has been done here to-day; (b) as to the effect of default in payment of one instalment upon others. Shall the others come due, for instance? And it seems to me the third question to be decided, after you have settled those, is, shall the position of the guarantor, the government, be that of the bank as soon as default has been made, and payment of eightydive per cent of the aggregate loan provided; shall the bank make an assignment to the government of its position-that is,
shall there be subrogation, and is there any provision for it? I cannot conceive of anything worse than that the government should be mixed up in any sense in the matter of endeavouring to collect fifteen per cent of $380 in various parts of this country. I say that very frankly; I think it would be an absurd position. Then that question of the agreement between the bank and the guarantor is the all-important question on that side of it.


Charles Avery Dunning: Agreed.


Richard Bedford Bennett: I say this with deference, but I think the Department of Justice can take section 8 and make it clearer than it is now. The point made by the hon. member for Rosthern, it seems to me, should be dealt with clearly by making it apparent in the statute itself that while the loan is not in default no charge is to be made for anything except such charges as are provided by that statute.
Or the second point, in view of the recent decisions of the privy council I do not see how we can possibly go so far as to say that the bank, in its relations with its debtors, cannot do as it pleases when they are in default. Mark you, we do not make the loan; the bank makes the loan, and the rights as between the bank and the man who borrows from the bank have not been changed by anything we are doing. All we do is to say that when there is a loss of fifteen per cent in the aggregate of the loans thus made, we will pay fifteen per cent. That is the whole story. We have not substituted our discretion for that of the bank manager. He still has to be accountable to his head office for his discretion, as he always has been. He still has to determine whether or not it is a good risk to take, morally, and whether the character behind it is worth while. The only thing he does not do is to require security. It may be that the property is mortgaged; in many cases that will be so. The very reason this measure is being brought in is to enable some of those cases to be dealt with.
We must bear in mind, I say to the hon. member for St. Boniface, that the government cannot possibly police these loans. It would be idle to expect the government to have some one running around to see that fifteen per cent of a loan of $300, which amounts to $45, is being properly spent; for our responsibility in connection with that fifteen per cent would involve the spending of more than that amount in connection with inspection. If we did it on the basis of patronage I imagine it would be very desirable in some ways. I see my hon. friend from York North
Home Improvement Loans

smiling. He lives near a large urban riding, and he would have a great many inspectors to appoint, but the civil service commission will look after that.
Leaving that aside for the moment, however, I think we should look upon this as a remedial measure which must be construed in the widest possible way. All that happens is that somebody goes into a bank and applies for a loan to be paid back within a specified time in monthly instalments. The bank has to do what all banks have done heretofore; it has to determine whether or not it will take the risk, and the only thing that makes this transaction at all out of the ordinary is that we say that if the banker makes a bad guess, and has not taken security-or as we say he shall not-at some time we are going to pay fifteen per cent. I think there should be a cut-off date specified, as was suggested by the hon. member for Yale (Mr. Stirling), but in any case we say that we will pay fifteen per cent.


Mr. KINLEY:: Of the aggregate.


Richard Bedford Bennett: Of course. That is the story.


John James Kinley: That is much different.


Richard Bedford Bennett: Of course, because there might be a one hundred per cent loss in one place which would be made up by a one hundred per cent recovery in another place. That, I take it, is why the minister has made it the aggregate.


Charles Avery Dunning: The administrative cost of the other method would put it completely out of court.


Richard Bedford Bennett: Quite so. That is the position, and I think section 8 can be improved to the extent of making it clearer than it now is that the granting of power to the government to enact legislation by order in council is sufficiently ample to satisfy every reasonable requirement in an agreement between the lending institutions and the government.
While I am on my feet I direct attention to the fact that the government have seen fit to depart from that great principle upon which the whole foundation of responsible government is built, by making provision for taking money out of the consolidated revenue without any appropriation. That is a catastrophe. If you have any doubt on that subject, Mr. Chairman, I recommend that you read the speeches of the present Prime Minister (Mr. Mackenzie) King) at any time during the period from 1930 to 1935, together with a few caustic comments by the hon. member for Comox-Alberni (Mr. Neill).


Leslie Gordon Bell: There is one question I should like to ask the minister in regard to these guarantees. Let us suppose that a man repays fifty per cent of the loan and then defaults and pays nothing further. This loss is included in the amount which the government ultimately guarantees and pays. Does that mean that the original owner of the property who has made the improvements and who owns them pays nothing further for them, or does the lending institution step in and obtain possession of the property while the government still has to make up the loss? That is rather a tangled sort of question; it is over-simplification on my part, .but cases of that kind will arise, and: I should like to know what will be the position.


Charles Avery Dunning: Let me see if I can
follow my hon. friend's supposition. A borrower repays fifty per cent, and he does not pay anything more. Then the question is to determine whether or not that is an ultimate loss. The regulations must provide that the bank shall take all reasonable measures of collection having regard to the amount to be collected. The bank would not be allowed to engage the hon. member for St. Lawrence-St. George, for instance, to prosecute in the case of a $50 debt, or my hon. friend the Minister of National Revenue, or any other lawyer whose employment would involve expense greater than would be reasonable in connection with thie collection of such a small amount.


Richard Bedford Bennett: Why deprive them of
good lawyers?


Charles Avery Dunning: I am advised that one of the first things good lawyers learn is how to charge.


Abraham Albert Heaps: Are high charges made only by good lawyers?


Charles Avery Dunning: That is not a question to address to me, and I prefer to be excused from answering it. But if I can make it clear to my hon. friend from Rosetown-Biggar (Mr. Coldwell) this is the whole point: Is the remaining $50 lost?


Major James William Coldwell: Fifty per cent.


Charles Avery Dunning: Yes; that is $50 on a loan of $100. The regulations must provide a manner of determining definitely that it is lost. The government does not propose to pay its guarantee without being sure that every reasonable method has been adopted to avoid loss and to collect everything that can be collected. But on the other hand that does not

Home Improvement Loans
mean that we would encourage the expenditure of a greater amount than the sum to be collected in an attempt to recover that sum.


Richard Bedford Bennett: The member for the constituency will look after that.


Charles Avery Dunning: I hope the member for the constituency will keep his hands out of it completely.


Richard Bedford Bennett: But your literature says he will be the first man in it.


Charles Hazlitt Cahan: There is nothing in this measure that provides for any expenditure on or any charge by the lawyer. That evidently did not enter into the contemplation of those who drew up this bill. Where the loss arises is in respect of a loan, and a proportion of the loan being lost. At the moment I wish to state simply that I cannot accept the construction placed upon section 8(b) by the Minister of National Revenue. I think when these sections are reconsidered by the Department of Justice the point I made should be taken into consideration, because loss is not necessarily incurred upon default. As the minister now admits, the loss is the net loss after reasonable remedies have been taken to recover the loan in whole or in part. Paragraph (b) does not clearly refer to the measures to be taken and the procedure to be followed. These are not apt words, I suggest, to determine what remedies are to be taken. I think the word "procedure" is not sufficient to govern, and, second, regulations made by order in council have no more force in law than regulations made by the minister or by any individual. No provision is made which gives these regulations the force of law, and that omission should certainly be considered.
I disagree with my right hon. leader in this respect, that I consider the making of these regulations is not legislation by the government, because in this measure the government have not taken any authority to give force of law to the regulations they make. Such regulations, if made undter this section, would, I suggest, be so much waste paper.


Frederick George Sanderson: Shall section 6 as
amended carry?


Robert Henry McGregor: No.


Richard Bedford Bennett: I thought it was to stand.


Charles Avery Dunning: It would be well to let sections 6 and 8 stand. Section 6 is amended to this point. We shall permit sections 6 and 8 to stand, in order that I may again take up the suggestions with the Department of Justice. In deference to the officers of the
department may I say to the committee that in drafting the bill they have had the advantage of watching the actual problems arise after two months' administration of the plan, and have had the further advantage of seeing the experience in the United States in the administration of a similar program. Of course, as always, I am in the hands of my official legal advisers with respect to the ultimate drafting of the measure. I thought it well to invite the committee, and particularly the legal members of it, to make suggestions, and such suggestions I shall be glad' to refer to the proper department. The measure will be returned at a later date with such further amendments or reasons for not amending it as may commend themselves to the law officers.
If that arrangement is satisfactory, and if hon. members are content with the discussion thus far on section 6, we shall allow it to stand, with the amendments made. When we reach section 8, I shall be pleased to allow it to stand1 also, in order that the points raised by the hon. member for St. Lawrence-St. George in connection with paragraph (b) may be considered.


Richard Bedford Bennett: Of course the law officers have hadi nothing to do with the question of default. We are now talking about remedies. They have not yet had anything to do with them, I hope.


Charles Avery Dunning: It is a little early for that.


Mr. McNIVEN:: Does the minister consider there is any conflict between paragraphs (c) and (d)? In paragraph (c) the expression is "and shall be repayable in convenient periodic instalments," and in paragraph (d) it is "repayable in equal monthly instalments." I raise the point because committees in Saskatchewan have been endeavouring to interest farmers in this important plan, and on every occasion we are met with the statement that farmers are not in receipt of a monthy income, and! that their income is periodic. Therefore they would like to have a plan which would permit payment every two, three, four or five months. On reading paragraph (c), it occurred to me that that was the intention, but in paragraph (d) there is a reference to repayment "in equal monthly instalments."


Charles Avery Dunning: I think the hon. member has misread the paragraph. Paragraph (d) sets up a maximum charge. In order to set up such maximum charge, the time of repayment must be specified. The hon. member will note the paragraph continues with the

Home Improvement Loans

words "and proportionate rates for other periods." The three and a quarter per cent discount with respect to a one year loan is the measuring stick by which the discount rate to be charged for all other periods must be measured,. That is the reason for paragraph (d) following (c). With regard to loans made under repayment conditions varying from the monthly period, may I tell the hon. member that in rural districts many loans are now being made in which the periods of repayment are being adjusted to the expected intomes of the farmers. But the measuring stick is to the discount rate is paragraph (d), and such discount rate must not exceed a rate of three and a quarter per cent when payments are monthly.
Mr. O'NEILL:	Has it been found impossible or impracticable to determine the loss in each individual case or to judge each individual case by itself, in place of judging all cases in the aggregate ?


Charles Avery Dunning: Each individual case will be dealt with by itself, but the application of the guarantee will be based upon the total sum lost, spread over all the loans. In one case the loss of the bank may be 100 per cent; in another case it may be only ten per cent, while in another there may be no loss at all. Each case must be proved. But in measuring the extent to which we will repay the lending institution, fifteen per cent of the total they loan is the limit to which the repayment may go.
Mr. O'NEILL: That is clear. The way it appears to me, however, is that by this manner of reckoning the government will have to pay more money than they would if they paid fifteen per cent on the loss which takes place in each case. If a man paid back 100 per cent, this would be all right, but if he paid back only fifty per cent they would be paying only on a fifty per cent loss. If he did not pay anything, the government would pay the fifteen per cent. When we reckon the whole thing in the aggregate, it seems to me that in most cases the government will have to pay. After everything is said and done, they will be paying nearly all the loss. I am not a banker, but that is the way it appears to me.


Charles Avery Dunning: In that connection I can only advance the experience of the United States. They have a plan which involves a twenty per cent government guarantee, carrying a five per cent discount rate, or a rate almost double that in Canada, and after three years of operation their aggregate losses are
\Mr. Dunning.]
less than two per cent. This is a new venture, so far as we are concerned, but it would appear from the experience in the United States that the hon. member's fears are apparently unfounded.


Richard Bedford Bennett: But the position there is vastly different.
Section 6 stands.
Section 7 agreed to.
Section 8 stands.
Section 9 agreed to.
On section 10-False statement or improper use of loan.


Charles Avery Dunning: There is one amendment to section 10 which will be apparent to all hon. members who look at the bill. The last word in line thirty-four is "and" and it should be "or." The change should be made.


Ian Alistair Mackenzie: I move accordingly.


Walter Adam Tucker: This brings up the point
I mentioned. Why cannot this bill be made to apply to a man who wants to borrow money with which to build a new home? In the constituency which I have the honour to represent there are people who own lots who have said to me that the only interest they have in this bill is the possibility of being able to borrow money to put up a small new home. If the idea is to promote employment, I cannot see why the bill should not be made to apply to the man who wants to borrow to put up a new home.


Charles Avery Dunning: It would require a different statute altogether to provide for housing. In my judgment it would be quite impracticable to combine housing with home improvement. The situation in each case is quite different.


Abraham Albert Heaps: Has the government any
intention of amending at this session of parliament the present housing act?


Charles Avery Dunning: I am afraid my hon.
friend will have to wait for an answer to that question.


Walter Adam Tucker: I do not want to disagree too much with the minister.


Charles Avery Dunning: The hon. member is at
perfect liberty to do that; that is his privilege.


Walter Adam Tucker: The basis of this bill is
the personal liability of the individual borrowing the money. If a man is good for $2,000

Home Improvement Loans
to improve a house, why should not a man who owns a lot be good for a similar amount to build a new house? I cannot see how this would complicate matters, although I may be overlooking something. The government says to the banks that it will guarantee up to fifteen per cent of the loans made, providing the money is used to improve existing houses. How would it complicate things to say that the government will also guarantee loans made if the money is used to build a new house? What, in essence, is the difference between a man borrowing $2,000 to put up a little house on a lot which he owns, and a man borrowing $2,000 to improve his house? The same employment will be created. A man may have a home worth only $500 and may want to borrow money to improve it to make it worth $2,000. The question of security does not enter into the matter as the loans are to be based entirely upon the personal obligation of the borrower. All that is needed to make this bill apply to loans for new buildings is two small alterations in sections 2 and 10. I do not believe that during the next three years there will be expended under this act anything like the $50,000,000 expected, but if the legislation were made to apply to new buildings I am sure there would be twice as much expended as will be the case under the act as it stands. The idea is to provide employment and I think consideration should be given to this matter. Several people in Rosthern constituency have said to me that if they could borrow $2,000 they would erect new homes on lots which they already own. This bill as it is now will be of no use to them at all. If this bill is worth while, it should be worth while giving consideration to the extension in its scope in the way I have mentioned.


