1937-01-29

Hon. C. D. HOWE (Minister of Transport) moved:: That standing order 63 of the House of Commons, relating to the appointment of standing committees of the house, be amended by adding to the standing committees of the house for the present session a standing committee on railways and shipping owned; oper-atf. , and controlled by the government, to " -lU b<j f.eferre,d accounts and estimates and bills relating thereto of the Canadian [DOT]National Railways and the Canadian Government Merchant Marine for the present session, lor consideration and report to the house-provided however that nothing in the resolutioA shall be construed to curtail in any way the full right of discussion in committee of supply-and that the said committee consist of Messrs Barber, Beaubier, Bothwell, Deachman, Elliott (Kindersley), Ferland, Fiset (Sir Eugene), Fraser, Hanson, Heaps, Howard, Howden, Howe Banley, McKinnon (Kenora-Rainy River) Mc-Larty Maybank, Parent (Quebec West' and South), Ryan, Stewart, Vien, Walsh and Young.


[Stage Direction]
Motion agreed to.
[Stage Direction]
Spanish Civil War


Hon. ERNEST LAPOINTE (Minister of Justice) moved:: That the name of Mr. McLean (Simcoe East) be substituted for that of Mr. Pmard on the standing committee on privileges and elections.


[Stage Direction]
Motion agreed to.

Ernest Lapointe: That the name of Mr. Pinard be substituted for that of Mr. McLean (Simcoe East) on the joint committee of both houses on the parliamentary restaurant		
That the name of Mr. Rheaume be substituted for that of Mr. Howden on the joint committee of both houses on the parliamentary restaurant.


[Stage Direction]
Motion agreed to.


[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved that the house go into committee at the next sitting to consider the following proposed resolution:
That it is expedient to introduce a measure to provide that obligations governed by the law of Canada and payable in gold or m gold coin or in an amount of money measured thereby may be discharged by payment of the nominal or face amount thereof in legal tender ot the country in whose money the obligation is to be paid.
Motion agreed to.


[Stage Direction]
On the orders of the day:
Mr. M. J. COLDWELL (Rosetown-Biggar):: I wish to direct a question -to the Minister of Justice (Mr. Lapointe). I am informed that during the regular nightly CBC news broadcast on Wednesday of this week at 10.45 p.m. eastern standard time it was stated that the government of Canada contemplated the passing of an order in council giving effect to the Imperial Foreign Enlistment Act of 1870 in Canada, with a view to the prohibition of Canadian volunteers fighting in Spain. I wish to inquire whether, and if so why, a decision of such importance is to be dealt with by order in council without first ascertaining the will of parliament now in session.


Ernest Lapointe: The	hon.	gentleman was kind
enough to give notice of this question. No order in council has been passed regarding enlistment in the armed forces in Spain or elsewhere, nor has the government contemplated passing any such order in council without first bringing the question before parliament.
In order to make the information more complete, and as it relates to the same subject, on behalf of the Prime Minister (Mr. Mackenzie King) I desire to answer immediately a question asked by the hon. member for Three Rivers (Mr. Gariepy), being question No. 19 on the order paper, which reads:
1.	Has the government given consideration
to a speech delivered by the Honourable Maurice Duplessis at Three Rivers and published verbatim in "Le Devoir" of January 26, 1937, in which he said:	.	.
"I declare that in our province communistic recruiting has been going on, that our young men have been enrolled to fight for the communists in Spain, that Canadian passports have been procured for them for Spanish ports, not for one or two young men, but for several, which shoivs that an organization exists, and indicates that there is something lacking somewhere."
2.	Is it the intention of the government to investigate these assertions concerning the issue of passports, as mentioned in this speech.
In reply to a question by the hon. member for Kindersley (Mr. Elliott) on January 19, I stated:
In view of recent developments, the question w'hether any special action should be taken regarding the control of enlistment m Canada for military service in foreign countries has been under examination. Canada is not included in the twenty-seven countries, all European states, which are represented on the non-intervention committee organized to deal with the Spanish situation, and which has made recommendations to the governments represented thereon for the prohibition of the substantial enlistment on both sides m the Spanish conflict which has taken place from European centres. The question, however, will continue to be given consideration.
I added that something more would be said on the subject later on. The whole question of the control of enlistment as well as the related question of the export of munitions has been under consideration by the government for some time past. As regards enlistment, members of the house are aware that the Foreign Enlistment Act, passed by the parliament of the United Kingdom in 1870, extends to Canada. The government concluded it would be desirable to propose Canadian legislation on this subject. After examination of the question by a technical committee, instructions were given for the drafting of a bill, which will shortly be introduced.

Home Improvement Loans
As regards application to Spain, I may say that the main section of the act, section 4, provides a penalty for enlistment or inducement of enlistment of a British subject within or without His Majesty's dominions, in the military or naval service of any foreign state at war with any foreign state at peace with His Majesty; the fifth section provides penalties for embarking for such purpose, and other sections deal with shipbuilding and fitting out naval or military expeditions against the dominions of any friendly state. It had been generally held that the prohibition of enlistment or recruiting did not apply to a civil war. This month, in pursuance of its endeavours to secure the acceptance by European states of the policy of non-intervention in Spain, the government of the United Kingdom issued a statement indicating its opinion that the act, and particularly the sections penalizing enlistment or inducement, or embarking for the purpose of such enlistment, are applicable in the case of the present conflict in Spain. As the Canadian government had already decided to introduce legislation on the general subject, it was considered advisable to deal with such specific questions in that connection.
As regards the issue of passports, I am informed that for some months past no application for a passport has listed Spain among the countries to be visited, and no passport has been issued to any person who has indicated Spain as one of the countries of destination. The procedure as to passports will be brought into conformity with any legislation that may be passed by parliament.
PARLIAMENTARY SECRETARYSHIPS On the orders of the day:


Mr. T. C. DOUGLAS (Weyburn):: In the absence of the Prime Minister (Mr. Mackenzie King) I should like to ask the Minister of Justice (Mr. Lapointe) the following question: The speech from the throne last year promised a bill to provide for the creation of parliamentary secretaryships. This bill was not presented to the house last session. Does the government propose to submit guch a bill to the house during this session?


Ernest Lapointe: If my hon. friend is agreeable I will submit his question to the Prime Minister (Mr. Mackenzie King) for reply when he is back in the house.



HOME IMPROVEMENT LOANS


[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved that the house go into 31111-25J
committee to consider the following proposed resolution:
That it is expedient to introduce a measure to guarantee approved lending institutions against losses which they may sustain as a result of home improvement loans made by them, to limit the liability of the government of Canada in respect of such guarantees to not exceeding fifteen per centum of the aggregate amount of home improvement loans made by any such approved lending institution and to not exceeding seven million five hundred thousand dollars.
Motion agreed to and the house went into committee, Mr. Sanderson in the chair.
Mr. BENNETT:: Perhaps the minister will give us as clear an explanation as he can of the whole situation. I thought it might be preferable that that be done now, when questions may be asked if necessary, rather than that time should be taken up in a discussion of the matter before going into committee.


Mr. DUNNING:: At this stage would the committee prefer a general statement, which later could be dealt with when the bill is in committee? Details can be much better examined, of course, when the bill has been brought down, but I agree that in connection with new legislation it is desirable at this stage of the proceedings to indicate broadly what is proposed.
The bill which this resolution precedes is designed to secure legislative sanction for the administration of a plan which has become widely known as the home improvement plan. Briefly stated, the bill asks authority to give a limited government guarantee to loans made in accordance with certain stipulated conditions which will be found in detail in the bill itself, by approved lending institutions for the purpose of making repairs, additions and improvements to urban and rural homes. The guarantee is to be limited to fifteen per cent of the total amount of the loans made by any approved lending institution, and in any case the authority to the government to guarantee is limited to $7,500,000 in the aggregate. This means that the total amount of loans to be subject to guarantee can not exceed $50,000,000. In the bill also, Mr. Chairman, will be found a provision reserving to the government the right to announce at any time that no further loans will be guaranteed.
The plan itself is based upon a recommendation made by the National Employment Commission as a result of extensive investigations into methods of absorbing the unemployed in this country, and into the operation of a similar plan in the United States of America during the past two years.
a
Home Improvement Loans

The recommendation was made by the commission and accepted by the government on the 9th of September, 1936, on which occasion the Prime Minister (Mr. Mackenzie King) made a public announcement in which he stated that the plan in its financial aspects would require parliamentary sanction under new legislation and that such legislation would be introduced into parliament at this session.
The announcement made by the Prime Minister on that occasion met with an enthusiastic response in, I think, all sections ^ of the country. Many requests were received that the plan should be made effective at once in order that its beneficial effects might accrue during the winter months when unemployment tends to be most severe. Under date of September 28 the president of the Canadian Bankers' Association, acting on behalf of all the chartered banks, wrote to me as Minister of Finance stating that the banks had agreed to cooperate fully with the dominion government in carrying out the plan, and moreover that they were willing to commence making loans on their merits without awaiting the legislation, provided they had the assurance that the necessary legislation would be introduced and that it would be in such form as to make the dominion guarantee retroactive to cover loans made in accordance with the approved conditions prior to the passing of the necessary legislation.
The plan as originally announced had suggested a financing' charge not in excess of the discount rate of five per cent for a one-year loan repayable in equal monthly instalments, and proportionate rates of course for longer periods. This was the maximum originally contemplated by the employment commission, and is the rate which was and is still allowed under the United States scheme. While the five per cent rate was intended by the employment commission only to be the maximum, and while such small instalment loans entail a great deal of detail work by way of both investigation and collection, it appeared to the government to be unnecessarily high for the effective working of the plan. Representatives of the banks were therefore called for conference at Ottawa to discuss their offer of immediate assistance and to consider the conditions which would have to be imposed in order to make the loans eligible for guarantee, including the maximum interest charge.
I would be stretching the truth somewhat if I were to say that the banks enthusiastically welcomed the government's proposal to reduce the maximum financing charge from a

five per cent to a three and a quarter per cent discount rate, but I can at least pay the tribute to the banks that when they were fully apprised of the government's intention and desire to make the plan a complete success, they willingly accepted the low interest rate as their contribution to a great national cooperative undertaking, and assured us that they would give the government their wholehearted cooperation in making the plan a real success. I think it is a matter of common knowledge that in the last few months the banks and other lending institutions have been living fully up to this undertaking.
When the conditions imposed had been accepted by the banks, under date of October 15, I wrote to the president of the Canadian Bankers' Association giving him the assurance that the government would introduce the necessary legislation at the next session of parliament, and that the legislation would be introduced in such form as to make the guarantee retroactive to cover loans made prior to the passing of such legislation, provided the loans were made in conformity with conditions approved by the Department of Finance and conditions which, of course, will be embodied in the legislation. On the basis of this assurance the home improvement plan has been in operation since about November 1, and the figures as to loans from November 1 to December 31, during the first two months of operation, as reported to the Department of Finance, indicate that up to that time 81,-
200,000	has been loaned in small amounts, and that, if my memory serves me correctly, about 3,600 loans had been made during that time.


Mr. HEAPS:: Has the minister the figures as to loans to provinces?


Charles Avery Dunning: I have not that information before me, but will have it when we are in committee on the bill. I shall have information by provinces, by cities, the average amount of loans, and analyses of any kind that might reasonably be issued from the standpoint of information required. However I have not the information sought at this stage, and am attempting merely to give a general survey.
I believe the first two months' experience should assure the committee as to the future success of the plan, and I believe there is wisdom in putting it into operation during the late fall and early winter months. I am sure the Minister of Labour (Mr. Rogers) will confirm the opinion of the employment commission. After studying the matter exhaustively they have found that approximately eighty cents out of every dollar ex-

Home Improvement Loans
pended in the project is expended on labour used at some stage of the proceedings. When the bill is under discussion I shall be pleased to table the correspondence with the president of the Canadian Bankers' Association.
Perhaps it is sufficient for me to say at this time that the plan provides for loans to owners of rural and urban homes in order to assist them in financing repairs, additions and improvements. The loans shall not exceed $2,000 on any single property. A provision in the bill to be laid before the house, however, will suggest a somewhat higher maximum with regard to multiple family houses. Another provision will be that the loans shall be made for terms not in excess of three years, except with respect to loans in excess of $1,000, where the maximum term may be five years. All loans are repayable by equal monthly or other convenient periodic instalments.
The bill will provide that the maximum financing charge shall not exceed a discount rate of three and a quarter per cent for a one-year loan repayable in equal monthly instalments, and proportionate rates for longer periods. The loans are based on the character and income of the borrower, and no security by way of collateral or endorsement is required. Furthermore we have attempted to devise a simple procedure in order that the plan may be available to home owners in every community, with a maximum of convenience and economy.
Although I believe the purposes behind the development of the home improvement plan are familiar to all, they may be described as (1) to absorb unemployment, particularly in the building trades where unemployment is most heavily concentrated; (2) to stimulate a revival of the construction industry, which, as every hon. member knows, has been one of the laggards among Canadian industries in the recovery movement, and
(3)	to make it possible for home owners throughout Canada to make long-needed repairs and improvements to their homes.
With regard to the experience in connection with a similar plan in the United States, may I say that in that country the plan is known as the modernization credit plan, and was initiated in the summer of 1934 under title one of the Federal Housing Act. It has now been in operation for over two years, and has met with striking success. In the first twenty-two months of operation, namely up to June 1 of last year, a total of 1,056,000 individual loans had been made in the United States for an aggregate amount of $382,000,000. In an official booklet issued by the federal housing administration of the
United States under date of July 20, 1936, the following statement is made:
Losses of the 6,289 financial institutions which have made loans under the modernization credit plan and which have been paid by the federal housing administration have to date totalled less than one-half of one per cent of the total amount of their advances. A survey made in the early part of 1936 showed that these loans on the whole had had an excellent record for prompt repayment. At that time only a fraction over two per cent of the total number of loans were in default thirty days or more. A total of 4,333 financial institutions reported that they had no accounts that were delinquent thirty days or more.
That is the experience of the United States plan up to June of last year, as officially reported.
Later information indicates that by the end of 1936 close to $500,000,000 had been borrowed under the plan in the United States, and the authorities there estimate that for every dollar borrowed, private capital has spent an additional $3. On that basis they have arrived at the conclusion that a $2,000,000,000 construction repair program has apparently been the result. No up-to-date figures as to actual losses in the United States are available, but it is estimated by the authorities of that country that they are still less than two per cent, and that the actual eventual loss to the government will be under one per cent.
In the original United States plan the government of that country guaranteed the lending institutions against loss up to twenty per cent of the total amount of loans. Later the insurance against loss was reduced in that country to ten per cent, and provision was made for increasing the limit of loans up to $50,000 with respect to certain larger properties such as apartment houses, manufacturing and industrial plants, colleges, churches, hospitals, business and commercial buildings, and so on. In this legislation we are not contemplating going beyond the home.
In connection with the amount of the guarantee, I would say that while we have provided in the legislation and in the resolution now before the committee for a guarantee up to fifteen per cent of the amount of the loan, judging from the experience in the United States I believe that the losses incurred will be only a fraction of that amount. However, it appeared essential that if we were to achieve the success we had in mind we should remove any hesitation which might otherwise be evident in the attitude of the lending institutions. Consequently, a fifteen per cent guarantee is asked for. I think the attitude of the lending institutions is at least in part the result of this decision, especially
Home Improvement Loans

in view of the fact that in the United States the lending institutions secure a much higher rate on the government guarantee home improvement scheme than we are proposing to allow under the legislation of which this resolution is a necessary preliminary.
This is all I wish to say in the way of a general statement. I think the details with respect to terms and conditions and standards and all the rest of it can be discussed much better when the bill is in the hands of hon. members. The bill will be distributed just as soon as the resolution is concurred in.


Mr. POULIOT:: Mr. Chairman, I listened with great attention to the explanations given by the Minister of Finance (Mr. Dunning). Every hon. member of this house is favourable to the improvement of Canadian homes, but it seems that such improvements should be made by those who already have the money to make them. There are thousands and thousands of men throughout the country who have money deposited in the banks, and who are keeping it there instead of spending it on home improvements. Since 1930 many people have been sitting on their money instead of spending it. They have been waiting for the proper time to spend SI,000,
82.000,	85,000 or perhaps S10,000 to build a barn, to purchase land for a son, to paint a house, to build a store, and so on. They are not yet spending their money as freely as they did when this government was previously in power before July, 1930. The Minister of Finance (Mr. Dunning) left the people of Canada a wonderful souvenir when he presented that budget which showed a surplus of over 840,000,000. That was a long time ago, and we have passed through some strenuous years.
Before giving an opportunity to people who have no money to get some from the banks, it would be much easier to induce those who have money to spend some of it. The results can be seen from the bank clearings. The last year my hon. friend was minister of finance, before July, 1930, the bank clearings amounted to $20,000,000,000. The year after, under the guidance of the leader of the Conservative party, who was then minister of finance, the bank clearings dropped down to
815.000. 000.000. People got very tight with regard to money matters because they had very little confidence in the government of the day.
Before passing such legislation as is proposed, two things should be done. First, we should fire all the Tories which the previous government put into strategic positions, and, second, we should repeal every piece of legisla-

tion passed by that government. If that were done, public confidence would be restored and people would begin to spend their money more freely. It is all very simple: we do not need any legislation. Fire the Tories and drop the Bennett legislation into the wastepaper basket. Then the people throughout the land will breathe easier.
This is one of the ideas of the employment commission. I do not believe in supermen or wizards. The chairman of this employment commission is a so-called wizard, but we do not need any wizards in this country. What we need is people with common sense.


An hon. MEMBER:: Hear, hear.


Mr. MacNICOL:: When the hon. member refers to common sense he looks over to this side.


Jean-François Pouliot: I was not referring to the hon. gentleman, but if I were it would be in connection with " cents." I was referring to "sense." This idea really came from the hon. member for Essex West (Mr. McLarty), who suggested it to the chairman of the commission. Here is what will actually happen. Joe has poor credit while John has good credit at the banks. They will both go to the bank to try to get $500 to improve their homes. Joe will get nothing because his credit is no good, while John will get the $500 he asks for. But he would get it even if there was no such legislation. If his credit is good he will get the money right away, whereas if his credit is no good, he will get no money from the bank. All this legislation actually changes nothing. We will have to come back to the good old policy of firing all the Tory strategic *men and dropping the Bennett legislation into the wastepaper basket. When that is done business will be good throughout the land.
The second idea brought forward by the employment commission was the classification of the unemployed. This idea was suggested by the member for Temiscouata. He carried on this classification himself, and then it was continued very efficiently by the Minister of Labour (Mr. Rogers). This work vras dene without the help of the commission; the ordinary staff in the department were able to do all that was necessary. Since September this work has been in charge of the employment commission, but we have heard nothing of it. It is being done by wizards, which probably means that it will never be seen. Work like this should be done right away and not continued over the centuries. I suggest to the chairman of the employment commission, to spend some time on this idea of the classification of the unemployed. Let

Home Improvement Loans
him work on it instead of making useless speeches on the housing scheme. This is my very humble suggestion about the matter. I may say that I dlo not believe in the enactment of more legislation; there is already too much of it. A very eminent financier, Mr. Thomas Bradshaw, has spoken of the enormous number of laws that we have in this country, laws that nobody is supposed to ignore. Next session it would be better, and I suggest this to the government, if they simply brought down the estimates and the necessary bills to ratify trade agreements. Let us try a session like that, without futile legislation, and the country, I am sure, will be all the better for it.