Charles Avery Dunning: I can only repeat what I said before, that the principle is an entirely different one. It would involve the consideration of many factors other than those which apply in the case of home improvement. For instance, it would involve the consideration of the term of the loan. The term provided for by this bill is five years, and it is questionable if a man borrowing to erect a new home would be able to repay the loan in five years. May I suggest to my hon. friend, who is a lawyer, that the legal members of this committee would no doubt have numerous points to raise if I attempted to add to this bill provisions with respect to building new homes. Consideration would have to be given to the provincial powers 31111-38J
with respect to property and civil rights and all that sort of thing. For instance, this is something that occurs to me as a layman and I put it to my hon. friend who is a lawyer. This bill provides that the man who borrows money shall give no security. What is to prevent such a man from borrowing money with which to build a new home and then after the home is completed, putting a mortgage on it? I know my hon. friend will say that we could legislate against that, but I mention that as one of the considerations which would enter into a change in the principle of this legislation.


Richard Bedford Bennett: Or he might sell it.


Charles Avery Dunning: He might even sell the home. I submit that to ask for a complete change in the principle of this bill when it is in committee is something which should not be entertained. I respectfully submit to my hon. friend that he is out of order. If he had wanted to include a housing scheme in this home improvement legislation, the proper time to have done so was on the second reading or, better still, when the house was considering the financial resolution preceding the bill.


Walter Adam Tucker: The limit of a loan under this bill is $2,000. I suggest that a man can repay $2,000 borrowed to erect a new home just as well as he could repay $2,000 to improve an old home. There would be no difference in his ability to repay.


Charles Avery Dunning: The hon. member is
speaking of different men. The man who could borrow $2,000 under this bill would be a man who, in the judgment of the bank, was able to repay that amount within the time limit. Remember he has a home and is borrowing $2,000 to improve it. The other man would be presumably starting from nothing.


Walter Adam Tucker: But the man who borrows under this bill may have his home mortgaged up to the hilt. What is the difference between a man who has his home mortgaged up to the hilt and a man who owns a lot. outright and wants to erect a new home? Suppose a man has a shack worth only $200. He can borrow $2,000 to improve that shack. There is nothing in the world to prevent him from then turning around and doing what the minister has suggested might be done, mortgaging the improved- shack or selling it. There is no difference in principle between the man whq has a small shack and wants to improve it to the extent of $2,000 and the man who -has a vacant lot -and wants to put up a new house
Home Improvement Loans

on it. I know of no difficulty in the law of the provinces standing in the way, although I may be wrong. If a difficulty can be pointed out, I am ready to defer to it.


Frederick George Sanderson: An amendment to section 10 has been moved by Mr. Mackenzie (Vancouver), as follows:
That section 10 of the bill be amended^ by replacing the word "and" with the word "or" in line 34.


[Stage Direction]
Amendment agreed to.
Alan Webster Neill: Does not the minister think the minimum penalty of $100 is rather steep? There is a possibility that a magistrate will hesitate to impose such a penalty. The case may be a borderline one based upon a technicality. I admit that a man who makes a deliberately false statement on an application which amounts practically to an affidavit should be penalized, but there is power to punish such a man under the maximum penalty. I have been a magistrate myself and I know that when the minimum fine is too high it is hard to get a conviction.


Charles Avery Dunning: I am in the judgment c f the committee on that point. I think ttere is some force to what the hon. member for Comox-Alberni (Mr. Neill) has said.


Alan Webster Neill: There may be a mere technical evasion or violation of the act. The local 1 auk manager may have made an error and 1 een blamed by his higher authorities; he looks over the application, which he probably iwrote himself and an uneducated applicant signed, and he sees that some statement which is made therein is not actually or entirely true, or that the man deviated from the requirements in some trivial condition such as, instead of having used the money entirely for repairs and alterations to his home, he did something which is technically a little outside, such as putting up a rabbit-hutch or a chicken-pen. So the manager gets back at this man and threatens that "if you don't do this or that I will lay an information against you, and remember, you will be liable for not less than a hundred dollars." That is the position as I see it. As the minister said he would be kind enough to take the opinion of the committee in this case, I would move a reduction of the penalty to a minimum of twenty-five dollars, with the maximum not more than five hundred dollars.


Charles Avery Dunning: Leave the maximum as it is and reduce the minimum?


Alan Webster Neill: Yes.


Richard Bedford Bennett: I think it would be desirable to abolish the minimum penalty. " Not
less than...." has always been found not to
work very well; I shall put it as mildly as that. If the clause read, " liable to a penalty not exceeding five hundred dollars," you would get the discretion of the magistrate, and that is the way most of the criminal code sections read. In addition, there is no doubt that, even without this provision, under one of the sections of the criminal code an offender under the section would be liable for having obtained money by misrepresentation. My personal view is that it would be better to say " a penalty not to exceed five hundred dollars."


Charles Avery Dunning: I am willing to accept an amendment as suggested by the hon. member for Comox-Alberni.


Alan Webster Neill: That in section 10, line 38, the words "one hundred" be struck out and "twenty-five" substituted therefor.
Section as amended agreed to.
Section 11 agreed to.
Progress reported.



CANADIAN RED CROSS SOCIETY

[Stage Direction]
Hon. IAN MACKENZIE (Minister of National Defence) moved the second reading of Bill No. 14, to amend the Canadian Red Cross Society Act.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Sanderson in the chair.
On section 1,-Central Council.
Richard Bedford Bennett: Is not the word "given," in subsection 4, a poor word to use in connection with the conferring of powers? The subsection reads:
The executive committee shall have and exercise all the powers given by this act.


Ian Alistair Mackenzie: The act was drafted by the legal officers of the society and was then referred to the law officers of the crown.


Richard Bedford Bennett: I know. But one never says that powers are "given."


Charles Avery Dunning: "Conferred."


[Stage Direction]
Section agreed to.
Bill reported, read the third time and passed.

C.N.R.-Accounting-Mr. Howe


[Stage Direction]
Hon. C. D. HOWE (Minister of Transport) moved the second reading of Bill No. 12, to provide for revision of the accounting set-up of the Canadian National railway system.
He said: A complete explanation of the purpose of the bill was given, I think, in committee on the resolution. At that time I stated that one purpose was to consolidate the component parts of the Canadian National system into one balance sheet. I think the importance of that action cannot be discounted. At the time of the Duff report the component parts of the system included some 130 separate corporations. Since then the number has been reduced to about 100 separate corporations, and the work of further reducing these numbers will be made considerably easier if all parts can be consolidated in one corporation. This the bill will effect.
Richard Bedford Bennett: Surely that is not what
this bill is. The minister is not serious in saying that this bill consolidates the constituents in one corporation.


Mr. HOWE:: We shall say that it brings
them into one holding company with one balance sheet.


Richard Bedford Bennett: But the balance sheet
issued by the Canadian National Railways is a single balance sheet.


Clarence Decatur Howe: It is; nevertheless there are
at the present time three separate corporations. As I explained, the Canadian National Railways as a corporate structure includes the old Grand Trunk railway and some sixty of its subsidiary companies, and quite a separate corporation is the Canadian Northern Railway Company with some forty subsidiaries. It is a separate corporation in every way, the stock of which is owned by the Minister of Finance, just as the stock of the Canadian National Railways is owned by the Minister of Finance. There is no connection between the two corporations except that they have a common board of directors. As I pointed out before, owing to the fact that the government does its financing, and its refunding as well, for both corporations, through the Canadian National Railways, the debt of the Canadian Northern is being gradually transferred to the Canadian National Railway Company, an entirely distinct and separate corporation. As I say, this bill will bring these roads under
one control and the board of directors of the Canadian National Railways will be ipso facto the board of directors of what is now the Canadian Northern railway. The Canadian Northern Railway Company will disappear as a separate entity.
With respect to the writing down of the accounts of the railway, I may say that the bill, which has been distributed, is susceptible of analysis as to just what is contemplated in that regard. As to the discussion of the details of the bill, I believe the standing committee is the proper forum for the purpose. Expert accountants will be in attendance and it will be possible for the committee to go minutely into the various items that are set out. I took little exception to the remarks of the leader of the opposition (Mr. Bennett) when the resolution was being considered in committee. He then pointed out that a record should be kept of the sums invested by the dominion in its railways. In my opinion the method of doing this is one which must engage the attention of the committee. It is perfectly clear that, once we set up a balance sheet which cannot be questioned as to what is intended, this balance sheet should not be' beclouded by reference to items which are now a part of the national debt and which will be so treated. I believe a schedule can be set up that will preserve the historical record, and this schedule can be made part of the annual report of the Canadian National Railways. That perhaps will satisfy the purpose as to a record.
I do not believe anyone will question the fact that the duplication as between the railway accounts and the public accounts should be eliminated. There may be those who take a different view as to the manner in which this duplication should be eliminated, but in my opinion there are only two ways in which this can be done; one is to take the duplicated items out of the railway account and the other is to take them out of the consolidated debt of Canada account. By taking a billion and a half out of the consolidated debt we could render the task of the Minister of Finance very much easier for this particular year.


Richard Bedford Bennett: The interest has to be
paid just the same.


Clarence Decatur Howe: It would give him a substantial credit in his next annual budget. I believe that a great deal of misunderstanding arises through duplication. The intelligent taxpayer of Canada is naturally concerned as to what his taxes are used for.
C.N.R.-Accounting-Mr. Howe

He is told that a certain proportion of the taxes goes to the servicing of the national [DOT]debt. He is then informed that the losses of the Canadian National Railways in cash are [DOT]so much; that is, that the taxes of the current year are charged a certain amount to make up the sum which must be turned over to the Canadian National Railways to keep it going. In addition to that, he learns that a mysterious sum shown in the statement of the railways is also a liability, and I believe most of the confusion with respect to the true position arises in connection with this additional sum shown as a loss which the railway does not pay. When the annual statement is brought down, there are newspapers that carry an alarming story about the situation disclosed by the account of $40,000,000 or $50,000,000 charged up to the system, and most people have the idea that there is some intermediate amount somewhere between the amount they are taxed to service the national debt and the amount they are taxed to hand over to the railway for its losses. If this bill passes as drawn there will be no longer a question about that intermediate amount; the taxpayer will know that when he services the national debt and provides funds to be turned over to the railway for the indebtedness which must be paid by them, the whole story has been told as far as the position of the dominion and its taxpayers is concerned.
Some extraordinary charges are made with regard to this situation. A few weeks ago there appeared in Ottawa a man, a student of railway affairs, who used some extraordinary language about this proposed adjustment of the balance sheet. He spoke of "perfidy, to the public welfare," of "votes of the unthinking masses," of "pure deception," a "dissembling of the real facts," and "political debauchery run riot." I cannot think that there is anything in what we are doing to warrant any of these charges. The operation is a perfectly simple one. We are removing this duplication between the public accounts and the accounts of the Canadian National Railways, the latter being the property of the taxpayers of Canada. I do not think I need dwell on this any longer.
As I have said, the exact method of carrying out the intention of the bill will come under the complete review of the committee, who will report back to the house. The record of exactly what has been spent by the public in connection with the railways may tell a story, but it is by no means a cofnplete story of what the public has spent on transportation. I have had a review made of the public accounts showing appropria-
LMr. Howe.]
tions for transportation, and in this connection I wish to make this statement. In the situation of transportation to-day it is hardly fair to single out the railways for treatment different from that given any other form of transportation. Whereas twenty years ago the railways were the dominant factor in transportation-they then carried so large a percentage of the whole that the amount transported by other means was not very important-to-day the railways are only one factor in transportation and no longer the dominant factor.
In looking over the public accounts I find that from time to time sums up to $1,506,000,000 have been advanced to the component parts of the Canadian National railways and to that railway itself. That sum is without interest; the interest, I suppose, would amount to about another $600,000,000. I also find that the sum of $104,000,000 has been paid in cash to the Canadian Pacific railway and written off. The interest on that, as it goes back a great many years, would have been perhaps another $300,000,000.


Richard Bedford Bennett: It is not correct to say it was written off. Part of it was subsidy.


Clarence Decatur Howe: Well, it was cash paid to the Canadian Pacific railway.


Richard Bedford Bennett: That is better. It was not a loan.


Mr.   PIOWE@: I accept the correction. We also find from the public accounts that the sum of $1,257,000,000 has been paid for waterways and shipping. Let us not worry too much about a write-off on the railways when we have already forgotten-or at any rate we say very little about it-that vast sum which has been written off for waterways and shipping.


Charles Avery Dunning: Not written off.


Clarence Decatur Howe: Well, charged to the consolidated debt, where it does not appear each year to worry us about the expense of our shipping.


Richard Bedford Bennett: It does appear in the
report of the Department of Railways and Canals.


Clarence Decatur Howe: 
Richard Bedford Bennett: Does that include the radio stations for navigation?


Clarence Decatur Howe: No; they are in shipping. So as far as the record of the sums invested in the Canadian National Railways is concerned, I do not believe that is so important in the general scheme of things except for one reason, namely that this railway is competing with a privately owned railway which stands on its own feet. We must not forget that prior to the war we had three privately owned railways in Canada; to-day we have only one. The reason we have a problem with our own railway is largely that the other two privately owned railways were not able to meet the situation brought on by the war. 1 think in fairness to its private competitor that record should be kept, and I believe a way will be found by the committee to set up a record in a manner that will meet the suggestions which have been made along that line.
Something was said about the position of the South African railways. Their position is extraordinarily favourable for a government owned utility. But I wonder whether the people of Canada would be satisfied to have our railway operated along similar lines. First, we must remember that the South African railway has a complete monopoly, while our railway operation is highly competitive. In 1935 the South African railway was able to obtain a surplus of $27,000,000 after interest charges were paid and a charge of $10,000,000 made for depreciation, while in the same year the Canadian National Railways had a cash deficit of .$47,000,000 after payment of interest due to the public but not to the government. We find also that the revenue per mile of the South African railway was $11,061, whereas the revenue per mile of the Canadian National is only $7,322; in other words the revenue per mile of the South African railway is 50 per cent greater than on the Canadian National Railways. If we could somehow obtain a 50 per cent increase in revenue per mile we could not only meet our debt to the public but have a small surplus in addition. Expressing it in another way, we contribute the amount to the public in the way of low freight rates, the lowest in the world, rather than have the surplus which the South African railway enjoys. I might also mention that the employees of the South African railways are about 30 per cent native, or non-European.


Richard Bedford Bennett: More than that.


Clarence Decatur Howe: But to me this is the interesting thing about South Africa: I wish it
were something that the public would take note of seriously. One provision of their railway act is that the mileage of 11,292 miles operated by the government is protected against wasteful and uneconomic competition in areas adequately served by the railway. Such areas are defined by proclamation under their Motor Carrier Transportation Act. Even taxis cannot operate a regular service between particular places without permission. I wonder whether our people would be satisfied with that. To-day Canadians have the option of travel by rail or motor. If the house thinks they do not, appreciate both, hon. members might examine some of the cases heard before the railway board where the railways wished to abandon a branch line, where all the traffic was going to the trucks. In South Africa, if a community has a railway, or if a railway serves any section, service by any other means is absolutely prohibited.
Yet it is interesting to note that the writing off of capital is a live subject there, as it is here. In the report of 1935 it is stated that:
The board of management have asked the government to reduce the capitalization by some $110,000,000 covering costs prior to union.
We come to the Australian railways, and find there a much more serious situation than in South Africa, quite as serious, I think, as we have in Canada.