Richard Bedford Bennett: Mr. Chairman, the minister has referred to certain letters. I think it might be well to observe the rule and table them now, so that we shall have an opportunity to see them before the bill is brought down. The rule requires that in any event.


Charles Avery Dunning: I was intending to comply with the rule, and I indicated-


Richard Bedford Bennett: After they have been referred to, they should be tabled.


Charles Avery Dunning: I shall be pleased to send for copies-I haven't them here-and they will be available at the bill stage of the proceedings.


Richard Bedford Bennett: I think, Mr. Chairman, it will be found that the three and a quarter per cent discount is a misnomer. Some of the borrowers have, informed me that the rate actually paid more nearly approximates twice that. It is a misleading term.


Charles Avery Dunning: Because of the importance of it, in order that there may be no deception, in all of the publicity the two rates will be given: the three and a quarter per cent discount rate, with the explanation of the manner in which it works, and its equivalent in terms of simple interest, which amounts to something just over six per cent. The rate in the United States is five per cent discount, which works out at a trifle over ten per cent simple interest. In Canada it is three and a quarter per cent discount, which works out at GT3 per cent, I think, in terms of simple interest-I may be out a fraction.


Abraham Albert Heaps: Mr. Chairman, I think generally speaking the people of this country will welcome the legislation which is to be founded on this resolution, in fact it is long overdue. It is true that the National Employment Commission may have suggested it to the government last year, but the Minister of Finance as well as other hon. members will recall that the housing co-mmittee of this parliament which sat in 1935 recommended that loans of this kind be made for the purpose of improving properties throughout the dominion.
I might point out also, in view of certain criticisms that have been made here this afternoon, that the greater part of the loans so far requested by people who own homes have been made, if I am correctly informed, in the province of Quebec. I know of none who requested such legislation more insistently than did the representatives from the province of Quebec, and I think there will be no province in Canada which will take advantage of these loans to a greater extent than the province of Quebec.
The Minister of Finance in his remarks this afternoon said that this money would be loaned for the purpose of improving individual homes. I am not quite clear how the minister will define individual homes. What I have in mind at the moment-


Charles Avery Dunning: If my hon. friend has
in mind the multiple family house, provision will be made for that.


Abraham Albert Heaps: No. What I had in mind
was the returns that were laid on the table or the answers that were made to questions last year, showing that the loans that were made under the housing act of 1935 were for the most part much larger amounts than were required for the building of individual homes. Loans of S20,000 and $30,000, and in many cases more than that, were made. I am speaking from memory, but I think the Minister of Finance will find that I am not very far out.


Charles Avery Dunning: Just on that point, and
also speaking from memory-I will bring down the information at a later stage although it is not really relevant to the matter under review, because the housing act as my hon. friend knows, is an entirely different statute- the average loan under the housing act was in the neighbourhood of $4,000.


Abraham Albert Heaps: Per house?


Charles Avery Dunning: In that neighbourhood,
yes.


Abraham Albert Heaps: I do not want to go into that further now. Last year I wanted to go into the operation of the housing act, but no opportunity presented itself, not even on the estimates, if I remember correctly; therefore nothing was ever said about it. What I want made clear at the moment is this:	The
minister has spoken of individual homes. Will these loans go for homer either single
Home Improvement Loans

or duplex, and not for large buildings, the owners of which perhaps may want to take advantage of the lower rate of interest? Personally I have no objection to apartment houses coming under the scheme provided there are reasonable guarantees for the government and the lending corporations. I think we ought to have information from the minister on that point.


Charles Avery Dunning: Perhaps my hon. friend
would be good enough to leave it until the bill is before us, because all the various qualifications necessarily appear in the bill itself, and I think the reading of it would save the asking of a number of questions. I cannot offhand answer that particular question in detail, but I know that provision is made for it.


Mr. HARTIGAN:: I want to bring to the attention of the Minister of Finance one feature of the act that was in operation last year, because it offers a very serious impediment to proper administration of the act. The clause to which I refer, which withholds the benefits of the act from a certain large class of our population, stipulates that the person borrowing the money must be steadily employed. Automatically that rules out, whether intentionally so or not, the shore fisherman on the Atlantic seaboard. I do not know what is being done on the Pacific coast, but on the Atlantic coast and in the maritime provinces the banks are taking advantage of the fact that a man must be steadily employed before he can come under the act. We all know that a fisherman's occupation is seasonal, and the amount he receives in any year depends on what he gets for his catch. The homes of our fishermen are badly in need of rehabilitation. A great many of them are living in buildings that would not be tolerated by any other class of the community except those living in the outports of the dominion. This is one clause of the act which I think calls for revision.


Charles Avery Dunning: I think my hon. friend (Mr. Hartigan) must be speaking of the housing act and not of the proposed legislation with respect to home improvements, which of course as yet has no existence.


David James Hartigan: No, I am speaking of the alteration and improvement loans that we had during the past year.
Mr. TOLM1E: Is it the intention of the government to issue loans strictly on the merits of the property in question, or are certain districts to be favoured first? I ask the question because in the neighbourhood

of Victoria when some people have applied for loans they have been informed: We propose, to begin with, to lend only in certain districts, ignoring others. I consider that is hardly fair, and I would like to know what is the intention of the government.


Charles Avery Dunning: My hon. friend is confusing this proposed legislation with the present housing act. I have had no such complaint with respect to the two months' operation of the home improvement plan. Under the housing act, as my hon. friend knows, the complaint he is now making was a very general one, especially in British Columbia. But any owner of a home, who is credit worthy and desires to make improvements, can get from a chartered bank or any of a number of other institutions, details of which I will give on the bill, a loan under the terms of this home improvement plan, which is entirely separate and distinct from the housing act.


Mr. TOLMIE:: I thoroughly understand that. I know quite well the property to which I refer. I sold the land, to begin with, on terms to the man who proposed to build the house, so that I am fairly familiar with the situation. What I was asking was whether it was the intention to favour certain districts or to lend them money on the merits of the property in question. In this case the man is a first class risk; I regarded him as one to whom a sale could be made on credit. He has constructed his house to a certain point, but it is not finished, and he wants to take advantage of this scheme in order to complete the building.


Charles Avery Dunning: I can hardly understand, under the circumstances referred to by my hon. friend, how a man could be refused a loan under the home improvement plan by any branch of any chartered bank, because that is the basis of the scheme. There may be something in connection with the credit worthiness of the individual concerned about which I know nothing, and about which, perhaps, my hon. friend knows nothing. If loans have been refused for any other reason than that the borrower is not in the view of the lending institution credit worthy, or that the money is not to be used for the purpose contemplated by the scheme, I have not heard of it. These are virtually the only two valid reasons for refusal of loans, and one of the things that have pleased me most is the very small number of complaints of people not being able to make use of the facilities provided for by the plan. I have felt up to now that the banks and other lending institutions concerned have been cooperating whole-heartedly in getting it going

Home Improvement Loans
in a large way. There will be cases, of course, where a prospective borrower will think he ought to get credit when the lending institution thinks he is not likely, for reasons which appear good to them, to be able to repay the loan. We are not compelling the lending institutions to lend where they do not think a loan would be repaid; they must have reasonable confidence of that. I take it, in the case that my hon. friend mentions, he at any rate would be willing to lend the money, because the borrower is a good risk, and if that is so there should be no reason why the borrower cannot demonstrate to a bank that he is a good borrower and, provided he comes within the terms of the scheme as provided by the bill which will be introduced following this resolution, he should be able to get the loan.


Simon Fraser Tolmie: I shall be glad to give the minister further particulars in the form of a letter.


Charles Avery Dunning: Thank you.


Abraham Albert Heaps: I should like to know whether the lending companies take any lien on a property for any loan they make.


Charles Avery Dunning: None whatever. The
only security is the individual's note. No endorsement is required.


Mr. McGREGOR:: Does the minister mean that anyone can get a loan without someone else backing his note?


Charles Avery Dunning: Absolutely; that is what I say. This scheme is devised for the individual on his own credit, without endorsement and without collateral security. That is why the government is standing behind the scheme,-in order to make it easy for people who have character and credit, and can assure the bank of their ability and willingness to repay, to get a loan without note or collateral, in the simplest possible way. That is why the scheme has started off so successfully. In spite of the winter season, SI,200,000 has been lent in small amounts in less than two months. All this, of course, will develop during discussion of the details of the bill itself.


Robert Henry McGregor: That is not being
carried out in my constituency. Anyone who applies for a loan must have someone to back his note before he gets the money.


Charles Avery Dunning: If it is a loan under this plan?


Robert Henry McGregor: Yes.


Charles Avery Dunning: Well, a bank making such a loan cannot qualify for the guarantee of the government.


Robert Henry McGregor: I can tell the minister that the fact is as I have stated, because I personally have backed two of the notes.


Charles Avery Dunning: I should like to have the particulars, because one of the conditions is undoubtedly the one I have stated. It will be possible to discuss this more intelligently on the bill itself, but if the loan is under the provisions of this plan unquestionably a borrower does not require an endorsement.


Robert Henry McGregor: I will give the minister the details, including the name of the bank, when the time comes.


Mr. LOCKHART:: May I support what has been said by the hon. member for Victoria, B.C., (Mr. Tolmie), and also pass on a suggestion to the Minister of Finance (Mr. Dunning)? In my particular vicinity there are two areas which in the past five years have been considered rather poor localities from the point of view of security. I personally supported one applicant to whom I would quite readily make a loan if I had the money, and who required it to repair his house. The bank, taking the attitude they have maintained for the last five years, said that the locality did not warrant a loaur, although the man was definitely of a good type to whom money could be lent, and is well employed. It may be said that the banks are justified in taking this attitude, but I bring the matter to the attention of the minister so that in his instructions to and deliberations with lending institutions he may point out that where a man is financially in a position to borrow, the locality of his residence should not particularly affect his entitlement to a loan.