Richard Bedford Bennett: Except that they are state systems, not one system.


Clarence Decatur Howe: 
Richard Bedford Bennett: Mr. Speaker, in view of what the minister has said as to the intention to leave to the special committee a large measure of discretion in dealing with the legislation, I shall confine myself to dealing with two questions.
The first is the distinct differences between the bill and the address delivered by the minister when he moved the resolution. In my judgment the bill does violence to sound principles of finance, and I cannot think the

minister seriously expects the committee to adopt the bill as it stands. I have just sent for the report of the Canadian National Railways for the year ended December 31, 1935. I assume that within a reasonable time we shall receive the report for 1936. There never has been any difficulty in making a consolidated balance sheet. If the minister will be good enough to turn to-pages 16 and 17, he will find the consolidated balance sheet as of December 31, 1935, but for the moment I am concerned only with the one item: Liabilities:	stocks:	capital
stocks owned by the dominion government, $265,628,338.70; capital stocks owned by the public, $4,584,225. Obviously we cannot change that second item dealing with stocks held by the public. What we can do, as the minister indicated the other day-and I think it is sound-is to reduce the value of the capital stocks owned by the government to the sums we paid for them. In the case of the Grand Trunk we paid nothing; in the case of the Canadian Northern we paid the equivalent of some $18,000,000. It would not be difficult to deal with that item; that could be accomplished very simply. There it is; we reduce the amount to what these stocks represent in cash outlay.
The next item under liabilities is: Governmental grants: grants in aid of construction: by province of Canada prior to confederation, $15,142,633.33; other, $2,570,904.78, a total of' $17,713,538.11. Subject to further investigation at the moment, I cannot think that any good purpose would be served by carrying this amount in the accounts. It represents subventions given by Quebec and Ontario prior to confederation to the old Grand Trunk and to lines acquired by the Grand' Trunk.
Mr. HOWrE: The sum of $15,000,000 represents those subventions.


Richard Bedford Bennett: Yes.


Clarence Decatur Howe: The sum of $2,000,000 is a little different.


Richard Bedford Bennett: Oh, yes; that is something else altogether. I had occasion to look into that some time ago. It is not necessary to go into that in detail, except to say that one could justify the carrying of the $2,000,000 item but it would be very difficult to justify carrying the $15,000,000 item because it represents old Grand Trunk subventions which are not worth the paper on which they are written. That amount might just as well be eliminated as far as we are concerned. The only reason that has not been done is the reason given by the minister the

C.N.R.-Accounting

Mr. Bennett
other day. Then we come to the item: Long term debt: funded debt unmatured, $1,154,779,000.78. I challenge the right of this parliament to change that by a cent.


Clarence Decatur Howe: We are not changing that.


Richard Bedford Bennett: That is what I say. Therefore this item, namely the long term debt item, stands at $1,154,779,000.78.
The next item in the liability column is: Loans from the Dominion of Canada: temporary loans obtained for redemption of funded debt, pending refunding interest paid, $74,726,975. This is an item which varies from time to time as the government carries on refunding operations for the railway when its obligations mature and a lower rate of interest is obtained, and as far as this item is concerned it cannot be modified or changed. It stands.
The next item is the important one: Other loans from Dominion of Canada, $679,873,935.08. Interest on above accrued but unpaid, $495,030,137.29, or a total of $1,174,904,072.37. I deny the right of this parliament, in honest dealing with the public, to change this amount by a single cent. It represents money paid by the Canadian people into the capital of this enterprise; it represents loans from the Dominion of Canada. The dominion government went into the open market and borrowed money, and then lent it to the Canadian National, that is, the constituent companies which now comprise the Canadian National. The money was not given by way of subsidy. Let us not have any misunderstanding about that. It was not given by way of subsidy or subvention; it was not given by way of special advances for capital stock, as in the case of the old Canadian Northern. It represents loans made to the railways of Canada. My submission is that it stands in a position where it should not be changed even by one cent. Why? Because it represents loans made to the enterprises as going concerns. Just as the minister has said, these roads represent a combination of two privately owned systems and, he might have said, one of the difficulties the people of Canada have in dealing with the railways is that those roads were not constructed by a common proprietor, but were constructed by competing proprietors. Many of them were not built in such a way as to make it possible for them to yield a revenue, when combined with the other competing system. In other words, the Canadian Pacific railway was laid out, according to the plan of its proprietors, where they thought traffic was available. In the case of the other railways, one was a contractors' road, built for subsidies, and the other was built afterwards- and never should have been built-for the
purpose of endeavouring to make a connection with the Grand Trunk system, between the east and the west.
These are important points to keep in mind when we are considering our position with respect to our railways. But, to get back to the financial statement: Why should we change a single cent or word of it? This is a certified report, submitted by trustees and certified by auditors. First, " loans from Dominion of Canada"; should that be written off?


Mr. MacLENNAN:: Would it make any difference, if it were changed?


Richard Bedford Bennett: Yes, it would give a false conception of the position.


Donald MacLennan: Not a materially false conception.


Richard Bedford Bennett: Yes, very material. I suppose a few hundred million dollars is not important?


Donald MacLennan: Oh yes, it is.


Mr. BOTHWELL:: Do those loans in any
way represent the year-to-year deficits of the railways?


Richard Bedford Bennett: I am coming to that presently. At the moment I am considering the accounts. These represent moneys the Canadian people borrowed on their credit, and lent to the railways. There is no duplication in that. If I may use the term with respect, I would say that it is absurd to use the word "duplication" in referring to two separate entities which are keeping their separate accounts, the one borowing from the other. The accounts of the Dominion of Canada show what we owe the world. Our accounts show that we owe the world hundreds of millions of dollars. The accounts of the Canadian National Railways show that they owe us hundreds of millions of dollars which they borrowed from us when we, the Canadian people, borrowed money from the world. There is no duplication in that. Every person knows that is the way in which accounts are kept in every enterprise in the world. One enterprise shows where it got the money and, in turn, the other enterprise shows where it got the money. In its public accounts the Dominion of Canada shows that it borrowed money from people throughout the world who lend it. The Canadian National Railways borrowed from us, the people of Canada. That is the story.


Clarence Decatur Howe: May I ask a question?


Richard Bedford Bennett: Yes.


Clarence Decatur Howe: My right hon. friend has had a great deal of experience in corporation matters. Is it considered good bookkeeping to write off an item of the parent company and continue it in the subsidiary?

C.N.R.-Accounting-Mr. Bennett


Richard Bedford Bennett: 
Richard Bedford Bennett: I do not think it would
be fair to the dominion to compare the conditions in South Africa with those in Canada. It is unfair to Canada because in South Africa native labour is a very important item in their operations and they are able, therefore, to operate their system at a very much lower cost relatively than we are. In addition to that, they have, as the minister pointed out, a complete monopoly of traffic, whereas under the railway department we have the railways, the airways, the harbours, the highways and certain steamships, all of which constitutes a condition that is not comparable with that which prevails in South Africa. One phase of the operation of the South African railways that does appeal to me, however, is the efficiency of the operation. When I said the other day that out of their gross earnings, that is, before charging depreciation, only 58 per cent, and that after charging depreciation, only a little over 65-42 per cent of their earnings was required to maintain the system, leaving a substantial balance for other purposes, I indicated a condition which I think approximates perfection as nearly as possible in operations in these days. But the real, the essential fact is the difference with respect to labour costs. Of total earnings of the South African railways last year, only 38-13 was spent for labour. And that is the whole story; when you have stated that you have stated practically the whole of it. Comparing that with conditions in Canada, you find on page 4 of the report of last year that the operating ratio for 1935 was 91-77 per cent as compared with 92-14 per cent in 1934. Then follow the particulars of the expenditures that were made. As is known, of course, the labour cost involved was substantially twice what it was in South Africa; the figures are given in the report, but I will not take the time to deal with them.
There is only one other point I should like to bring to the minister's attention, and it is this. He cannot possibly say that the consolidated balance sheet of the railways- and I direct his attention to pages 16 and 17 of the report-is not a fairly complete report of the position of the system. If that is true- and I think it must be taken to be-why should we disallow any of the items contained in that balance sheet other than the ones I have mentioned? It cannot be claimed that there is duplication, because that balance sheet does not in any sense duplicate any report in connection with the national debt.

C.N.R.-Accounting-Mr. Bennett
It cannot be said to be misleading so far as our credit is concerned, for it deals in extreme detail with the whole situation, setting out in succeeding pages the details of every issue that was made by the railway company and also borrowings from the Dominion of Canada. Loans from the Dominion of Canada will be found on page 29 of last year's report. These loans from the dominion make up a total of over $669,000,000 in addition to the sums required for financing last year. Why should we in any sense lessen these amounts in any balance sheet we prepare?
I am perfectly willing to be convinced-* I have no feeling about the matter-but I believe that in fairness and in justice to the Canadian people we should make clear to them what the position is. Let me put to the minister one difficulty that has arisen by reason of the very statements made by him and others in this chamber. It has been suggested that the cash deficit last year was $48,000,000. That is not the fact. The Canadian taxpayer had to find $48,000,000 on income deficit, that is, on the income not being able to meet, not the interest on the money which the Canadian people had put into the enterprise but the interest on the securities which the Canadian National had issued, not those that represented money borrowed from the Canadian people on their general credit as part of the national debt. That is made abundantly clear by the report itself. Why, then, should we say that the deficit was $48,000,000? We know it was twice that. Why? Because the taxpayer had to pay the interest on the money which the dominion borrowed and lent to the Canadian Northern, and that is not included in the $48,000,000.
Let me make the situation perfectly clear so that there will be no misunderstanding about it. On page 28 we find the funded debt, principal and interest:
Total debt held by public (including therein $11,792,798.65 par value held in special funds and accounts) as per balance sheet	$1,154,779,000 78
That is the total debt incurred by the companies which are now under the Canadian National system, all set out in detail. That debt of $1,154,000,000 odd was incurred by the railway companies; the interest on it is payable by the companies, and they had $48,000,000 less than what was required to pay interest on that amount held by the public. But turn to the other side of the question and look at the page to which I directed attention, page 29, showing loans from the Dominion of Canada. The loans from the
Dominion of Canada being part of the national debt, the Canadian people are now paying interest on that debt. It has nothing at all to do with the $48,000,000; the amount of interest we paid last year on it came to the enormous sum of $35,949,676.70, as shown on page 29. So that, instead of $48,000,000, it was $48,000,000 plus $35,000,000, or $83,000,000, and that is in the report itself.


Clarence Decatur Howe: Who paid it?


Richard Bedford Bennett: The $35,000,000?


Clarence Decatur Howe: Yes.


Richard Bedford Bennett: It was paid by the Canadian people to the people who held bonds of the Dominion of Canada with respect to some of the money lent to the Canadian National Railways. That is the story. Now, should we do anything with that which would make it appear to be other than it is? I say to the minister in all sincerity that he will find in these documents nothing which could give rise to any confusion. The auditors have made it so plain that the wayfaring man, though a fool, may read. He who runs may read; there it is. I want to go one step further, however. There are certain figures which the minister has used in his bill as indicating his intention, shall I say, to wipe out or write off sums representing the real debt of this system to the people of Canada since we began to operate the system. Why should that balance sheet be changed, then, if that is what these figures are, namely, an indication of the losses sustained by the Canadian people in the operation of their property since they nationalized it? That is my position.
The hon. member for Swift Current (Mr. Bothwell) asked a question to which I now direct attention. He wanted to know whether in these figures I have given there was included any portion of the moneys paid by the dominion for deficits. There were included in those figures deficits up to 1932, but neither in this report, which is the report of the railway company, nor in the public accounts, is shown the extent to which the debt of Canada was expanded to provide money to pay deficits since 1932. So that there stand to be added to these figures the deficits that were paid by borrowing money in 1932. 1933. 1934, 1935 and 1936. These are not included and must be shown in any complete system of accounting.


Charles Edward Bothwell: May I ask another
question? Do the items on page 29 of the report indicate the deficits of the Canadian National Railways which were covered by loans from the dominion government?

C.N.R.-Accounting-Mr. Bennett


Richard Bedford Bennett: I said a moment ago that up to 1932 in part they were paid out of these loans which are shown on page 29. Therefore the taxpayers of this country are paying interest on money borrowed to pay those debts.


Charles Edward Bothwell: I would appreciate hearing what the right hon. gentleman considers is the difference between a deficit in the Post Office Department and the deficit of the Canadian National Railways. They are both public utilities owned by the government.


Richard Bedford Bennett: The answer is so simple that I am surprised at my hon. friend asking the question. One has a corporate set-up; the other has not. The post office is a part of the operations of the government of Canada and any deficits are charged against the consolidated revenue fund.


Charles Edward Bothwell: But in principle they are pretty much the same.


Richard Bedford Bennett: As far as the railway is concerned, a boast of Canadians has been that we set up an independent corporation which was free from political control, which was to be operated as a public utility publicly owned. That was our start. If we are going to treat it in that way we must make apparent in the balance sheet, as the auditors have heretofore done, what sums it has been necessary for us to provide every year from the public treasury to meet the deficits in the operation of our publicly owned utility, and also the extent to which we have pledged the public credit to enable us to maintain this nationally owned enterprise.


Charles Edward Bothwell: Then, do I understand
that apart from the corporate existence of the Canadian National Railways, in principle the deficits are the same?


Richard Bedford Bennett: Not at all. All the hon. gentleman would have to do as a lawyer is to read the statute creating the company and then read the Post Office Act.


Charles Edward Bothwell: I appreciate that, but
I should like to know what the difference in principle is.


Richard Bedford Bennett: There cannot be any
similarity in principle between the two things. One depends upon licking postage stamps and the other, I am afraid, upon licking the Canadian people.
But let us go a step further with my friend the minister. I pointed out in this house on previous occasions that the trustees of the railway are not unlike receivers. If it were not for the fact that the Dominion of Canada has guaranteed securities to the extent of
[Mr. Both well. 1
the various sums which have been advanced for deficits, they would be in the form of advances made against receiver's certificates. Does anyone suggest that receiver's certificates would not be shown in the balance sheet as a liability? No one does. Everyone knows that when a balance sheet is drawn up by a railway company-all one has to do is to take one or two of the companies in the United States now in the hands of receivers and see this-the receiver's certificates are shown as liabilities of the enterprise. The bonded debt is shown; the capital stock is shown. The interest is not being paid on the funded debt because the property is in the hands of a receiver. These advances are of that kind, only as no one would buy receiver's certificates, the nation itself borrowed the money and lent it to the company. Therefore the company should show in the same way that these sums are unpaid.