Richard Bedford Bennett: Perhaps there has been
a little misunderstanding on the part of some of those who have spoken. The government has not undertaken under this plan to direct that banks shall make loans. The banks must make their own decision, based upon the exercise of discretion.


Charles Avery Dunning: Right.


Richard Bedford Bennett: But if they do make the loan-without endorser, too; they have no right to ask for an endorser or for a second name-the government underwrites it to the extent of fifteen per cent against loss. The plan, as has been pointed out, is not entirely new, and it is predicated on the assumption that the institutions will lend money. They are not compelled to lend it; there is nothing at all in this resolution which provides that. It merely means that if I walk into a bank and say I wan' a
Home Improvement Loans

thousand dollars to improve my home, the bank advances me $966.50-roughly that is what I get-keeping back three and a quarter per cent bank discount. Thereupon I execute an agreement to repay the 81,000, not the 8986, in monthly instalments upon which interest is computed.


Charles Avery Dunning: No, my right hon.
friend is wrong there. Interest is not computed; the discount takes care of it.


Richard Bedford Bennett: But what I am pointing out is that, extended over a period of months, the ten dollars, or whatever the amount is, certainly represents some part of the additional interest; otherwise you would not have your six per cent. I think however it is only confusion of detail, not of principle. If I meet my engagement promptly, then of course it is just a banking transaction between the bank and myself, but if at the end of the given time the bank finds that fifteen per cent of its advance has not been paid, up to that point the government will reimburse. The government may be obliged to reimburse the bank under this guarantee to the extent of S150, if the loss amounts to $150. I have not yet had a chance to go into the legislation, but there are always questions of subrogation of the government and matters of that kind, which will be considered in the bill itself. Were any orders in council issued giving effect to these arrangements between the government and the lending institutions?


Charles Avery Dunning: No. I think the correspondence which I have mentioned covers it all. I am not positive of that, but almost positive.


Mr. THOMPSON:: No member of this committee is more anxious to see our working men better housed than I am, but I believe this bill is starting at the wrong end. I am confident that there are sufficient funds awaiting investment in the hands of private individuals to build all the houses necessary in this country, but these funds are not so used because if a man builds a house in any city or town in Canada he cannot sell it for more than fifty per cent of what it cost him. That is where the trouble lies. Years ago a man could buy a lot, build a house and rent it and make some money out of it; to-day the costs of labour and material and taxes are so high that it is impossible for people to make such investments profitably. Some relief from taxation on real estate would help a great deal in the matter of the expenditure of money for the building of houses for our people. It would not then be necessary for the government to enter into any building scheme.
[Mr. Bennett. 1


Mr. PELLETIER:: I would like the minister to define what he means by the term "home improvement."


Charles Avery Dunning: I would appreciate it if my hon. friend would wait for the bill, because the bill itself goes into considerable detail as to what is covered by that term. It is one of the most difficult things to apply limitations to, and I have not the bill before me at the moment.


Mr. SENN:: Will these loans be available for farmers?


Charles Avery Dunning: Yes.


Mr. ESLING:: This discussion is simply leading to confusion as between the housing act and home improvement loans. To my mind this home improvement proposal is the most sensible and practical one which has ever been put into legislation. In the first place it relieves the government of overhead charges; it places the responsibility upon the banks. No hon. member can expect a man to be able to go into a bank and borrow money unless the bank thinks the loan will be repaid. The man must be a home owner to start with. The difference between this proposal and the housing act is that the lending companies who lend money for the construction of a house consider material collateral. In this matter they simply consider a man's moral worth and likelihood of repayment of the loan. And it is not a matter of thousands of dollars but of a few hundred-to improve one's bathroom or kitchen, to add a room, and so on. As for private loans, one hon. member suggests that there is plenty of private money available. Let me tell you, you can have plenty of difficulty in getting a private loan, and the rate of interest will be higher than it will ever be on a loan from a bank, if your moral standing is good.


John Ritchie MacNicol: I should like to know whether the bill will cover a case like this: I have in mind a very worthy and thrifty working man who came here from the old country-he is perhaps only one of many in the same class-who bought a piece of land, paid for it, and commenced to build a little home. In the first place I believe he built two rooms. He saved a little money and added two more rooms. In the building of the house the roof necessarily had to be flat, because it was only one storey. Now he desires to add another storey and have a hip roof, and to modernize his plumbing a little. He has no debt of any kind; his property is clear. What would that man, who at the moment requires something less than $750 on a

Home Improvement Loans
property worth $3,000 or $3,500 have to do to borrow the $750? Could he go to a bank or lending institution, get the money and proceed with the work without engaging a solicitor or someone to intercede for him when the loan is being negotiated? If the bill covers such a situation as this I can see that it will be of tremendous benefit to hundreds, perhaps thousands, of working men of the class I have mentioned, and will result in considerable increase in employment in the building trades and allied industries, such as lumber, hardware, plumbing supplies, and so forth.


Charles Avery Dunning: It is very difficult to give an answer with respect to a specific case, especially in view of the fact that my hon. friend approaches the matter from the wrong angle. He speaks of the value of the property, which is free of encumbrance. That has nothing to do with the home improvement loan scheme, because the bank cannot take security on the property. My hon. friend will see that the factors entering into the bank's decision to make the loan cannot comprehend any collateral, because the scheme bars collateral and bars endorsements. If the man in question, having a house such as my hon. friend describes, is in a position to show the bank that there is reasonable prospect of his being able to repay the money according to his contract, certainly the bank can qualify for a guarantee from the government under the home improvement scheme for the kind of improvement which my hon. friend has outlined. Do I make myself clear?


John Ritchie MacNicol: This particular man is a civic employee; he works perhaps ten months a year, and is very thrifty. Plenty of people will lend him the money on mortgage, but being an old country Scotsman he does not want to mortgage the property. What I want to know is, will he be able himself to go to a bank and get a loan under this scheme? If so, the bill will be of great benefit.


Charles Avery Dunning: I would not like to say that he can get it, because I know nothing of the credit standing of the man.


John Ritchie MacNicol: His credit is A-l.


Charles Avery Dunning: But I am not the judge of that; the bank is, as the right hon. leader of the opposition pointed out. As long as a man's credit standing is good; as long as his character is good enough to warrant the bank lending him money on his sole note, he does not need to go to a lawyer, and the bank cannot take a mortgage under this scheme. I think that is the answer to my hon. friend.


Richard Bedford Bennett: It is intended for properties that already have mortgages on them, I think.


Charles Avery Dunning: Yes.


Mr. WILTON:: Unless this government or the provincial governments are in a position to regulate to some extent the activities of the municipalities in regard to assessments I ami afraid this bill will not attain thie success it so richly deserves. For example, a man finds it convenient or necessary to make some improvement to his home. He goes to the bank and, on his good credit, succeeds in securing a loan to the extent of $300, $400, $500 or $1,000. He then adds to the value of his house by the erection of a verandah, we will say, on the front, or by some other improvement to the extent of his loan, which we will say amounted to $500. A little later along comes the local assessor. He looks at the house and says, "It is a thousand dollars better than it was," so he raises the assessment by a thousand dollars. This sort of thing is going to discourage householders, I am afraid, who may desire to take advantage of this scheme, and I think something should be done to put a stop to it.


Charles Avery Dunning: In fairness to the provinces and municipalities I should say that since the scheme has been mooted province after province and municipality after municpality have come forward voluntarily and said that so great is the need for stimulating employment that the necessary arrangements will be made so that improvements of this kind will not be made a penalty upon the improvers, within the terms of their assessment acts. I cannot pretend to know personally how they work it out in detail, but I know that the employment commission has succeeded in getting quite a strong body of public opinion behind this thing in order to make it go.


Richard Bedford Bennett: They should; they are paying a man $4,500 a year for publicity.


Charles Avery Dunning: Part of that body of
public opinion is shown by the fact that many municipal authorities are willing to cooperate with a view to removing the disadvantage to which my hon. friend refers. I did not catch the remark of the leader of the opposition.


Richard Bedford Bennett: I said they were paying a man $4,500 a year for publicity.


Charles Avery Dunning: I suppose he is earning it; I do not know.


Sir GEORGE PERLEY:: Will the fifteen per cent guarantee apply to each individual loan? That is to say, if a bank lends a
Dairy Industry Act

million dollars altogether, naturally some of those loans will not be repaid. Does the guarantee of fifteen per cent mean that the government is behind the bank to the extent of $150,000 of losses?


Charles Avery Dunning: It is an aggregate, not an individual guarantee.


Richard Bedford Bennett: It applies not to the branches of the bank but to the bank as a whole?


Charles Avery Dunning: Yes.


Mr. CLARKE (Rosedale):: In regard to these loans, is there any provision which will ensure that one hundred per cent of the amount borrowed will be used in the improvement of the property? Is there any provision in the bill to that effect?


Charles Avery Dunning: Yes. If my hon. friend will wait until the bill is introduced I shall be glad to go into that with him, although he will understand that it rests very considerably upon the good faith of the bank in making the loan and following it up.


Mr. GRAYDON:: During this discussion
we have heard a good deal with reference to home owners in urban places. I should like to have the position of the farmer made clear. Does this scheme apply only to the house on the farm or does it apply to any other buildings which the farmer may desire to repair under this arrangement?