Clarence Decatur Howe: Does the right hon. gentleman think a company in bankruptcy is a parallel case? It pays no interest.


Richard Bedford Bennett: C.N.R.-Accounting-Mr. Dunning
that enterprise to continue to function. Anything less than that would be keeping bad faith with the Canadian people, if it would not be deception. Anything more than that could not be asked for. Less than that I do not think anyone, least of all any public man, should be able to either suggest or think of, for it is imperative that in matters of accounting we should remember that after all, except by repudiation, we cannot change the obligation of Canada to pay the interest on these securities. And in looking to the railway company, to whom we have lent the money, to repay the interest that we are paying, we are but looking as one who lends, that is, a lender, looks to his borrower. The balance sheet of the lender as well as that of the borrower should disclose the situation. On the one hand the loans are shown as assets; it may be that in the opinion of the lender the assets have a lesser value than is shown on their face, but that is no reason why the borrower should not indicate clearly the extent of his liability to the lender.
Hon. CHARLES A. DUNNING (Minister of Finance): Mr. Speaker, I desire to detain the house for only a few moments. The object of the government in proposing the legislation which the Minister of Transport (Mr. Howe) now has before us is not, as I think everyone will agree, to deceive the Canadian people or to produce a set of accounts for the Canadian National which will not reflect, as accurately as the complexities of the Canadian National system will permit, the true condition. My right hon. friend the leader of the opposition (Mr. Bennett) has just pronounced what I might term a doctrine of accounting perfection. No one can take exception to the broad general principles of accounting which he lays down, but with all respect may I point out that so far as the Canadian National balance sheet is concerned, the principles of accounting perfection were departed from quite a number of years ago, and have been departed from still further in the intervening years. I think it was back in 1920 or thereabouts when the difficulties incident to calculating the interest upon the unpaid interest on the money which had been advanced by the Canadian people to the Canadian National or its various units were a source of concern to the Minister of Finance of that day.


Richard Bedford Bennett: I eliminated that from my discussion.


Charles Avery Dunning: My right hon. friend
has eliminated that from consideration, but I am pointing out that, if not the first, at any

rate that was one departure from the principle of accounting perfection. Quite obviously, if the Canadian people are required to advance money to pay interest upon money which was advanced by them to the railway, then interest on that interest is also payable from time to time by the Canadian people when it is not paid by the railway company. What the accumulation of that amount would be in the intervening years I am not going even to try to guess, but in any case, as far as the railway accounts were concerned, as far back as that the amount of interest due upon interest, which had been unpaid by the railway company to the Canadian people was dropped from consideration in the railway balance sheet. Later, my right hon. friend himself, facing the problem in 1932, I think, adopted the principle that in future the cash deficit should be paid out of the treasury of Canada.


Richard Bedford Bennett: That was a recommendation of the commission.


Charles Avery Dunning: It was a recommendation of the commission, and as my right hon. friend indicated this evening, since 1932 no accumulation of the amounts paid by the Minister of Finance with respect to the cash deficits of the Canadian National Railways has been added to the balance sheet items from year to year.
The point I am making is simply this, that with respect to an undertaking of such tremendous complexity, with the history which has been so well outlined by the Minister of Transport and the leader of the opposition, at this date it is impossible to lay down the principle of accounting perfection, apply it throughout all the years of the undertaking and expect to reach any intelligible result. The principle upon which the Minister of Transport is working in connection with the bill now before the house is not to attempt to create a condition which will1 deceive the Canadian people into thinking they have not put into this railway the money which has been put into it, but rather to clarify the present position in that regard' and to maintain before the Canadian people the amount which they have put into the roads as representing what it really is, the equity of the Canadian people in the railway after the fixed securities in the hands of the public have been taken care of. True, the value of that equity, as my right hon. friend says, is represented in the public debt of Canada at this moment. True, the Canadian people are paying the interest on that portion of the public debt just as they are paying it on the rest of the public

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debt, but with this qualification: The portion set up in the balance sheet of the Canadian National Railways to-day, plus the rate of interest calculated upon it, does not represent the cost of that amount of money to-day to the Canadian people. It represents a calculation based upon the rates obtaining when the various loans were made, under the contracts connected with them. As a matter of fact, there is little comfort in looking at our railway balance sheet picture, but there is this much comfort, at any rate, that the amounts set up by way of indebtedness in the present balance sheet do not cost the Canadian people quite as much as the amount set out there, for the reason that as a consequence of lower interest on moneys and refunding operations, the average cost of the public debt has been reduced, while the rates used1 for computation in the balance sheet remain about the same as those existing when the obligations were undertaken in the first place.	[DOT]
The government appreciates the attitude in which the house has approached the question. The minister has indicated that when the bill is referred1 to the special committee- and I hope it will be referred to-night-the most searching examination will not only be permitted but invited, to the end that we may, if possible, evolve a set-up which will be iealistic in so far as it relates to the property as it now stands, and at the same time will not disguise from the Canadian people the amount of money which all down through the years they have invested in this great railway undertaking.


[Stage Direction]
Motion agreed to, bill read the second time and referred to the standing committee on national railways and shipping.

Mr. SPEAKER:: I have the honour to inform the house that I have received communications from two members notifying me that the following vacancies have occurred in the representation, to wit:
Of the Hon. Charles Marcil, member for the electoral district of Bonaventure, by decease.
Of Herbert Earl Wilton, member for the electoral district of Hamilton West, by decease.
I accordingly issued my several warrants to the chief electoral officer to make out new writs of election for the said electoral districts.

The house in committee of supply, Mr. Sanderson in the chair.



POST OFFICE DEPARTMENT

[Stage Direction]
Civil Government-
Salaries, including the assistant Deputy Postmaster General and General Superintendent of Postal Service at $7,500 a year from April 1, 1937; amounts required to pay allowances to' office appliance operators, grade 2, operating mechanical audit card punching machines in accordance with the terms of order in council P.C. 280/383, dated February 17, 1930; to pay allowances to typists, grade 1, employed cutting stencils in accordance with regulations approved by order in council; and to pay allowances to office appliance operators, grade 2, in the revenue division employed as key punch operators, schedules and rates to be decided upon by the Civil Service Commission and the Post Office Department and approved by the governor in council, $1,318,488.
Contingencies, $215,000.
Richard Bedford Bennett: The minister was about to make a statement on the last occasion his estimates were before the committee.


Hon. J. C. ELLIOTT (Postmaster General) :: The statement I had begun relates to item 275. I thought that if the committee were agreeable we should complete discussion on item 16, and then proceed with item 275.


Frederick George Sanderson: Shall the item carry?


John Campbell Elliott: When the
house rose on February 2, in reply to a question asked by the hon. member for Halifax (Mr. Isnor) I was making a statement as to whether or not in the last year the department had made ends meet, and as briefly as possible I was endeavouring to give the committee a statement of receipts and disbursements, according to the method of bookkeeping which has been in vogue since the department was established.
I believe on the last occasion I had given the receipts and expenditures, as they appear at page 507 of Hansaird, but for the sake of clarity I shall repeat them to-night.
I shall give the figure for 1935-36 first, and then the best estimate we can make-and I think it is reasonably accurate-for 1936-37. Of necessity we can make only an estimate for the last two months of this fiscal year. In the year 1935-36 we received in gross revenue $39,203,499.82. From this sum there has to be deducted $6,210,498.70 paid to commission postmasters, leaving a net revenue of $32 507 -888.52.	'
For the year which will close on March 31 next the gross revenue-of course estimating the income for the last three months, in accordance with the income for the past nine months-will be $41,178,199.40, from which we

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must deduct approximately $6,868,164.56 paid to commission postmasters, leaving a net revenue of $34,310,034.84. May I say that in connection with the estimated revenue, in the cities we have been, able to obtain figures as to income for the ten month period, but in the figure I have given the estimate is made for the last three months. The figure of $34,310,034.84 represents an increase of $1,803,146.32 over the preceding year.
Those who are attempting to follow the last report of the Postmaster General, for the last complete year, will find on page 7 the information I am about to give. Perhaps the system adopted there will enable them more readily to follow the figures I am giving. For the year which will close on March 31 next, the outlay, estimating the last three months of the year, will amount to $31,043,227, or an increase of $943,126 over the preceding year. Comparing the estimated net revenue with the estimated expenditure for the year closing on March 31 next, we should have a surplus of $3,266,807.	_
That is the largest surplus we have had since 1920.


Charles Avery Dunning: Can you pay me that tonight?


John Campbell Elliott: The banks
are closed.
As will be noticed from the reports of the Post Office Department, that is considerably in excess of any recent year. Perhaps this would be the most convenient time for me to deal with the system of bookkeeping. I know this question will come up and I might just as well meet it now as wait for it to meet me.


Mr. SPENCE:: The minister promised to
do that.


John Campbell Elliott: I promised
to do it and, like the hon. member for Park-dale (Mr. Spence), I like to keep my promises. I am going to give the nearest figures that can be obtained by the use of the system suggested as being the ideal one. I have looked over the discussion on the Post Office estimates for a number of years past, and I think this question has arisen in nearly every year. The department has been asked whether the expenditures as shown in the yearly report include all expenditures which should properly be charged up to the Post Office Department. First, we have an estimate of the rental value of all buildings throughout the dominion used for postal purposes. For the information of the committee I might say that there are 413 government owned buildings, and space for post offices

is rented in 112 private buildings. The public buildings are constructed by the Department of Public Works, which department also supplies part of the furnishings. One rather odd feature is that this department supplies certain things like belting in the first instance, but when they are worn out, unfortunately the Post Office Department has to pay for them. I have argued this matter with some of my friends in the department with which I was reasonably familiar formerly.
I said that if it were proper for them to provide these things in the first place, they should keep them in repair. The Department of Public Works is most familiar with the needs of these buildings in the way of equipment, char service, cleaning and all that kind of thing.


Mr. ISNOR:: What is done in connection
with replacements? Are they charged as capital expenditures or as operating expense?


John Campbell Elliott: They are
charged as operating expense.


Gordon Benjamin Isnor: In the first place they would
be charged as a capital expenditure?


John Campbell Elliott: They would
not be charged against the Post Office Department even in the first place. What I am endeavouring to show is the estimated value. I am doing this in compliance with the many requests made by hon. members when we were last passing our estimates. The details which are very extensive have been furnished to me by my colleague, the Minister of Public Works (Mr. Cardin). The total value of space occupied in public buildings and services rendered is $2,555,072.58. That is that side of it.
There is a service rendered by the Post Office Department for which no charge is made. I refer to the franking privileges extended to other departments and to the members of this committee. Based upon the revenue which would be obtained from a similar amount of mail, this is valued at $1,101,763.


Richard Bedford Bennett: I remember asking once before how such an estimate would be arrived at.


John Campbell Elliott: I asked exactly the same question myself and the answer I received was that it could be given accurately by basing it upon other material being sent out. In addition, we run a savings bank. When profits are made from this operation they go into consolidated revenue, but every other expense connected with this phase of the department is borne by the department. The estimated cost for last year is $80,000.


John Ritchie MacNicol: Is that the profit?


John Campbell Elliott: No. that is the cost of running the bank. Any profits would go to my friend the Minister of Finance (Mr. Dunning).


Charles Avery Dunning: Who also bears the losses, if any.


Richard Bedford Bennett: There is no transfer of profits?


Charles Avery Dunning: No.


John Campbell Elliott: Those two,
together with the $3,266,000 of surplus, make a total of $4,348,571. Deducting the $2,560,000 for servicing and rental of buildings leaves a surplus of $1,788,571.
I think I should refer to another matter in connection with which some questions have been asked. We receive certain services from some steamship companies for which a subsidy is paid. A fair estimate of the value of those services would be somewhere in the vicinity of $300,000.


Richard Bedford Bennett: I do not want to interrupt the minister, but it must be more than that if the department charges for the services on a cubic foot basis.


John Campbell Elliott: No. I am told by the departmental officials that that is a fair estimate of the value of these services to the department. I can give my hon. friend only what I have received from those who have figured it out.


Richard Bedford Bennett: Well, if the rest of the work is as good as that, they are doing well.


John Campbell Elliott: Well, we hope we are. That is the situation as far as that is concerned. I have made that explanation to see if those figures would satisfy hon. members who were anxious to have some information along these lines.


Abraham Albert Heaps: I am glad that the Postmaster General has brought down something in the way of a departmental report. Last year he promised to do so. After all, this report is only a partial statement of the workings of the post office. I should have liked it to include much more detail than he has been able to give us, but I realize that it has entailed a good deal of work on the part of the officials, and another year, no doubt, it will be rendered in greater detail. It would be a good thing if the post office estimates were dealt with in the same way as those for the railways, referred to a committee of the house to be gone into carefully. Our post office is a
31111-39 J
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utility; it should stand on its own feet and not be a charge upon the public treasury. I understood the Postmaster General to say that there was a surplus of-was it $1,700,000?


John Campbell Elliott: 



$1.78S,000.

Richard Bedford Bennett: The minister said $1,800,000 in round figures.


Abraham Albert Heaps: Is that the net profit or the estimated profit on the operations of the post office?


John Campbell Elliott: We are estimating the last three months, but the estimates we have made are quite in proportion to the increase for the nine months that have already expired. If it is realized, we shall have a surplus, if we do not take in the $300,000 steamship subsidy of $1,788,571,


Abraham Albert Heaps: After allowing costs of operating the buildings and the rental of the buildings which come under the jurisdiction: of the post office.


John Campbell Elliott: Yes; my hon. fiiend is quite right. The difference between the revenue and the expenditure on an operating basis is the amount that I have stated.


Mr. BAKER:: Is that before the department pays the rent, or afterwards?


John Campbell Elliott: Afterwards.


Gordon Benjamin Isnor: Will the minister tell us whether the item of rentals has been taken into consideration in previous years, particularly since 1932?


John Campbell Elliott: If I understand my hon. friend's question, he asks if it was included in the other years. I have already stated that it has not been included since confederation.


Gordon Benjamin Isnor: This year the minister is going to include it? [DOT]


John Campbell Elliott: No. I am showing only what the result would be if we were to figure on that basis, and I gave that estimate for the information of those who wanted to know what would be the result if that other system of bookkeeping were adopted.


Gordon Benjamin Isnor: In view of the. fact that, on the minister s own statement, a great many members are interested in this particular item, is it the intention to include it in future as a regular item of expenditure?


John Campbell Elliott: As far as intention is concerned, that is something which will be disclosed after it is decided upon.
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Some hon. MEMBERS:: Oh, oh.


John Campbell Elliott: May I make myself clear? You cannot give expression of a government's intention in a matter of that kind until a decision has been reached.


Gordon Benjamin Isnor: Perhaps this is a laughing matter; I do not know.


John Campbell Elliott: I do not think it is.


Gordon Benjamin Isnor: To me it is a matter of business. Ever since confederation the practice of the department has been to set up in one column its revenue and in the next column its expenditure, and one subtracted from the other gives the net deficit or the surplus as the case may be. This evening the minister comes here and, after having been questioned with regard to the set-up of expenditure, says, in effect, we should or perhaps we shall include an item running into many thousands of dollars. Then, when I ask whether it is the intention of the department in future to include this expenditure, he laughs.


An hon. MEMBER:: No, that is not correct. We laughed.


Gordon Benjamin Isnor: Then, I say, members of the house are not dealing in a businesslike way with this matter.


An hon. MEMBER:: Do not be too serious.


Gordon Benjamin Isnor: I am not too serious, but I do not want to be laughed at when I am asking a question that I consider I am entitled to ask.


An hon. MEMBER:: We were not laughing at the question; we were laughing at the answer.


Gordon Benjamin Isnor: May I point out that in 1935 the report shows a surplus of $2,274,007.94. In view of the statement which has been made by the minister we can take it for granted that that is not correct. The same thing applies to the 1936 report, showing a surplus of $2,407,768 and some odd cents. We can also take that statement as not being correct. This year, we are told, the item of rental is to be included.


Some hon. MEMBERS:: No.


Gordon Benjamin Isnor: That was included in giving the net surplus. I believe that if we are going to have a true picture of the position of the post office along the lines indicated by the minister the other evening, we should have the complete set-up of the revenues, including, perhaps, items that are not mentioned, fees collected by his various officers
ii*r. J. C. Elliott.]
throughout the country for the sale of radio licences. I do not know whether that is taken into consideration; I do not see any mention of it. All these items should be included as revenue, and all other relevant items on the other side; then we shall have a true picture showing whether the post office department is paying its way. Until we have that, I do not think the minister is in a position to say "Yes, I can state that the department is paying its way."


Mr. DEACHMAN:: I should like to support the view expressed by the hon. member for Halifax (Mr. Isnor). In the administration of any department it is essential that all the facts should be revealed. If there are some items which the Post Office Department is getting from the other departments- as, for instance, the public works department -it should pay for them, and if the post office department is giving service to other departments of the government those departments should pay the post office, in order that when the yearly statement is brought down it will reveal to the public exactly what has happened.
One other item which the minister has mentioned relates to subventions to certain steamship companies. Apparently those companies are receiving subventions and also carrying the mails, and that is not charged against the department. We ought to know how much we are paying for steamship subventions and also how much is being paid for carrying the mails.
In this connection there is another matter I want to point out which I am sure the minister will appreciate. If the Post Office Department is paying rent for buildings, then the minister, as the shrewd manager of a business department, will endeavour to see that the rent is as low as possible. It is more than probable that if we had a separate department constructing these buildings and operating them, the eagle eye of the Postmaster General might not be quite so keen and his Scotch sense of thrift might not exercise itself with the same intensity as if he were footing the bill himself. I suggest, therefore, that in this department as well as in others we should have all the facts so as to know exactly what is being done, and when there is an achievement such as there is this year, a surplus being presented, we shall be able to congratulate the minister more fully than we now do inasmuch as we shall know the statement contains all the facts and is an exact reflex of the operations of the department.

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Mr. POOLE:: What is the amount which is collected in stamps used on cheques and which should be going into the consolidated revenue fund instead of to the Post Office Department?


John Campbell Elliott: We have no means of estimating the value of stamps used on cheques.


Eric Joseph Poole: Then how does the minister know' what should be going into the consolidated revenue fund?


John Ritchie MacNicol: In arriving at the surplus, does the department take into account the matter alluded to by the hon. member for Huron North (Mr. Deachman), namely, the mail subsidies to steamships? Is that deducted from the Post Office Department or is it charged to the department?


John Campbell Elliott: In the estimate I prepared I did not deduct that; I called attention to the amount. It has never been the practice to deduct it and I am not deducting it. I am simply giving the estimate arrived at by the official of the department.


John Ritchie MacNicol: I suppose that the subsidies to steamship lines include allowances for both mails and freight. If, in the amounts quoted as steamship subsidies, allowances are made for carrying freight, is the minister able to tell us how much is paid for carrying the mails and how much is allowed for freight?


John Campbell Elliott: The subsidies are made by the Department of Trade and Commerce and I cannot give them accurately. All I am attempting to give is the best estimate we can arrive at of the value which the officials of the Post Office Department believe that these subsidies represent in the way of transportation of mail matter.


John Ritchie MacNicol: Are they not charged against the Post Office Department?


John Campbell Elliott: No; against the Department of Trade and Commerce.


Richard Langton Baker: Does the minister not agree that the rentals which have not been charged in the past for the buildings used should be credited from his department to the public works department? And should not the revenue from stamps, which belong to the finance department, be credited to that department.? Would he not recommend that system in future in connection with these items? No one can tell from the figures which have been given whether the department is making a profit or not.


John Campbell Elliott: If my hon. friend had followed me he would see that the department had a surplus whether we counted those or not. There are certain items that enter into transactions which take place among the various departments and they make it difficult to estimate accurately the payments which are made in different ways and which are of value to one department or another. There is an item that might properly be charged on the other account, and that is civil government. The cost of civil government enters into the handling of all the mail that is franked. If my hon. friend went into the matter he would realize the difficulties that stand in the way of an accurate estimate of the amounts which should be charged for these various services. Let me say in reply to my hon. friend (Mr. Deachman), I know something of the workings of the public works department and I believe that one department can put up buildings and rent them much more cheaply than if the work were divided among two or three or half a dozen different departments.


Robert John Deachman: I did not suggest that it should be.


John Campbell Elliott: No; but what my hon. friend did suggest was that if the Post Office Department were making these arrangements for rentals they would exercise thrift a little more, having to pay the money themselves. If my hon. friend says I misunderstood him I am glad to hear it, because I happen to know something of the workings of that department and I do not believe there is any other department of the government that scrutinizes more closely the obtaining of buildings at reasonable rentals.


Richard Bedford Bennett: Times may have.-
changed1,	?


John Campbell Elliott: No. I
followed this pretty closely during the past six years when other departments were not doing as well as I thought they might have done, and I must say to the credit of the Department of Public Works that in those six years they did a lot better than many other departments.


Richard Bedford Bennett: I desire to make a few observations about the operation of the Post Office Department, for it is a department in which I took a great deal of interest before having any responsibility with respect to it, because I thought it might be conducted in a little different way. I suppose there has not been a House of Commons since confederation in which there has not been a debate in connection with the operations of this depart-
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John Campbell Elliott: Are those
total expenditures or total revenues?


Richard Bedford Bennett: Those are the total expenditures.


Abraham Albert Heaps: Is that nothing more than
the post office?


Richard Bedford Bennett: I said it includes telegraphs, telephones, the post office, and the savings banks in a small way. For the expenditures they have the annual votes, and they expect to have a small surplus on the year's operations. It is treated as I say as a separate and distinct business. What made me think of it was the question asked to-night by the hon. member for Swift Current (Mr. Bothwell) in connection with the Canadian National Railways. One who has listened to what has taken place to-night will at least understand the difference between the operation of a railway and of the post office, whatever else may be said. In Australia they do operate it as a business, separate and distinct. The estimated revenues are stated to be so much from the sale of stamps, so much from the various services-


Major James William Coldwell: May I ask a question? Is this run as a political arm of the government or as a business, without political patronage?


Richard Bedford Bennett: 
An hon. MEMBER:: Production for use.


Richard Bedford Bennett: Yes, production for use
and service, and not for profit. That has been the general rule which has prevailed in most countries. It has never been regarded as a large profit making organization, but in many parts of the world they have put it on a business basis. So, while congratulating the minister, I think it is not quite fair to conclude that the general exchequer has shown such great improvement, because in the end it will be found, I should think, that with proper charges we have about a balanced condition of affairs. If the department is conducted on a hit-and-miss basis, such as an estimate of $300,000, I should not judge that this was very much to be depended upon. If on the other hand it is carried on in the light of exact receipts and disbursements, as is the case in connection with postage stamps, for instance, we can perhaps better appreciate the situation. The profit on postage stamps, for example, is the difference between the cost of making them and what you get for them, but you cannot work that principle into every question with which you have to deal. It might be well
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for the minister in the recess to give some little consideration to the question as to whether, even at this late date, it might not be possible to treat the department as on a purely business basis, as what one might call one of the departments of business of government. I have long had that hazy idea in the back of my head. Like many other ideas I have, it may be in the opinion of hon. gentlemen opposite, not very valuable, but I was desirous of seeing the extent to which that situation existed in other places. I had heard much of it, and I am bound to say that my investigation made me believe that not only is it practical but that it has worked with very great success in other parts of the king's dominions.


Robert John Deachman: There is just one
question I should like to ask the minister. Freight and express rates in Canada have declined sharply, I think, since about 1918. I should like to know if there has been a corresponding decrease in the cost of moving the mails. What was that cost in 1918, say, as compared with last year?


John Campbell Elliott: I shall be
very glad to obtain that information for my hon. friend. I do not have it before me and my assistants tell me it is not in the data they have. There has been no substantial change for a number of years. ,


Robert John Deachman: Since 1918?


John Campbell Elliott: No, but for
a number of years past.


Robert John Deachman: I am going back to a time when express and freight rates were high in order to see if our friend the Minister of Transport (Mr. Howe) is getting away with too much.


Mr. ELLIOTT (Midfdlesex):: I quite
agree, and I shall be glad of the assistance of everyone to see if we can get a little more out of the Minister of Transport.


Mr. RYAN:: I should like to ask if
there was not a substantial cut in the subsidy paid the Canadian Pacific on the Atlantic service.


John Campbell Elliott: Yes, I am
advised that is correct. Offhand I cannot give the amount, since that comes under the Department of Trade and Commerce.
I should like to say just a word to my right hon. friend the leader of the opposition, for whose opinions I have a great deal of regard, particularly with respect to financial matters. For the transatlantic service payment is made on the basis of space, as he has said; for the [Mr. Bennett. J
transpacific service payment is made on the weight basis. I am told positively that the estimate of $300,000 is a fair one, but I shall be very glad to have it reviewed.


Charles Edward Bothwell: On page 38 of the estimates we have an item of $2,087,470 for mail subsidies and steamship subventions. Surely it should be possible to analyse item 135 and show just what portion applies to mail subsidies and what portion to steamship subventions.


Richard Bedford Bennett: The hon. member for Swift Current undoubtedly remembers some of the representations which were made in communications directed to members of the house in times past with regard to the cost of the movement of mails in relation to subsidies. I quite agree that we should be able to break down that item. I was going to ask the minister, if I might, in view of the position which he discloses, if he thinks the revenues will bear a reduction of postage to the two cent rate again.


John Campbell Elliott: I am not going to express any opinion on that. All I can say to my right hon. friend is that apparently the opinion of this committee is that we are undercharging ourselves in connection with certain items that should be charged against the Post Office Department. I suppose a great deal will depend upon just how the finances work out. While the situation is encouraging from the old standard of bookkeeping, it is not very encouraging from the standard which has been adopted by various other governments, including the government that was in power before us.


Richard Bedford Bennett: Would the minister think it too much if I asked him to give an indication of how that item is made up? I should like to have on the record how the revenue is made up; it will be helpful for the future.


John Campbell Elliott: I shall be glad to give that information, and I want the committee to understand that as far as I am concerned I consider all these questions helpful. I must confess that frequently I find myself in doubt in regard to many matters. Even after having been in the department for a year, I do not know it nearly as well as I should think would be possible for a person who had been there longer.


Richard Bedford Bennett: I understand there is one gentleman in the department who hardly knows the minister.


John Campbell Elliott: Certainly he is missing a great deal.

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Richard Bedford Bennett: I am told that it is involuntary on his part.


John Campbell Elliott: It must be. The total revenue for the year 1936-37 is:
Postage stamps, postcards, etc. . . $28,205,589 10 Postage paid in cash on newspapers	 1,808,570	77
Postage paid in cash on third
class printed matter	 920,590	86
Postage paid in cash on metred
mail	
4,032,781	43Postage paid in cash on parcels..	3,372,791	51Postage paid on gold shipments..	35,989	65
Rents on letter boxes and
drawers	 313,403	83
Commission received on money
orders	 1,484,457	55
Commission received on postal
notes	 295,000	00
Commission received on foreign
money order business	 5,921	97
Profit in exchange on money order transactions with other
countries	 24,707	11
Postage on parcels from other
countries	
439,954	28Transit charges on correspondence from other countries.	.	.	180,525	80
Collections from the sale of rural
mail boxes	
18,556	00Lapsed postal notes	
8,000	00Lapsed money orders	
15,706	49Miscellaneous revenue	
15,653	05
Deductions
Salaries and allowances paid to
postmasters at revenue	offices. $6,353,740	02Discount to stamp vendors and postmasters and compensation to messengers for special delivery of letters	
321,006	29Losses by fire, burglary, etcetera.	2.484	14
Loss in exchange on foreign
money orders	
916	77Commission paid to other countries on money order business.	12,545	94
Postage on parcels to other
countries	 82,096	99
Transit charges on correspondence to other countries.... 74,745	04
Indemnity paid to owners on
lost insured parcels	 20,629	37


Richard Bedford Bennett: That is the break-down?


John Campbell Elliott: Middlesex): Yes.


Major James William Coldwell: To-night we have listened to a profitable discussion. The contribution made by the leader of the opposition in bringing to our attention the manner in which post offices are run in New Zealand and Australia should prompt the committee to inquire into ways and means of operating this great public utility on a more businesslike basis. I have not been a member of the house for very long, but during my short stay I have had all kinds of persons speak to me regarding the manner in which rural mail contracts and post office appointments are undertaken and made. As I am a non-government
member, of course that does not mean that one has been approached for such appointments, but it does mean that in Canada, to a great extent apparently, the post office is looked upon as an arm for political patronage.
It seems to me that in all probability many of our troubles in the Post Office Department proceed from that particular cause. Where you have that kind of appointment and' that kind of operation I believe you have inefficiency. As one who a few years ago had to make some investigation of the civil services of both New Zealand and Australia, I know that the efficiency of their services is due largely to the fact that they have been removed from political patronage. The sooner hon. members face the matter squarely and realize that we shall never have our post office or any other institution efficient until we remove political patronage from the service, the sooner shall we have the service for the benefit and use of the people of Canada.