Charles Avery Dunning: I can assure my hon.
friend that it is not confined to the farmhouse, but if my hon. friend will be good enough to wait until the bill is brought down I think all these details will be made clear.
Resolution reported, read the second time and concurred in. Mr. Dunning thereupon moved for leave to introduce Bill No. 11, to increase employment by encouraging the repair of rural and urban homes.
Motion agreed to and bill read the first time.



DAIRY INDUSTRY ACT

[Stage Direction]
Hon. J. G. GARDINER (Minister of Agriculture) moved the second reading of Bill No. 8, to amend the Dairy Industry Act.
He said: In moving the second reading of this bill, Mr. Speaker, I just want to refer to what I said on the motion for leave to introduce it. The amendments do not involve any matter of principle having to do with the Dairy

Industry Act. They are very limited in extent, and might be better discussed in committee, I suggest, therefore, that the house go immediately into committee to consider the bill.
Motion agreed to and bill read the second time.
Mr. GARDINER moved that the house go into committee on the bill.
Richard Bedford Bennett: Mr. Speaker, is this one of those bills which, having regard to its relation to agriculture and to the dairy industry in particular, it would be better to have considered by the committee on agriculture? I remember that on one occasion the present Prime Minister (Mr. Mackenzie King) took the view-I did not share it at the time and I do not say that I share it now-that a bill which involved discussion of details concerning an industry such as agriculture would be better dealt with by a committee, where the members can discuss the different questions in the light of the information that from time to time may be conveyed to the committee from other sources. I merely ask the question, because I am not enough of an authority on agriculture to express an opinion.


Mr. GARDINER:: I would have no objection to letting the bill go to the committee, but I would suggest that the changes are very limited. The first is just a matter of adding the word "cream" to one section where we had only "milk" before, preventing the introduction of adulterants into cream as well as milk. Another change simply takes from section 7 the amendment we made to that section last year, and puts it in section 8. The wording is practically the same, but the penalty under section 7 is from $500 to $1,000, while under section 8 the penalty is from $10 to $50. The penalty under section 7 was too high. These are the main changes. Another section of the present bill merely adds a few matters which may be dealt with by regulation.


Richard Bedford Bennett: In view of what the minister has said, as far as I can see there is no necessity for sending the bill to the committee. Apparently it can be dealt with here.
Motion agreed to and the house went into committee, Mr. Sanderson in the chair.
On section 1-No foreign matter to be added to milk or cream.


Mark Cecil Senn: Would the minister state
whether there have been many cases of adulteration of cream, and why the word "preservative" appears in this section? It seems to me that at times it might be difficult to get along without a preservative.

C.N.R.-A ccoun ting


James Garfield Gardiner: The word "preservative" has always been in there. The only words added are the words "or cream."


Mark Cecil Senn: But cream, as well as milk,
is included in the bill. A preservative might not be well in milk, but it might do no harm in cream. I am not prepared, however, to make a definite statement as to that. Have any cases of adulteration come to the notice of the department? Is it a prevalent custom?


James Garfield Gardiner: This is a more or less
technical matter. My information from officers of the department is that there has been some difficulty due to the fact that cream has not been covered by the act, and that the insertion in the section of the words "or cream" is not in any way endangered by the fact that "preservative" is mentioned later.


Mark Cecil Senn: I am not finding fault.


[Stage Direction]
Section agreed to.
Section 2 agreed to.
On section 3-Cheese.
Norman James Macdonald Lockhart: The last part of section 3 states:
. . . but nothing in this subsection shall be held to apply to portions of Cheddar cheese of indiscriminate -weight, or to cheese of indiscriminate weight manufactured by individual farmers.
Will this permit farmers serving cheese
to customers on the market to label as one pound packages those containing only twelve or thirteen ounces?


James Garfield Gardiner: This particular section
is not intended to apply to individual farmers who are selling their products. I assume there are sections in other acts which would permit the prosecution of a man who sells as a pound a weight of any product which in fact is not a pound.


Norman James Macdonald Lockhart: I have asked the question in order to clear the matter in the event of any technical point being raised. I know it has been discovered that cheeses manufactured by some farmers have been sold on the market under conditions such as I have described. So far they have got by with it, and I thought the provision in the bill might strengthen their position.


James Garfield Gardiner: No, this would not strengthen their position.


[Stage Direction]
Section agreed to.
Section 4 agreed to.
Bill reported, read the third time and
passed.


[Stage Direction]
Hon. C. D. HOWE (Minister of Transport) moved that the house go into committee to consider the following proposed resolution:
That it is expedient to introduce a measure to provide for,
(a)	the surrender by the Minister of Finance of certain amounts of the capital stock of the Canadian National and the Canadian Northern railway companies,
(b)	the transfer and exchange of certain shares of the capital stock of the said companies,
(c)	the abandonment of certain claims against the Canadian National Railway Company,
(d)	the adjustment of certain accounts affecting government railways,
(e)	the setting up of a securities trust corporation for the purpose of preserving the priority rights of the dominion and its protection against future contingencies in respect to potential interest and other savings, and
(f)	generally for revision of the accounting set-up of the Canadian National railway system.
Richard Bedford Bennett: Mr. Speaker, it is customary to discuss a resolution of this kind before the house goes into committee. In view of the fact that it involves many intricate matters with respect to money and finance, without in any sense committing ourselves to the principle of the resolution I am prepared to agree that the Speaker leave the chair and the house go into committee, on the understanding that by so doing we are in no sense acquiescing in what under some circumstances might become a very dangerous piece of legislation, depending upon what the legislation may be as outlined by the minister.
Motion agreed to and the house went into committee, Mr. Sanderson in the chair.


Clarence Decatur Howe: Mr. Chairman, as the resolution indicates, the bill to be founded on the resolution involves important changes in the balance sheet of the Canadian National Railways. In the first instance it will provide for the centralization of capital stock control of the companies now comprising the national railway system, through one company, namely, the Canadian National Railway Company. At the present time the Canadian National Railway Company includes the Grand Trunk railway and about sixty subsidiary companies. On the other hand the Canadian Northern Railway Company includes the old Canadian Northern railway with about forty subsidiary companies. These two companies are entirely separate corporations, both owned by the Dominion of Canada, the only connection between them being a common board of directors.
C.N.R.-Accounting

The financing for both the Canadian National and the Canadian Northern is carried out through the Canadian National Railway Company, so that through the funding of maturing obligations and advances for capital purposes the debt of the Canadian Northern is gradually being transferred to the Canadian National, even though the Canadian National Railways have no direct stock control of the Canadian Northern Railway.


Richard Bedford Bennett: Does it not own all the
stock?


Clarence Decatur Howe: No.


Richard Bedford Bennett: The Canadian National Railway?


Clarence Decatur Howe: No, the stock of the Canadian Northern Railway is owned by the Minister of Finance, or the federal government. Similarly the government railways are in a rather anomalous position. Under the act of 1919 the government railways were entrusted to the Canadian National Railways for management, with the proviso that the account of profits or deficits would be for the consolidated fund. In the financing act of 1923 and in subsequent financing acts this arrangement has been modified, so to-day the deficit account or profit account of the Intercolonial and other government railways is included in the consolidated balance sheet of the Canadian National Railways. But the control by the Canadian National Railways is far from definite, and this whole situation requires some clarification. The bill will provide also for the bringing of the balance sheet of the Canadian National Railways into conformity with the net debt of Canada. At the present time there is a duplication between the net debt of Canada and the balance sheet of the Canadian National Railways which has reached the staggering sum of 81,-
500,000,000 and which is pyramiding annually.


Richard Bedford Bennett: It is not pyramiding as a national debt; it is pyramiding only on the books of the railway.


Clarence Decatur Howe: But it is pyramiding as a duplication. I have noted this frequently in financial journals and I had it brought to my attention quite forcibly a short time ago during a discussion with a prominent man who was investigating the finances of Canada. The debts of the railway are a liability of the government as long as the railway does not earn sufficient to cover them, and the usual practice by analysts interested in dominion finance is to add the net debt of Canada to the debt of the Canadian National Railways as shown

in the balance sheet. If that is done the obligations of Canada are shown to be about $5,750,000,000, which is entirely incorrect. This figure is arrived at because of the duplication to which I referred. The real position is that the responsibilities of Canada with regard to debt on account of both dominion and railway obligations amount to about $4,250,000,000. I think this is a very important matter and one which should be corrected. If this pyramiding of duplicated debt is allowed to continue it is bound to affect the credit of Canada very materially, as well as the credit of the Canadian National Railways.


Richard Bedford Bennett: It is only the interest that is being pyramided.


Clarence Decatur Howe: In 1932 the pyramiding of deficits was put an end to, but the pyramiding of interest goes on. When I tell you that to-day the interest alone, which is included as funded debt of the railway, amounts to $495,000,000, you will appreciate that it is pyramiding in an extraordinary way.


Abraham Albert Heaps: Has money been borrowed
to meet these interest obligations?


Clarence Decatur Howe: This interest has never been paid and has never been shown on the government books as due. Under the legislation governing the accounts of the Canadian National Railways it must be shown as a debt of the railway in the balance sheet. To that extent it duplicates the national debt.


Abraham Albert Heaps: Have there not been
occasions when the government was obliged to borrow in order to meet the indebtedness of the railway?


Clarence Decatur Howe: This has no relation to the obligations of the railway to private investors.


Abraham Albert Heaps: I was referring to interest charges alone.


Clarence Decatur Howe: 
Richard Bedford Bennett: Fifty-five per cent, was
it not?