Donald MacLennan: Is it not efficient now?


Major James William Coldwell: No, it is not. The fact that we had the statement brought down in the way in which it has been brought down in the last two years proves that we know nothing about the service in detail. The discussion we have had to-night regarding subsidies and payments for the carrying of mail shows that so far as we are concerned we have no conception of the business basis of the Post Office Department. When an organization such as that department cannot produce before the House of Commons a statement giving us a more approximate idea of the relative costs of the various services, and the relative receipts, such department is not efficient.


Donald MacLennan: The hon. member
attributes it to politics?


Major James William Coldwell: To a very large degree I attribute it to political patronage within the service.


Gordon Benjamin Isnor: Included in>
the item is the salary of the superintendent of air mail service. I do not know whether I am entitled to discuss that phase of the matter at this time, but-


John Campbell Elliott: That amount was passed under the civil government vote; however, so far as I am concerned I have no objection. The only point I make is that I should not like the doors to be opened wide, and to go back to discuss all persons who come under the civil government vote.
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Gordon Benjamin Isnor: I purpose discussing it, not in a personal way, but rather from the standpoint of the service. Before doing so I should like to express my pleasure at seeing the increased revenue derived1 by this department in the past year. I know that in the east we had an exceptionally busy Christmas season. The Nova Scotia newspapers gave glowing accounts of the efficient servige rendered by the post office employees, and I wish to take exception to the remarks of the hon. member for Rosetown-Biggar-


Some hon. MEMBERS:: Hear, hear.
Mr. ISNOR; 

when he speaks of the inefficiency of employees of the department. I come in close touch with the Post Office Department in Halifax, the centre for Nova Scotia, and! I want to say that we have an exceptionally efficient and loyal staff. I believe the same condition applies equally throughout the whole province.
May I point out that we of the province of Nova Scotia appreciate the air mail service given in New Brunswick and Prince Edward Island, but unfortunately that service has not yet reached Nova Scotia. Ours is still the only province in Canada which is not served by air mail. May I draw particularly to the attention of the minister the fact that I believe we are entitled to the service, along regular lines. However, at this time the department has received from one of the air mail lines an offer under which it will not cost Canada a single cent to provide air mail service to Nova Scotia. With an offer such as that before it, I fail to understand why the government has not accepted the service and put it into operation in Nova Scotia. I draw the matter to the attention of the Postmaster General in the hope that he will not lose much time in giving air mail service to our province.


Major James William Coldwell: May I make a correction, because I do not wish to be misunderstood. I was not criticizing the efficiency of the permanent employees under the civil service commission, but was discussing more particularly the service in the rural areas and the patronage to steamship and railway lines. I was not referring to the general, permanent service.
Mr. BOTHWELL; What particular complaint has the hon. member for Rosetown-Biggar about the rural service, and where does he believe the Post Office Department loses money through any patronage he might have seen exercised in his district?

Mr. COLDWrELL: I am pleased to answer that question. I would say that efficient people carrying the mail and running the post offices are changed sometimes when there are changes of government. It requires a considerable amount of time for a man or a woman to become efficient in a new job. Every time there is a change a new official must be trained, and I say that is a source of inefficiency. It lowers the morale of the whole service.


Charles Edward Bothwell: I can speak only of conditions as I know them, and I must say that I am not very favourably impressed by some of the work that has been done by the civil service commission. In the constituency which I have the honour to represent I know of instances where men have been appointed by the civil service commission to jobs for which they were in no way qualified. I know of one man who obtained marks of 98 per cent in the examination and yet was passed by in favour of a man who knew practically nothing about the work to be done. That is aside from the Post Office Department. I have represented my constituency since 1925 and during that time there have been only two changes in postmasters. These changes were not made because of political patronage. One man was using the post office as a recruiting ground for a political party, and when the citizens of the district protested he refused to desist. Such a man was not fitted for the post he held and he was dismissed. If that could be called political patronage, then there was political patronage. After looking over the situation for many years in my constituency, I have not seen any inefficiency. I do not believe the charge made by the hon. member for Rosetown-Biggar is correct, unless the situation in other parts of the country is different from that which I have observed in mine.


Mr. REID:: I should like to say a word or two on behalf of the rural mail carriers. These carriers do not come under the civil service; they are not appointed through patronage, which might perhaps be better; they carry on under the tender system. There are men in this country carrying the mails for less than the service is worth. They also have to make a considerable capital investment to provide motor cars. These people should be protected even against themselves. I should like to see the Postmaster General (Mr. Elliott) give some consideration to these rural mail carriers.
Another point to which I should like to refer is the order in council which stipulates that twenty per cent of the permanent staff

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must be temporary. This places a great hardship on many postal employees. Some of them must work ten, fifteen or twenty years before they are placed on the permanent staff. During those years they are precluded from contributing to the superannuation fund. I ask the Postmaster General if something cannot be done to permit men who have been postmen for, say three, four, five or six years to be placed on the permanent staff and not to allow them to go into old age while still on the temporary list.


Mr. McIVOR:: As a new member I was
surprised that I did not have to pay any postage on the letters I posted. If the Postmaster General and his staff did not do anything but carry the letters of the 245 members of this house, they would certainly be deserving of commendation. A dollar a day for 245 members-the hon. member for Huron North (Mr. Deachman) is not here-for 100 days, which would be a short session, would mount up into the millions.


Some hon. MEMBERS:: No.


Daniel (Dan) McIvor: I am not a mathematician.


Some hon. MEMBERS:: Hear, hear.


Daniel (Dan) McIvor: I want to say that I am better able to pay my postage now than I was before I came into the house. I think members of parliament should pay their own postage and thus put the post office on a paying basis. I have just one criticism to make. I should like to see the letter carriers get their holidays on Christmas day and Good Friday.


Gordon Benjamin Isnor: I should like an answer to
my question with reference to the air mail service.


John Campbell Elliott: I have been trying for some time to get around to answering my hon. friend, but there seems to be so much zeal in offering commendation of the present system that I have not had an opportunity. With regard to Nova Scotia, I may say to my hon. friend that it will be a great pleasure to the officials of the department and myself when we reach the time when we can give the service to *which he has just referred. I may say that this matter is receiving serious consideration and I hope to be able to make some reply before very long.
With regard to the hon. member who spoke last (Mr. Mclvor), I want to say that he stands in a class by himself. I have been in this house for a good many years and his is the first protest I have ever heard against the franking privilege granted to members of the house.


Thomas Reid: His mail must be light.


John Campbell Elliott: Perhaps I
could answer two or three of my hon. friends who have spoken. As far as Christmas day and New Year's day are concerned, I do not see how it would be humanly possible to do without a service on those holidays. If I recall rightly, the receipts for the month of December were a little over $403,000 more than they were a year ago. Indications very early in the season were that this was going to be an unparalleled Christmas season. Apparently this was some indication of how the people of this country felt toward one another. May I refer to the city of Toronto-I do not want to pick out any particular place because I have not always picked out Toronto-


John Ritchie MacNicol: It is a good Tory town.


John Campbell Elliott: -as the city *that has sent the best representatives to parliament. However, it has been improving in this connection. Perhaps my hon. friend will sympathize with the officials of the department when I tell him that on one day just preceding the Christmas rush 5,000,000, less 1.000, pieces of mail, incoming and outgoing, were handled in Toronto alone. I should like to say a word with regard to what happens when Christmas day or some other holiday follows a Sunday and a rush is on. I had better explain this, though perhaps I am trespassing on the time of my colleague who is to follow me. We were having Christmas day and other holidays following Sundays. In the large cities, if delivery is not made on Saturday afternoon, the mail that comes in after seven or eight o'clock on Saturday morning stands over until Monday. This year the mail received in the large cities on the day before Christmas and on Christmas day was substantially larger than in previous years. It must not be forgotten that formerly there were deliveries on Christmas day, New Year's day, and all these holidays, and now we are giving to those who handle the mail time off for the hours they serve on the holidays which have been granted them from time to time.


Mr. LENNARD:: Are those employees
satisfied with those conditions?


John Campbell Elliott: I think the
best answer I can give my hon. friend is that a large deputation representing the trades and labour council interviewed members of the government shortly after these changes were put through, and there was not a single protest against the changes.


Howard Charles Green: Perhaps I might ask a
question.
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John Campbell Elliott: I should like
to complete my answer to the hon. member before I reply to any other question.


Howard Charles Green: I wished to know whether
the minister had had any protest from postal employees in the various cities. I am sure there have been protests from Vancouver.


John Campbell Elliott: Yes, we have had protests. I doubt whether my hon. friend was listening to what I was saying. I said we had a large delegation from the trades and labour council, voicing their grievances and asking for certain changes which they thought should be made, and there was not a mention by any one of them of this matter of mail service on holidays. There have been deputations, but I might mention that this arrangement was arrived at only after serious consultation with representatives of the mail service from one end of Canada to the other.
What would have been the position if the change had not been made? We would have had people carrying, on the morning after Christmas, much more mail without any additional pay. We are now paying them extra. It is our intention to ask for an additional sum of about $185,000 to pay for deliveries on holidays and for the time, between now and March. 1, that it will take to work off that over-time. It was thought that that work should be done to a large extent by people who are without jobs, and that the working off of the over-time should proceed during what is, to unemployed men, the hardest period of the year, namely between December 15 and April 1. I am assured by some of those who are affected that it has been a veritable godsend to them to have that extra work at Christmas and to have the prospect of additional work in the first three or four months of this year.


Richard Langton Baker: With regard to Christmas
work, one postman told me he was grateful to be able to deliver on Christmas day because he received in Christmas boxes twice the amount he had ever received before.


John Campbell Elliott: There is no
question about that. You can always get an agitation; they are much easier to start than to stop. But I may say there is no serious agitation against this arrangement. In certain sections serious objections on religious grounds have been made, but we have throughout this country a pretty good class of postmasters, exercising a wise discretion,, and except in the larger places, where the mail can be delivered by midnight on Christmas eve, there is no great amount of pressure exercised for more than one delivery on Christmas day. We want to accord to those

who object on religious grounds the greatest privileges possible, but I would say to them- and I know they are conscientious-that in the households of many of them they have maids working who are doing much more work on Christmas day than they do on any other day of the year. The same applies to New Year's day. Then there are the telegraphers from, one end of the country to the other who work competitively in sending out messages at Christmas, which necessitates much heavier work on Christmas day than on any other day of the year. The same applies to those engaged in work on the street railways, the trains, and various other services. All we are trying to do is, in view of the necessities of the time, to have the mail delivered in an orderly way. Take the city of Montreal: with the immense amount of mail received there this year, if there had not been a delivery on Christmas day the Christmas mail would not have been all out by the following Saturday.


Abraham Albert Heaps: How was it done in previous years?


John Campbell Elliott: It was done,
until a few years ago, in exactly the same way as we are doing it now. Then they got New Year's day, and later on, Christmas day, and may I inform the hon. member for Winnipeg North (Mr. Heaps) that what was said by the hon. member for Eglinton (Mr. Baker) is absolutely true-the great majority of these postal carriers get much better treatment if they deliver their mail on Christmas day than if they wait until the day after. Also, Christmas cards this year were much more numerous than they ever were before in the history of the department. That, I think, is a hopeful sign of the times.


Charles Avery Dunning: A sign of good government.


John Campbell Elliott: What does a Christmas card mean if delivered the day after Christmas? The thrill has gone, as my hon. friend (Mr. Heaps), who, I suppose, gets more of them than any other member of this house except the hon. member who is sitting beside him (Miss Macphail), should know. After Christmas has gone, there is not much thrill in getting a Christmas card.
As to the mail carriers, I think I should deal with them at this time.


John Ritchie MacNicol: The minister is out of order. A number of members wish to talk on that subject.


John Campbell Elliott: I thought I would do away with the necessity of that if I answered, my hon. friend now. With regard

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to the rural mail carriers, first of all it would be necessary to change the act. By section 67, contracts for the transportation of mail, if the amount is over $200, must be advertised for a certain length of time and then let to the lowest competent tenderer who furnishes proper sureties. There is nothing new about the tender system. What would my hon. friend say if, when we were letting a contract, for instance, for one of these buildings, it was not accepted because somebody bid too low? When I was Minister of Public Works a number of people bid so low they failed. The confederation block is an example. The receiver went on and completed it. These people tender at a certain price. Their tenders are not known to anybody else, and the man who tenders at a particular price knows he would rather have that job at that price than not have it. Let me give an example of what happened in one of the rural routes out here. Where we used to have, a few years ago, six or eight tenders on a rural route we had forty-two tenders. I would not be sure about this, but I believe I had a representative from every one of the forty-two, the highest of which was more than double the lowest, wanting the contract at the lowest tender. These people are driving out through the country serving people who are working perhaps longer hours at harder work for the same amount of money they are getting, and I know of very few mail carriers who want to throw up their job at the present time. I should like to see them get more; they will get more as times improve, and I believe we have definite evidence that times are improving. I know, having made that statement, it will render unnecessary any explanation to the hon. member for Parkdale.


John Ritchie MacNicol: I shall not refer to the matter the minister last spoke about, but I want to refer to something he said in reference to Toronto in connection with engaging a large number of temporary posties to permit the regular posties having a few days off after Christmas in compensation for having worked all Christmas day. A postie called at my neighbour's house shortly after Christmas andi as he was a stranger to the community he was asked where he came from. It turned out that he did not belong to Toronto but came from one of the Yorks. I happened to accost him a day or two afterwards and I learned that >he had a temporary job-I suppose a job such as the minister has referred to-and I understand that it will last perhaps until the first of March. I would not for a moment charge the minister with being
partisan. I know he is far too broad-minded to issue orders that all these extra postal employees should belong to the Liberal party. He would1 not do anything like that.


John Campbell Elliott: I am glad to hear the hon. member say that.


John Ritchie MacNicol: I like the broad view he takes of these matters and I know that if he had his way, when these poor unfortunates wanted jobs, he would issue an order to the authorities in Toronto to engage men just as they came along without regard to their politics. But I made inquiries myself, and with respect to all those about whom I inquired I found that back to their great-grandmothers 

at any rate as far back as the inquisitor could go-they were supporters of the Liberal party. I know the minister does not want anything like that, and I should greatly appreciate it if he would instruct the authorities in Toronto it is his wish that in the selection of these temporary employees no questions should be asked concerning their politics. I should like him to issue a warning to the Liberal association there not to send letters to these applicants requiring them to have cards of the Liberal association. Let him warn the officials in Toronto it is his wish that anybody, Jew or Gentile, Hottentot or Greek, Grit or Tory, or anybody else, shall be equally welcome to be engaged by the department.