Clarence Decatur Howe: Sixty per cent, I think. I
believe the government owned forty per cent, which it had obtained in compensation for guarantees and one thing and another.
As I was saying, the board of arbitration found that sixty per cent of the stock of the Canadian Northern Railway was worth $10,800,000, which would make the total stock of the railway worth about $18,000,000. It is proposed to surrender $82,000,000 of this stock which has no value, and to write into the balance sheet the remaining $18,000,000 of stock which was found to have full value. This $18,000,000 will be exchanged for new stock of Canadian National Railways, which will represent common stock ownership of the railway, and which of course will be wholly owned by the dominion government.
That is a brief outline, Mr. Chairman, of the changes in the balance sheet. Of course, when the bill is brought down, the details will be shown, with very complete explanations in the bill. In any event the bill will be sent to the committee on railways and shipping, where it will be studied very fully.


Richard Bedford Bennett: The minister might deal with paragraph (e).


Clarence Decatur Howe: That deals with the securities trust corporation. I may say, Mr. Chairman, that the revision of the capital structure has been before the house on many occasions, and has always been the subject of debate when the Canadian National Railway estimates have been before the house. The reports of the committee on railways and shipping also indicate that similar discussions take place there every year. The government has always taken the view that no change in capitalization could properly be



C .N.R .

[Stage Direction]
Accounting
[Stage Direction]
made as long as any feature of the Canadian National accounts was in dispute; that is, as long as lawsuits were pending, the capital position of the railway should not be changed.
Richard Bedford Bennett: What is the present position of that lawsuit? Is it through?


Clarence Decatur Howe: The Lovibond case, yes. I
have a statement here but I think I can give the gist of it. The privy council ruled that Lovibond has no claim against the government of Canada. They also ruled that he has no case against the Canadian National Railways for having the stock of the Grand Trunk Railway restored to the books. The privy council did give him permission to sue the railway for damages, and they said in their judgment, "for what it is worth," indicating that they thought his claim was not very serious. However, in order to preserve all the priorities in the case it is proposed that the claims of the government which are being eliminated as funded debt from the balance sheet shall be preserved in a securities trust, a company within the corporate structure of the railway and the stock of which will in turn be wholly owned by the dominion government. These claims of the government that are eliminated from the balance sheet will be maintained in this securities company, where they can be used at any time to maintain the priority of the government equity as it now exists. In that way I think we can say that the priority of any outstanding security or any outstanding claim against the railway will not in any way be disturbed by the change in the capital structure now proposed.
This change in the capital structure involves no change whatever in the net debt of Canada. Any claim against the railway on behalf of the government which is regarded as an active asset is maintained in exactly the same position. The change in capital does not involve the writing out of the balance sheet of any amount that was expended on the railway for capital purposes, that is, which created an earning asset of the railway, although its position is being changed from bond interest to proprietors' equity.
In regard to the Intercolonial and other government railways which were entrusted to the Canadian National Railways, these railways are included in the balance sheet as proprietors' equity. These railways were paid for by the dominion government as they were built, and their present position in the balance sheet as a funded debt against the railway is hardly proper under the circumstances.

That is a general review, Mr. Chairman, of the subject matter of the bill. The details will be printed in the bill itself, and the bill is printed with very complete explanations of the changes proposed.


William Kemble Esling: With respect to the indebtedness to consolidated revenue of about $600,000,000, and accrued interest of $500,000,000 odd, is that interest of $500,000,000 being carried to the trust account? Does it still remain a liability of the railway? What becomes of it? Was any portion of it ever guaranteed by the government?


Clarence Decatur Howe: The interest referred to,
$495,000,000, is the interest due to the dominion government itself for funds it advanced to the railway.


Richard Bedford Bennett: Out of consolidated
revenue fund.


Clarence Decatur Howe: Yes. This interest is being written out of the balance sheet of the railway. It is a duplication of the consolidated fund, because no asset in the consolidated fund is set up to correspond with it. This $495,000,000 of interest will disappear from the balance sheet of the railways but will be carried in the securities trust for the purpose of preserving whatever priority the government has in connection with these claims against the railway for interest.
'Mr. POULIOT: Mr. Chairman, I hold in my hand Hansard of April 27, 1936, in which there is a speech by the right hon. leader of the opposition (Mr. Bennett) at page 2200, where he says this:
The minister has referred to the president of the Canadian National system. I have a high regard for him.
I am not speaking; it is the right hon. member for Calgary West (Mr. Bennett) who is speaking through me. He went on:
He was in Calgary, working with the Canadian Pacific Railway, when he was taken by Mackenzie and Mann as master mechanic, and he has risen to a position of importance, but it is my duty to say this, that, temperamentally he cannot resist pressure. He cannot, in that sense, say no. The pressure of politicians, members of this house, members of the government, is such that he cannot resist it; that is the pressure, not of the opposition, hut of the powers that be. I say that with the best intentions in the world, and I say so because I know whereof I speak.
Afterwards our venerable colleague who sits for one of the constituencies of Montreal, St. Antoine-Westmount (Mr. White), protested very strongly against the language used by his leader in connection with the president of the Canadian National Railways.

C.N.R.-Accounting
The questions I ask the leader of the Conservative party, the right hon. member for Calgary West, are these: When did he notice first that Mr. Himgerford was weak and could not resist pressure? Was it before he himself appointed Mr. Hungerford president of the Canadian National Railways, or was it afterwards? If it was before, was it on account of the fact that he found Hungerford was weak that he appointed him, to please the Canadian Pacific Railway? If it was afterwards, why did he not cancel through his own government Hungerford's appointment as president of the Canadian National Railways? I have written a series of articles in a weekly which is published at Riviere du Loup, and which the right hon. gentleman probably reads because he quoted from it during the last session. The questions I have put to him are most serious. Here is the most important job in the business of our country, a job equal to that of president of the Canadian Pacific Railway Company, one that needs a strong man. The so-called strong man who was at the head of the government of that time chose a weak man, and, having chosen him, he says, "I know whereof I speak." I will ask the right hon. gentleman to be kind enough to answer the three questions I have just put to him.


Richard Bedford Bennett: 
Charles Avery Dunning: The debt is about $700,000,000, translated into our money?


Richard Bedford Bennett: If you put it that way, yes, about $700,000,000. The road is a narrow gauge one, three feet six inches wide. Last year they operated the road on a ratio of 58 per cent of its takings, without depreciation, and after allowing for depreciation it cost only 65 per cent of its earnings to operate the property. The important part of this interesting document is the detail with which the investment of the people of South Africa in the property is indicated.
So far as I am concerned I was pleased to hear the minister say to-day that he thought it undesirable that there should be any change in the capital structure as long as that litigation was pending in respect of the shares. When we came into office in 1930 we found this threat of litigation, and it continued until after Mr. Lovibond finally got the case to the privy council. Particulars of his statement of claim were placed upon Hansard in answer to a vigorous complaint made by the present Minister of Trade and Commerce, Mr. Euler, that we had failed to deal with the reduction and readjustment of the capital stock as suggested by the auditor and by the then chairman of the trustees. I pointed out the reasons why we had not done so, and I think they were wholly adequate ones, because if the judgment which Mr. Lovibond had hoped to get had been obtained the question as to the shares in the Grand Trunk being properly vested in the Minister of Finance would have been at issue. As the matter now stands, the statement made by the Minister of Transport (Mr. Howe) represents my appreciation of the situation, namely, that Mr. Lovibond may maintain an action for damages, with what success the future may disclose, but that would be an action which would be founded purely in damages and would be disposed of by a monetary payment.


Charles Avery Dunning: It will not affect title at all.


Richard Bedford Bennett: No; as the Minister of Finance (Mr. Dunning) says, it will not affect title. That is an entirely different question from the one that obtained when the judgment of the privy council was given.
I may say frankly to the committee that it was a matter of some relief to me to see that judgment, because there have been grave differences of opinion as to whether this parliament could adequately vest in the Canadian Minister of Finance shares of a company whose head office was at Dashwood House, in London. But I always felt that the answer was to be found, not as a pure matter of law, in just a legal proposition, but rather in the conduct of the parties, and that it was not

C.N.R.-Accounting

competent for the railway company, in view of what had taken place, to make any such contention as that. The ground of the decision, however, was technical; it does not touch that phase of the matter at all; and we may now eliminate from our consideration any question which arises with respect to the shares themselves and realize that any action which may possibly be maintained will be an action founded in damages and not against the shares themselves.
There are three matters that must engage the attention of anyone concerned with a readjustment of the capital structure of the Canadian National Railways. The first is the properties which belong to the crown, and which we speak of as government railways. They comprise the Intercolonial railway so-called and all the other properties which have been acquired which were branch line feeders of that property; they also comprise the line from Winnipeg to near Moncton, namely, the National Transcontinental and various other connections with that line. The Prince Edward Island line I classify as part of the Intercolonial. We have here a definite investment which is reflected in part in the national debt of the country and in part by payments made out of surplus revenues during days of buoyant and large revenues in this dominion.
The method by which that expenditure can be dealt with in a set-up or balance sheet is not one which for the moment I am going to discuss. The minister says that he proposes to send the bill to the committee, and the committee doubtless will have the opinion of the auditors who made the suggestion as to the set-up, and will arrive at a conclusion as to the best way to deal with it. There are many methods of dealing with it, but the cold fact is that in any report made to the people of Canada it is in my judgment essential that they should know that since confederation the people have invested so many millions of dollars in the Intercolonial, the Prince Edward Island railway, the National Transcontinental railway, and the branch lines and various undertakings subsidiary to and connected with that large government railway enterprise.
The minister referred to this investment being dealt with as owner's equity. I do not think that term conveys anything to the people of Canada in dealing with this matter. It need not be an item in the balance sheet itself in the narrow sense of the term, but in the wide sense a report of the Canadian National Railways should never be issued

which does not make apparent to any person who reads it the amount of the investment by the Canadian people in what we call government railways.


Clarence Decatur Howe: That is, preserved in the balance sheet.