John Campbell Elliott: I think my hon. friend knows the standing of the postmaster in Toronto in charge of the work there.


John Ritchie MacNicol: A very capable man.


John Campbell Elliott: One of the most capable men who can be found in any service, and that applies to most of the employees throughout the whole postal service, notwithstanding what some of my hon. friends have said to-night. His instructions were to get the best men who could be obtained for this work, and from what my hon. friend says, I gather that he succeeded.


Eric Joseph Poole: I want to ask the minister, in view of his avowed intention of giving us a more simplified statement, whether he would recommend a change in the present practice of using postage stamps on cheques. I have raised this question because if the excise stamp were used, the proceeds would go into the consolidated revenue fund and in that event I believe the Post Office Department might show a deficit rather than a profit.


James Houston Spence: It is amusing to hear the Postmaster General in his present vein of talk, and I wish to congratulate him upon the
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amount of information he has brought to the house. He has brought down more than any Postmaster General has done since I have been a member. No doubt this is due to the questions put last year which he has endeavoured to answer to-night. There is no general complaint at all about the Postmaster General or about the personnel of the Post Office Department, because our Canadian postmen cannot be excelled. But the hon. member for Davenport (Mr. MacNicol) mentioned something which is no doubt true, that politics was played to some extent at Christmas and has been since then. It was intimated that 200 letter carriers were required and an examination was held for the purpose of establishing an eligible list in Toronto; yet, from that day to this, that eligible list has been filled through hon. members who sit in this house, representing North York and one of the Torontos. They can go to the postmaster with three or four names of persons and they are appointed. Then people say to me, " My goodness! Have you lost all your prestige?" I reply, "I have nothing to say just now; go to my friends or to the defeated candidate; he may help you to get an appointment." We never played that game in Toronto until this Christmas. I was closely associated with the Post Office Department and the Public Works Department as the minister knows, and I can assure the committee we never played politics. The work was divided among the different ridings and the returned soldiers got their share. The thing was fair. This year, however, it was an absolute racket, and I am sorry to say the returned men received little consideration. The hon. member for York North (Mr. Mulock) and the hon. member for Spadina (Mr. Factor) were the ones who filled every job they could find in the post office. I am glad to say, however, that our party never played a game of that kind, because we divided the work.
We have heard a great deal to-night about estimates, gross receipts and so on, but at no time have I ever found a Postmaster General able to tell us anything beyond gross receipts; he never knew the expenditures. To-night we have received some information, but I do not think we have yet had sufficient to satisfy this committee that the Postmaster General or anyone connected with the department is running it efficiently. This is due largely to the fact that the Public Works department and the Department of Trade and Commerce do not keep track of the services they render to the post office, the cost of carrying mails on the ships, and the cost of buildings supplied by the Department of Public Works. That department should have a proper

accounting system and charge for each building separately on the basis of its value. The minister said to-night he thought he was paying fair rentals, but we do not know what they may be. He may estimate that postal station A at Toronto cost only Si0.000, but it cost $500,000. How does he estimate this fair rental? Does he base it on four or five per cent of the value? I think at least five per cent should be taken. What is it in Toronto?


John Campbell Elliott: I have before me a list of all the buildings; I shall be glad to give it to my hon. friend.


James Houston Spence: No; we do not want to take up the time of the committee. If the minister can give the information in regard to Toronto, that will be sufficient. While he is looking it up, let me say it is no wonder the post office does not pay; it costs too much for franking privileges. If you went from here to-night on the Toronto train, to-morrow morning at station A you would see the postmen unloading bags of mail piled up ever so high, all franked from this house. Half of the publications from the different departments, and particularly the Department of Agriculture, should be eliminated entirely. We are breaking the backs of the postmen with the weight of the mailbags strapped over their shoulders, and mostly carried for no purpose.


Mr. BRADETTE:: Why the agriculture
department particularly?


James Houston Spence: All the departments. I
am not going to say we should not have the franking privilege from this house, because it would make it very difficult for some hon. members if we did not have it. It would not for me, because I send very little, but I see hon. members sending out stuff that would cost them five or ten dollars a day.


Richard Langton Baker: An abuse of the privilege.


James Houston Spence: I think the minister said
it cost over a million dollars.


Mr. MULOCK:: Will the hon. member
permit a question? Did he mention that before the last general election?


James Houston Spence: No; at the present minute.
I will bet you a hundred dollars that tomorrow morning-


Frederick George Sanderson: Order.


James Houston Spence: And it will be worse before the next election, if things go on the way they are. The hon. member had better keep quiet or I will tell a little story on him. I am not as dumb as he may think I am.

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William Pate Mulock: We never suspected that
the hon. member was dumb.


John Campbell Elliott: If I am not interrupting, I can give the estimated rentals for Toronto. This statement shows the yearly rental value including heating, lighting and cleaning of space occupied by the Post Office Department in public buildings throughout Canada, together with yearly cost of space in rented buildings, including all services. I am not sure that I have all the Toronto buildings; I do not think I have them all in one place. There is the Toronto general post office, apparently the rental value put on that is $14,000; Toronto terminal A, $185,247; station C, $3,285; station D, $2,210; station F, $5,680; station G, $7,370.


James Houston Spence: I must say that the figures are very fair. Those are fair rentals. I am glad the minister is now establishing a system of carrying on the post office in a businesslike way. I shall give the Postmaster General credit for the fact that he has given us more information to-night than we have ever received before, and if he keeps on improving he will do better yet.


Abraham Albert Heaps: He might join the Tory party.


James Houston Spence: No; I am not one of those who cannot see some good in my Liberal friends-if there is any good in them.


Charles Avery Dunning: Oh! Just when you were being nice!


James Houston Spence: I can see some good even in the hon. member for York North, although he trimmed us badly and stole all the jobs from us. He has some good qualities. However, that is getting away from the subject under discussion. A proper accounting system should be kept so that we might know the gross earnings and net profit of the post office, as in the case of any other business. This could easily be done.


Richard Langton Baker: I wish to confirm what the hon. members for Davenport and Parkdale have said, not saying that patronage has never been exercised, but surely it is going too far when, for purposes of patronage, employees for post office service in Toronto during Christmas time, and even now, are hired from outside the city. Surely there are enough unemployed in Toronto, without bringing men in from outside. This is carrying patronage too far. There is a limit to how far the game should be played.


William Pate Mulock: I do not know why my hon. friend should object so much. It seems to me that in the past many voters from Toronto used to come to North York.


Richard Langton Baker: That has nothing to do with what I said at all.


James Houston Spence: Mr. Chairman-


Frederick George Sanderson: Order. I do not like to interrupt the hon. member for Parkdale, but the hon. member for Winnipeg North (Mr. Heaps) has the floor.


Abraham Albert Heaps: I do not like to interrupt the hon. member for Parkdale (Mr. Spence) but I cannot help thinking how interesting it is to find my hon. friends to my right objecting so strongly to patronage. It appears to me that there is always an objection to patronage on the part of hon. members in that section to the left of the Speaker.


Richard Langton Baker: I do not object; I say there should be a limit.


Abraham Albert Heaps: The hon. member's objection is not to patronage in principle but to the way it is carried on. In fact, if patronage were confined to the constituency of the hon. member it would not be so bad, but it is when someone from outside intervenes that patronage is bad, in whatever way it is carried on. I think the present Postmaster General has been good in comparison with his predecessors, but I wish he could eliminate patronage entirely. It would save him a great deal of trouble if he did. The number of jobs given by a member at Christmas time may amount to a dozen or a hundred as the case may be. If the opportunity were given to me of handing out patronage I would not want to take it. I do not think it is right that any member of this house should exercise patronage at all. The hiring of employees should be left entirely to the discretion of the officials of the various departments of the government, and members of parliament of whatever stripe should not interfere. After all, we expect these departments of the government to be run efficiently, and there cannot be efficiency if members of parliament keep interfering with the administration. The best thing that could happen, from the standpoint both of members of parliament and of efficiency of administration, would be for the officials of the departments themselves to have complete control of the men and women employed under them. I know the condition complained of has existed for a number of years. I believe the Post Office Department during the regime of the present Postmaster General has been freer from this fault than in former years.


James Houston Spence: Not in Toronto.
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Abraham Albert Heaps: Toronto has always been a bad spot. Possibly, if the members from Toronto would get together and appeal to the Postmaster General, he might see that the abuses which apparently were prevalent during the last period when temporary employees were hired, dio not occur again. To-night I would appeal to the Postmaster General to see to it that in future years, when extra help is required for the postal service of this country during the Christmas rush, help is hired from the regular employment agencies or other agencies of a similar kind.


John Ritchie MacNicol: Or from the available list.


Abraham Albert Heaps: Or from the available list if that is the desire. It is most unfair, if what has been pointed out is true, that at the behest of a department of the government men should prepare for examinations; that they should write those examinations and perhaps be first on the eligible list, and then that a member of parliament should come along and practically eliminate the list, by employing a few preferred individuals instead of the men who happen to be on the list. I do not think anything could be more unfair than that. There is nothing that brings parliament or a member of parliament into greater disrepute than things of that sort. We would all be better off if we could eliminate patronage from our activities and give our jobs to the most efficient men available for the kind of work that is to be performed.
If I may say a word further, Mr. Chairman, the situation of the postal workers has been discussed this evening. On behalf of our Canadian postal workers I wish to say this:
I think they are an efficient set of public employees, and further I believe that they are prepared to cooperate and assist to the full in an endeavour to make of the Post Office Department an efficient public utility. That being so, I think the way the postal employees were handled by the government or by the officers of the Post Office Department just prior to the Christmas rush was most unfair and, I would add, most unfortunate. It was a bad thing. It is wrong in principle to take away from the employees the holidays they have enjoyed for so many years. The fact that maids may work on Christmas day, that the telegraph companies may operate, that trains may run, that street railway lines may operate, does not in any way excuse the Post Office Department for compelling these postal workers to deliver mail on Christmas day. There is no analogy between the postal service and, say the operation of a street railway system, for the 
simple reason that a transportation system is essential, and it is necessary that it operate every day of the week. On the other hand, it is not so essential that mail be delivered twice on Christmas day, for the very obvious reason that when a postal worker takes mail to a business section on that day he finds practically all the stores and offices closed'. I believe it was the experience of many men delivering mail on Christmas day that they had to take back to the post office a great deal of the mail; at least that is what I have been told by some of t.he employees who were delivering mail on that day. So I say there is no analogy. If, as the Postmaster General claims, it is wrong for maids to be working and wrong for other services to operate on Christmas day, I do not see how he can argue that two wrongs make a right, and really that is what his argument amounts to.
More than that, however, I object to what was done because I believe there was an important principle involved. It is this:	I believe this government is in favour of the principle of collective bargaining; at least I hope so. It has been stated many times by hon. gentlemen opposite that they are in favour of that principle. It is against the principle of collective bargaining between employee and employer for the government, as the employer in this case, to lay down a set of rules and say to the employees, who have had no opportunity of discussing the rules with their employers, "You have to abide by these rules whether you like it or not." That is really what happened in regard to the change of hours.


John Campbell Elliott: May I just
correct my hon. friend. Before the details were arranged, the first question asked was, "Are w,e going to be paid for this overtime?" They discussed the matter with the officials of the department, principally with Mr. Underwood who is in charge of that branch, and while they would have preferred cash for the overtime, I think the great majority of them were fair enough to see that they, having jobs already, should be satisfied that somebody who was without a job should get paid for that extra time. That was what took place.


Abraham Albert Heaps: May I ask the Postmaster
General if this arrangement, this change in the hours and conditions of labour, was taken up by the officials of the department with the unions concerned?


John Campbell Elliott: I do not
know about the unions; I know that before the details were settled the postal employees met with the officials of the department. I

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do not know whether they suggested the interview or whether the department suggested it, but they were here and the discussion as to working out the details lasted a whole day.


Abraham Albert Heaps: Can the Postmaster General inform the committee as to who were here?


John Campbell Elliott: I think I
have the names, but I could not give them offhand.


Abraham Albert Heaps: I do not want to know the
names of the individuals, but I should like to know whom they represented. I have not the information before me; it is up in my room, but I am told that the men themselves were not consulted as to these changes. So far as they were concerned, there were notices posted in the various post offices, and they had to abide by these new regulations. I feel that our government, as an employer of labour, should be a model employer. When the government makes changes which may arouse resentment among those affected, such changes should not be brought about until the men themselves have been consulted so that a more amicable adjustment may be arrived at between the government and the men concerned. The Postmaster General and the officials of the department may have different information, but I am told that this was not done in this instance. I know that in Winnipeg a mass meeting was held and a good deal of objection was expressed to the new regulations which were put into effect by the Post Office Department. I know from the expressions of opinion at that meeting that practically all those attending certainly would have liked to have Christmas day off instead of being compelled to take out two loads of mail on that day.


Mr. POULIOT:: The hon. member for
Winnipeg North (Mr. Heaps) did not speak as a vulgar politician. He spoke as a statesman, and a statesman has no time to receive his electors. He is so busy studying the important problems which may affect the nation that he cannot do anything for the poor little fellow who would like to have a post office in his range or his township just for the convenience of the people around him, the twenty, thirty or forty families who would like to have a post office for their greater convenience. I cannot picture one of those men passing an examination set by a civil service commission which does not know anything about local conditions. Everything is left to the wisdom of the Postmaster General and the officials of his department, who decide first whether it is in the public interest to
establish a post office there, and later whether this one or that one should be appointed postmaster.
My hon. friend does not know about the funny ways of some Tories. I know them better than he does. It is not my custom to trouble anyone in regard to a post office provided that the Tory incumbent does not boast of the fact that he stays there when a Liberal has not a job. The hon. member does not know about all the conditions in the country. He thinks he does, but in fact he does not. He represents a constituency in a very large city, but if he represented a rural constituency in Ontario, Quebec or even Manitoba he would possibly have one of his strongest opponents acting as postmaster in that small locality. That Tory would say, "I am here and I defy the member to dislodge me." That causes some trouble. The member must receive complaints from here and there saying, "That fellow should keep quiet; he has a government job, and he should do his work as postmaster. He should not provoke people. He should not go from house to house canvassing and saying 'I am against him. I have my job and he cannot dislodge me'". That is pretty brassy, and when it is done to the knowledge of the member, the only action left for him, in order not to create trouble for a Tory but to have peace in the community, is to write the Postmaster General and say that within his knowledge so-and-so is creating disturbances by canvassing openly, despite his government job.
That is one point. May I tell the hon. member that I do not believe in the merit system of the civil service commission. He does believe in it, because he does not know about it. I have before me an advertisement for the position of supervisor of time service, and micro-analyst. If anyone approached the hon. member in connection with that job he would say, "I have nothing to do with that; go to the civil service commission." Well, some supporters of the hon. member may admire him for his statesmanlike speeches, but at some time or another they may want a little chance somewhere. We Liberals and Conservatives understand that very well. We try to favour our friends to the greatest extent. We are just vulgar politicians, but the hon. member is a statesman and he will say to that particular man, "Joe"-or Abie or Enoch, as the case may be-"I have nothing to do with that job. You must go to the civil service commission and enjoy the fruits of the merit system. You must fill out your application for the examination, and then if you are the best competitor you will

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get the job, under the merit system. I have nothing to do with it." Then my hon. friend makes a wonderful speech about the League of Nations, hours of work or something like that, and does not give anything to anyone.
I cannot understand why the hon. member is elected; it is contrary to human nature.