Richard Bedford Bennett: Yes, that is all it is necessary they should know. I am not very particular as to how it should appear, but I am concerned that the Canadian elector who reads that balance sheet shall be able to know, for his own interest and his own welfare, just how much money has been invested in the railways and their appurtenances since confederation. That is number one.
Number two is the investment made by the Canadian people in the Canadian National railway system. It will be recalled that the Canadian National system was reorganized by the Borden administration with a capital of $100,000,000. That this was done against my protest, and that I voted against it-


Clarence Decatur Howe: Excuse me; I think the amount is $165,000,000. They exchanged the Grand Trunk-


Richard Bedford Bennett: No; I am speaking of the Canadian Northern. The second branch is the Canadian Northern system. It will be remembered that the Borden government reorganized that system by creating out of the various constituent and subsidiary companies a new organization known as the Canadian Northern system, capitalized at $100,000,000. That I personally thought that capitalization greatly excessive or that I voted against my own friends on that occasion is not a matter of interest now. But I did protest as strongly as I could against the property not being allowed to go into the hands of a receiver. We set up a new system, known as the Canadian Northern system, with a capital of $100,000,000. That system transferred to the Canadian people a certain percentage of its capital stock, I think some 40 per cent, or $40,000,000. As compensation for that the Canadian people advanced to the system $45,000,000, partly paid, as the hon. member for Rosthern (Mr. Tucker) mentioned the other day, by the issue of promissory notes of the Dominion of Canada in the shape of $1,000 bills.
Then the war came. But the result of the first transaction on the part of the Borden government was to create a new transportation system known as the Canadian Northern system, which comprised railways in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia and one small line in Quebec.

C JVJt.-Accounting
It is worthy of note at this point that practically every province except Prince Edward Island, and I think Quebec, was concerned with the Canadian Northern system as a guarantor of its securities. That is a matter of tremendous importance in dealing with the set-up of the balance sheet. The province of British Columbia guaranteed the securities of the Canadian Northern (British Columbia), and from- the proceeds of the securities thus guaranteed Mackenzie and Mann built that line from the great divide between Alberta and British Columbia down into the city of Vancouver. They also built certain lines in the Okanagan district, and undertook certain contractual obligations with respect to hotels and other matters. Bear in mind, however, that that undischarged guarantee of the province of British Columbia was the basis of the construction of the British Columbia section of the Canadian Northern railway system, and that from day to day and from year to year since the consolidation, British Columbia has not been called upon to pay that guarantee but the Canadian taxpayer has himself absorbed it and is from day to day making the payments which otherwise would have had to be made by the' province. If that is kept in mind, the extent to which the Canadian, taxpayer has prevented the bankruptcy of that province will be realized, because it wouldi have been financially impossible for British Columbia during the years of the great depression to pay the guaranteed interest upon those securities.
In Alberta a number of guarantees of the same kind were outstanding. On the strength of the legislation and the guarantees the bonds and securities were sold by Mackenzie and Mann and the money deposited in a trust account, and there is yet a part of a right of way from Calgary to Macleod as a memorial to the optimism of the people and the capacity of great contractors to induce the people to take action which was wholly unnecessary. The road has never been built, but part of the money was expended and the remainder was in a trust account when last I investigated.
In Saskatchewan guarantees were given more largely to the Grand Trunk Pacific branch lines company than to the Canadian Northern system. There again, as in the case of British Columbia and Alberta, the people of Canada are discharging the obligations arising under those guarantees, which, if added to the already impossible burden that these provinces are carrying, would have made it quite beyond the realm of possibility for
them to stagger on. That obligation of those three provinces has been discharged by the Canadian people since the consolidation of the system into the Canadian National.
Then we come to Manitoba. In Manitoba a very difficult situation exists. There are the old Canadian Northern lines of Mackenzie and Mann; the old Northern Pacific lines, to which, as hon. members know, the province succeeded, and the province making its arrangement with the Canadian Northern. There are, in addition, guarantees given with respect to terminals, branch lines and main lines, and there is certain legislation enacted by this parliament to deal with that situation. The consequence is that the province of Manitoba is committed to guarantees on a scale which it is quite impossible for it to meet-I think that is a fair way to put it-which guarantees the Canadian people are now paying instead of the people of Manitoba.
In Ontario just before the election of 1911 guarantees were given by this parliament on the Canadian Northern Ontario railway, the section in that province. And certain land grants were made available for the system under conditions to which I need not now refer. There was, I believe, one small line, a very small one, guaranteed in the province of Quebec. In New Brunswick the National Transcontinental ran to Moncton and thence went off on the Intercolonial to Halifax or Saint John. I think the guarantees, as far as the people of New Brunswick are concerned, were given to lines which since have been merged in the Canadian National system, rather than to the Canadian Northern or the Grand Trunk. New Brunswick was saved from bankruptcy by reason of our assumption of the obligations created by the guarantee given by the government of the day on the Halifax and South Western road, which was constructed by Mackenzie and Mann from Halifax around the coast. In Prince Edward Island there was nothing to get, so that no railways were guaranteed there.
That is the picture in regard to number two. How are you going to set it up in your balance sheet? In 1917, it will be recalled, the government of the day was pressed to acquire the balance of the Canadian Northern shares, and the question as to whether this should be done by arbitration or through the exchequer court was considered by the parliament of that day, sitting in the Victoria museum.	Finally it was
decided to have it done by arbitration. Three arbitrators, the chief justice of Nova Scotia, the chief justice of Ontario and the late Wallace Nesbitt, constituted the arbitration tribunal, and they decided that the remaining
C.N.R.-Accounting

60 per cent of the shares was worth $10,800,000. But I believe it was clearly demonstrated by the evidence which was given that the shares were worth nothing, and but for what took place in this chamber I do not think the arbitrators ever could have awarded anything, because instead of the shares having value, they certainly were a liability. But they were given a value of $10,800,000, which was $800,000 more than the maximum which the statute provided should be paid for the shares. Allowing that 60 per cent is worth $10,800,000, it follows that 100 per cent is worth $18,000,000, and in my judgment the minister is dealing generously with the situation when, on the balance sheet, he carries those shares at $18,000,000. That is what he proposes to do. In my judgment they are worth considerably less than that, but the matter is one which need not be discussed now. It is ancient history; I expressed my views on that subject some twenty years ago.


Charles Avery Dunning: The shares never were
worth it.


Richard Bedford Bennett: Of course not. I come
now to the third factor in the balance sheet which is dealt with by this resolution, namely the Grand Trunk, the Grand Trunk Pacific and allied organizations. This is neither the time nor the place to deal with the situation as it arose in connection with the Grand Trunk. Personally I would have let it go into the hands of a receiver, but again my views were only those of one man, and very unimportant at that time.


Charles Avery Dunning: There was one other.


Richard Bedford Bennett: We determined to deal with these railways in another way; certain securities were settled with on the basis of an annuity, to put it shortly, and the value of the other securities was to be determined by arbitration. That arbitration by a majority decision decided that the shares had no value. Against that judgment, of course, the old Grand Trunk people have ever since protested, and at times they have made it rather difficult for us in London and elsewhere because of the contentions they have made. During the few weeks or months we were in office in 1925-26, I came to the conclusion that the sound thing to do was to bring to the knowledge of the British people the real facts in connection with the Grand Trunk; for if one wants to read of high finance developed to its nth degree in connection with the payment of dividends and the disbursement of money, one has only to read the evidence given at the arbitration in connection with those matters.

The subsidiary companies, the Grand Trunk Pacific, Grand Trunk Pacific Townsites, and so forth, perhaps need not be referred to here beyond saying that what we paid for the Grand Trunk system and its subsidiary companies is represented by an annuity, and nothing else. And when I say an annuity I mean the interest upon the senior securities which we took over practically at par and which we need not now discuss because they were not the subject matter of either arbitration or expropriation. Their value was fixed by agreement.


Charles Avery Dunning: The Grand Trunk Pacific did go through receivership.


Richard Bedford Bennett: I was coming to that. The Grand Trunk Pacific, while it was a subsidiary enterprise of the Grand Trunk system, was a separate entity. I am sure all good Liberals who read the history of it must do so with a sense of pride. I cannot resist saying that, though I am endeavouring to be most moderate in my criticism. At any rate the Grand Trunk Pacific did go through a statutory receivership. The Minister of Railways became the receiver, and ultimately the late Sir Henry Thornton made an adjustment with respect to the securities, which are now part of the obligations of the Canadian National system with which we have to deal from time to time. I might have said the same with respect to certain income securities issued by the Canadian Northern.
That is the third factor we have to deal with in the balance sheet. I think the minister is wholly justified in writing out absolutely the Grand Trunk common shares and the other shares, because we paid nothing for them, and if my logic is sound there should not appear in the balance sheet a successive valuation upon anything in that balance sheet. Therefore, as far as the Grand Trunk and its subsidiaries are concerned, we can write out the value of those common shares.
Those are the three factors. To-day they constitute what we speak of as the Canadian National railway system, but there are no Canadian National railway shares in the sense in which we usually speak of a corporate enterprise. To all intents and purposes the Canadian National is a holding enterprise. In reality the Minister of Finance holds the shares; I am considering the Minister of Finance as being the same thing as the Canadian National.


Clarence Decatur Howe: The Minister of Finance is the holding company.


Richard Bedford Bennett: Quite so, but the operations are carried on by the Canadian National. Perhaps as a matter of exactitude I should

C.N.R.-Accounting
say that the shares are vested in the Minister of Finance, unless the procedure has been changed. I take it that they are still so held.


Charles Avery Dunning: They are still held by the Minister of Finance.


Clarence Decatur Howe: 
Clarence Decatur Howe: Yes.