Abraham Albert Heaps: I might repay the compliment to my hon. friend.


Jean-François Pouliot: I cannot understand.
Everyone who supports the hon. member may accept his views, support his ideas and believe in his speeches, but on the other hand it is human nature to expect something in return. Hon. members opposite, good Conservatives, understand that very well. I see some who have taken part in provincial politics, and the same condition obtains there. You try to reward your friends the best way you can; it is legitimate.


Abraham Albert Heaps: "To the victor belong the spoils."


Jean-François Pouliot: Not so much as that; my hon. friend is all wrong when he says that. I do not believe every postmaster should be fired at each change of government. My idea is that two Tories should be fired for every Liberal who was fired by the previous Postmaster General.


James Houston Spence: You started it.
Mr. PO'ULIOT: One must be honest about this. Afterwards the other Tories keep quiet and remain in their jobs. But when someone is troublesome or is a source of disturbance in the community he should see the long hand of justice, the long hand of the Postmaster General, reaching out to him and talcing his post office from him.
The hon. member for Winnipeg North is a child, if he believes in the merit system. He knows very well that one of the officials of the civil service commission is still in gaol because he was selling jobs. He must know that, because it was in all the papers.


Abraham Albert Heaps: The Prime Minister believes in the merit system too.


Jean-François Pouliot: He is all wrong in that. He knows one poor fellow is in gaol now because he was selling jobs. The hon. member must know very well that there is more narrow patronage in the civil service commission than there is in any department of the government. The hon. member must know, too, that there is a clique here in Ottawa of ten or twelve-


Richard Langton Baker: I rise to a point of order. Are we discussing the department of the minister, or the civil service commission?


Jean-François Pouliot: I should like to see the hon. member for Eglinton running against the hon. member for Winnipeg North. But to summarize all I have said: I hope some day I may have a private conversation with the hon. member for Winnipeg North, at which time I shall show him my post office files. I have nothing to hide from him or from anybody else. I shall show him human nature at its best and at its worst. Then he must judge for himself, and he will know more about the matter than to-night he has shown he does.


Frederick George Sanderson: Shall the item carry?


Some hon. MEMBERS:: Carried.


Frederick George Sanderson: Item 275.
Post Office-Outside Service

Salaries and allowances, $16,713,338.50.
Mail services, including mail services by air, $14,520,000.	_
Miscellaneous, including $5,000 to provide for payment of compassionate allowances to employees injured while in the performance of their duties or to other persons injured while performing duties in any way connected^ with the postal service or in protecting His Majesty's mails, or to the dependents of such employees or other persons who may be killed while so engaged, payments to be made only on the specific authority of the governor in council, $1,004,600.


Howard Charles Green: Before the item is carried may I say that while I hesitate to impose on the good nature of our friends on the government side of the house at this late hour, I believe that this question of a postal service on Saturday afternoons and statutory holidays is far more important than they realize. Certainly that is true in the cities, and I can speak particularly of Vancouver.
After all, there are thousands of postal employees across Canada who are affected by this new provision. These men are serving Canada, just as we are serving Canada, and I suggest that their position should receive a little more serious consideration than it has to-night. I know hon. members have not meant to consider the matter lightly, but for example there has been talk about Christmas postcards having to be delivered, as though that were the matter of importance.
I believe the issue goes deeper than that. As I understand it the change was made on December 5 of last year, and it was made by order in council or by departmental regulation. I believe, too, that very little warning or notice was given to the postal service. I understand the post offices were given no chance to prepare for the Saturday afternoon and holiday services. In normal times the staff in Vancouver is short, even without the extra work which was added. No previous

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provision was made by the department for increasing the staff. In other words, there was no reasonable or common sense arrangement made to increase the staff to a point where it could handle the extra work.
We find that through the order there is to be a full postal service on Saturday afternoons when practically all business offices are closed. In my own office it is a nuisance to have mail delivered on Saturday afternoon, because it is apt to lie around on the floor or be misplaced by the janitor. I am sure the same observation would apply to thousands of offices across Canada.
Then, in addition there is to be a full- not a partial-postal service in post offices. I assume that service will be given on New Year's day, Good Friday, Victoria day, July 1) Labour day, Thanksgiving day, Remembrance day and Christmas day. On almost all these holidays not only offices but also all stores are closed. Surely there is no need for mail delivery on these statutory holidays. I suggest that there has been no great demand from the general public for mail delivery on these holidays. I understand that postal employees have had their Saturday afternoons and other holidays for many years, so why should a change be made at this time? There is no such thing as overtime pay; a man simply works more one week and less the next. It is all rather uncertain; he does not know what days he will have off. I know there has been the greatest confusion in Vancouver as to when the men will have their time off, and I am sure similar confusion must have arisen in other large post offices.
Will this affect the mail collection service? I understand that contracts for the collection of mail are largely on a six-day basis. Are we to have full mail collections on all holidays and on Saturday afternoons? The minister has said that the extra cost of providing this holiday service will be nearly $200,000. The extra staff required is not being obtained through the civil service commission. In Vancouver the same complaint is made that was made in Toronto. I know that many war veterans were unable to obtain the temporary work simply because they were not of the right stripe politically. It is all very confusing for the service. I understand there has been no request from the public generally for this service. There may have been requests from a few business firms, but I believe that is all. In fact, I understand that the public were more or less surprised when this service was inaugurated.
The Postmaster General has mentioned the difficulty when a holiday falls on a Monday.
Surely it would be possible to make special arrangements to handle the mail on these occasions. I suggest that this change is not fair to the postal employees of Canada and that the matter should be given further consideration. It is a step backwards. In British Columbia the weekly half holiday and statutory holidays are provided for by a provincial statute, but here we have dominion civil servants being obliged to work when other employees, with very few exceptions, have the holidays. I think it is unnecessarily disturbing the postal service and I ask the minister to give the matter serious consideration. I believe he would alleviate the condition if he realized how much dissatisfaction has been caused.


Abraham Albert Heaps: What item are we on?


Frederick George Sanderson: Item 275.


Abraham Albert Heaps: What about item 16?


John Campbell Elliott: That was
carried the first of the evening.


Charles Avery Dunning: In order to clarify the
situation might I point out that the committee has been discussing item 275. For almost the last two hours the matters discussed would fall within the limits of item 16.


John Ritchie MacNicol: Earlier in the evening
I said that the minister was allowing a lot of discussion which was entirely irrelevant. Item 16 is the only item I have heard of to-night.


John Campbell Elliott: That was carried earlier in the day. The leader of the opposition mentioned that it had been called "carried" the last time the post office estimates were under discussion, but had not been marked as such.


Frederick George Sanderson: I may say to the hon. member for Davenport (Mr. MacNicol) and to the other members of the committee that item 16 was carried. I then called item 275.


Abraham Albert Heaps: I never heard it.


John Ritchie MacNicol: I never heard it until this moment.


Abraham Albert Heaps: I do not think anyone here heard the word "carried" in connection with item 16, and we certainly never heard item 275 called.


John Ritchie MacNicol: Surely you do not expect to carry an item of over a million like that.


Frederick George Sanderson: Item 275 is before the committee; item 16 was carried.


John Ritchie MacNicol: I did not agree to item 16 carrying.

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Howard Charles Green: I spoke before that item was declared carried.


John Campbell Elliott: I may say to the committee that I have been following things pretty closely. I am sure if the leader of the opposition (Mr. Bennett) were here, he would bear me out when I say that it was carried and marked "carried." We then proceeded to item 275, which contains many items that were partly discussed the other evening.


John Ritchie MacNicol: Item 275 has not been called to-night so far as I remember.


Eric Joseph Poole: Is it possible for me to have an answer to my question?


John Campbell Elliott: I must apologize to my hon. friend, but I have been trying to answer his question. I understand his question was with regard to the stamps issued by the Department of Finance for use on cheques and as to whether some method could be devised whereby postage stamps would be used entirely for that purpose. The stamps issued by the Department of Finance are excise stamps, and I suppose that is why they were issued. However, a large number of postage stamps are used on cheques. There is no way I know of, without incurring an expense out of proportion to the value of the information obtained, by which we would be able to check up how many excise stamps and how many postage stamps are used on cheques.


Eric Joseph Poole: I do not think the minister understood my question clearly, but I can understand that as there was considerable confusion in the committee. The minister has intimated his intention of giving us a more simple statement and I was asking if he would recommend the use of excise stamps only on cheques, and abolish the practice of using postage stamps. I have made an inquiry at various banks throughout the country and I understand that stamps used on cheques run about forty per cent postage stamps. I understand the revenue derived from the sale of excise stamps goes into the consolidated revenue fund, while that derived from the sale of postage stamps goes into the Post Office Department. When I see an item of $27,000,000 for stamps with a surplus of one and three quarter millions, it might well be that the department could show a deficit rather than a profit. I would suggest that either post office stamps or excise stamps be used exclusively.


John Campbell Elliott: I understand for a time it was not permissible to use postage stamps on cheques, but many complaints were made, particularly in the rural
[The Chairman.]
districts, as to the difficulty in obtaining excise stamps. I think the preponderance of public opinion is in favour of the system as it now exists. I shall be glad to discuss with the Minister of Finance as to whether it is possible to make some arrangement which will clarify the situation as to the revenue derived from each source.
With regard to what has been said by the hon. member for Vancouver South (Mr. Green), there is always a possibility of making some changes which will be of advantage to both parties. I have not found any lack of cooperation among those who are getting time off for Saturday afternoons and the holiday service that they give, and I think it will be found that they prefer a week's holiday at a time to a half day some Saturday afternoon and odd holidays at other times. I repeat that we shall cooperate with them as far as we can and do the best possible under any circumstances which may arise. We came to the conclusion that we must immediately adopt a system of working on Saturday afternoons and holidays, and we shall make such improvements as we can in agreement with the men engaged in the work.


Howard Charles Green: Is it not possible to work
with skeleton staffs on statutory holidays and on Saturdays?


John Campbell Elliott: In the smaller places that is being done.


Howard Charles Green: But is it necessary to have a delivery on statutory holidays? Take any holiday, even Christmas; I think the great majority of our people were accustomed to doing without mail on Christmas day. They would rather have the postman get his day off.


John Campbell Elliott: As regards
the suggestion of skeleton staffs, I can agree with my hon. friend to a large extent so far as the offices are concerned, but in view of our experience so far, I cannot agree with him as regards doing away with deliveries on holidays.


Howard Charles Green: But let us take deliveries on, say, July 1. Is there any reason why the ordinary home owner should get mail on July 1?


Mr. WOOD:: It seems to me that the only "skeleton" there will be in the mail service will be the rural mail delivery man. He is the one about whom I am concerned. Much time has been taken up in discussion about these postal men working on Christmas day. It is a repetition of the same old thing; anything that emanates from the urban centres must receive a great deal of consideration.

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Yet these postal men get pretty good pay; they also receive free suits of clothes, and I do not think they are deserving of nearly as much consideration as those engaged on rural mail delivery.
I have only two minutes, but I want to take this opportunity of supporting the views of the hon. member for New Westminster (Mr. Reid) with regard to the position our rural mail delivery service is in. We discussed that for a few minutes, but we spent an hour and a half talking about postal service in the cities. In my constituency there is a man who drives the rural mail over a route of twenty-one miles for $445, or $1.40 a day. I appreciate the stand taken by the hon. member for Winnipeg North (Mr. Heaps) on behalf of labour, but I do not know why there is so much consideration for these people who happen to live in the specially privileged centres. Lots of farmers have to milk cows on Christmas day and hurry around in preparing Christmas dinner, very often for visiting aunts and uncles. There should be a little consideration for the class to which I have referred, and I hope the Postmaster General (Mr. Elliott) will appreciate the situation with which we are faced. It looks as though there is going to be an increase in the cost of living. What will be the position of these rural mail carriers when they find the cost of living has become so high that they cannot maintain themselves? It is not very difficult for some high-salaried men to get bonuses. The city postal service employees, I believe, come under the Civil Service Act and are entitled to superannuation. But the rural mail man is not protected in any way. As soon as he is off his job, well, he is off, and whether or how he lives does not seem to give anybody any concern.
The minister has been extremely kind and has given us a great deal of latitude in discussing his department. I very much appreciate his attitude and have nothing but praise for the manner in which he is conducting his department. I do not think there have been many complaints in regard to political patronage. In my constituency, at least, there has been no evidence of it.
I should like to get a statement from the minister as to what will be done on behalf of these poorly paid rural mail carriers in view of the way the cost of living is going up.


Charles Avery Dunning: It is quite evident that hon. gentlemen are not going to allow an item to pass to-night. That moves me to say something, in moving that the committee rise, which I think should be said in the interests of the conduct of this committee. The misunderstanding which occurred this evening arose entirely out of our having permitted discussion on an item which was not before the committee. Had discussion been confined to item 16, there would not have been in anyone's mind any question as to whether that item had been passed. In spite of that, for practically the whole of this evening, and most of a former evening, during which post office estimates were before the committee, discussion was permitted over the whole range of the Post Office Department, although according to the rules we should have been discussing item 16, which would have restricted the discussion to the subject matter of the item. I suggest, Mr. Chairman, that there is only one way by which to avoid in future misunderstandings of that kind, and that is to hold the discussion strictly to the item under discussion. I believe it would be in the interests of all of us if that were done, and would prevent future misunderstandings. I move that the committee rise,, and report progress and ask leave to sit again.. It is understood that item 16 is carried.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Monday, February 8, 1937