Richard Bedford Bennett: That was not always the view expressed, mark you. I am happy to hear the minister take that view, because some of the officers of the road on one occasion went so far as to suggest to me that it would be desirable to write the enterprise down to what it was worth. How is one going to determine what it is worth? What we want to know is what we put into it, and the amount on which we have to pay interest.
The second question asked by the hon. member is this:
2. What is the total annual interest on this indebtedness?
And the answer is: $49,184,622.87 in 1936. That is the sum of money which, if our railway system were successful, it would be earning, in addition to any other sums, to enable it to square-and I use a word which is sometimes used-or to clear itself with regard to its accounts.


Clarence Decatur Howe: Had it been successful it would not owe any such sum, because a large part of that is deficit, and interest on deficits.


Richard Bedford Bennett: Yes, but that is a separate matter, and I shall come to it later on. Remember, Mr. Chairman, that I have endeavoured to put before the minister this- and so far he has agreed with me-that we have an indebtedness of $1,184,612,248.59 of the Canadian taxpayers' money tied up in our railways. For the year 1936 to the end of December it cost the Canadian people $49,184,622.87 to service that debt. It cost that much to pay interest on the sum invested. My submission is that it must always be clear to the Canadian people what sum they have had to pay by taxation and otherwise from year to year to discharge the interest on the obligations incurred for the railways. I am talking about the public only-


Charles Avery Dunning: It is very difficult.


Clarence Decatur Howe: I do not like to interrupt my right hon. friend at this point, but-


Richard Bedford Bennett: It is quite all right.


Clarence Decatur Howe: -we may as well discuss these points as they arise. May I point out to the right hon. gentleman that in its legislation of 1932 the late government really stopped
40G
C.N.R.-Accounting

the historical record, that is, as to the funding of deficits. I do not see how the historical record suggested by my right hon. friend can be maintained, even if no change is made. We might give the deficits of past years, but we stopped giving them in 1932, so that the whole picture is really not a correct statement. That is, the balance sheet of the railway does not show the total funds advanced by the government to the railway for capital and deficit purposes, with interest compounded annually.


Richard Bedford Bennett: I am afraid the minister has not been following the matter prior to coming to the house. In 1932, when the Duff commission was appointed, it dealt with the matter and made a recommendation stating that it was undesirable to issue the company's securities for deficits guaranteed by the government, but that the government should borrow the money itself and pay the deficits.


Clarence Decatur Howe: Yes.


Richard Bedford Bennett: Therefore, so far as the securities items on the railway company's accounts are concerned, the balance sheet does not show. But they should show that to pay those deficits they got the money from the Canadian people.


Clarence Decatur Howe: But the balance sheet does not.


Richard Bedford Bennett: That is what I contend they should have done. I have asked them to do it, but it was not done. I had no control over it, because the trustees were in complete control. I do not think their views were in any greater harmony with mine than with those of the Minister of Transport.
I say without question the sums of money the Canadian people had to borrow to pay for the deficits on that road from year to year should be apparent in the accounts of the system, so that the Canadian people, the shareholders, may know what they had to borrow to keep their property afloat. That is the position I have always held, and I submit that anything less could not be regarded as satisfactory. If we do otherwise we are not being fair with the Canadian people.
My position with the officers of that system is a simple one. I simply say to them, "I want a balance sheet that shows to me as a citizen and a shareholder how much money the Canadian taxpayer had to put up last year to keep this property afloat. That is all I want." Anything less than that I cannot but think is a form of deception-not practised deliberately, possibly-upon the

Canadian people. In other words if they assume, from looking at the accounts, that because there is nothing showing, and because it is not indicated that they had to borrow so much money to pay their obligations during the year, all is well, they are living in a false paradise.
Now, let us come to the next point. What is the total indebtedness of the Canadian National railways to the consolidated revenue fund of Canada? That is, how much money from time to time did we pay out of our revenue fund to these properties? The minister made this answer:
3. Of the total cash expenditures by the dominion, amounting to $1,468,611,114 (not including interest on loans) as shown on page 7 of the Department of Railways and Canals report for the fiscal year ending March 31, 1936, the following are the amounts that may be considered as charged against the Canadian National Railways:
Loans to C.N.R. (includes loans to former privately-owned roads) on which interest is accrued but not
paid	
Investment in Canadian government railways	
Stores and open accounts of Canadian government railways	
The following amounts are in suspense:
Temporary loans (interest
paid currently)	
Expenditures under supplementary public works construction act. 1935 (unemployment relief)	
Balance covering all deficits, subsidies, and all other items which have been absorbed in the net debt of the dominion	
$645,527,455 83* 388,880,002 78
15,748,921 60 36,390,204 25 5,068,081 85
376,996,447 69
Total	$1,468,611,114 00
The other day the minister was good enough to give us the aggregate of the deficit and of the subsidies which had been paid which, in part, include part of the national debt of the country and, in the other part, those .portions which were paid out of the consolidated revenue fund.
I am not going to discuss the matter in further detail, much as I might be disposed to do so, because when the minister said he proposed to send the bill to a committee it appeared to me that it is for men more expert than I am in matters of this kind to explain and to suggest what would be a proper system of accounting. I think the committee will agree with me when I say that whatever set-up may be finally agreed upon, it

CJV.-ffi.-Accounting
should be a statement which will show to anyone who studies it just what have been the expenditures by the Canadian people in our railways. That is number one.
The next point is that, although it 'may not be part of what one might call the consolidated balance sheet, it could easily be shown as part of the annual statement so that there would be no difficulty in understanding on the part of any one. I think the minister is anxious, and I know every hon. member is anxious, that with respect to our railroads we should know just what we have done. I do not believe any hon. member is satisfied by being told that we had a deficit of S40,000,000 or $50,000,000 last year; what he is anxious to know is how much it has cost Canada to run these railways.
If I were disposed to give a chronological history of the railroads of this country I am sure it would be very difficult for any one within sound of my voice who belongs to the Liberal party to explain how two transcontinental lines came into being. I have never met such a man in later years although I used to meet him occasionally in earlier years. I can remember during the progress of a debate in the old chamber when one member suggested that I favoured three systems. The late Mr. Oliver had made some observations about having built up two systems and my cynical interruption was, "Three systems." It was then stated later on that I favoured three systems.


Charles Avery Dunning: Oh, oh.


Richard Bedford Bennett: I do not wonder that the hon. gentleman laughs. In my own community I was condemned as a pessimist.


Charles Avery Dunning: That was said about me too.


Richard Bedford Bennett: Whoever said that was not very familiar with my public appearances. I advocated to the extent of my ability that there should be a second system. I happened to be in Edmonton when the Canadian Northern was opened for traffic to that city on September 1, 1905. I wonder if many members in this chamber realize what limitations were placed upon the guarantee which Mr. Blair gave Mackenzie and Mann. Do they realize that Mr. Blair provided that there should be no amalgamation with the Canadian Pacific? When I lived long enough to see this effort made to put three transcontinental systems across the Dominion of Canada, I but ventured to prophesy what came to happen. I do not think I was ve.y much of a prophet because I was successful in my anticipations. I could not see how anyone could have done otherwise.
But I am not concerned about the past. Recriminations serve no useful purpose with respect to these matters. There is one thing I do feel very strongly, that is that the balance sheet as finally made up should be such as will enable every Canadian to know without difficulty just how much money successive governments have compelled the taxpayers of this country to pay. That is not unfair, is it? That is not asking too much, is it? Anything I have to say will be predicated entirely upon that assumption. I did not think we could reach this matter to-day and I did not bring with me the report of the government railways in South Africa. This is a volume of many pages and it deals with every phase of their railway life. I think it will make us feel that there is still room for more improvement.
Cannot we get this matter out of politics? During the last election I was charged everywhere in the country with being an enemy of the Canadian National system. I dare say that not more than five per cent of Canadian National employees who were electors voted for the candidates of my party, that is outside those employees who voted for purely personal reasons for candidates in a particular locality. I dare say that dollar for dollar I am as much interested in the success of the Canadian National Railways as most people. Every failure of the Canadian National to meet its obligations means more taxes for the Canadian people. Let there be no misunderstanding about that. If it does not meet its annual expenditures the minister has to borrow money with which to pay them, or he must get it out of surplus, which means taxation of the Canadian people. No citizen of this country, however poor he may be, has not a direct interest in the success of this system. It touches his economic life as no other single thing in the state does. There are combinations of many things which may concern him more, but there is not a single thing which concerns him so closely.
Do hon. members realize what the raising of the interest on the public debt and providing for these deficits mean? As I mentioned last session, it means the providing of so many dollars per minute or even per second. Every citizen is concerned. We are often anxious to make matters appear better than they are, and I ask the minister to keep in mind what the Prime Minister (Mr. Mackenzie King) said the other day about conferences. His statement should be applied to these balance sheets. Let these balance sheets reflect the facts; let them indicate the full extent of our liability and our financial responsibility, so that eveiy Canadian
C.N.R.-Accounting

will be interested in giving his support and assistance toward the successful operation of his property. It is his property, not somebody else's. It belongs to us, not to somebody else. In my judgment the only way in which a sense of responsibility can be developed is to show the people the financial side of this question, what it means in taxation, what it means in interest on the national debt and in the payment of deficits. All this has to be borrowed from the public and they must be made to realize that the success of the railway means a lessening of the burden of taxation. To the extent that taxation is lessened, the personal prosperity of the people is increased.
When I rose I had not intended to speak at such length on this matter, as the minister said that he was going to send the bill to the committee on railways and shipping. It seems to me that that method will provide an opportunity for everyone concerned to express his opinion and for those who are expert in the adjustment of figures on balance sheets to make such suggestions as in their wisdom are necessary. I hope the minister will keep this one thought in mind, that the balance sheets should reflect the true financial condition of the enterprise so that every citizen of Canada may know without difficulty the exact extent to which he and those who went before him have either placed out real money or borrowed money for the purpose of making the enterprise part of the assets of this country.


Jean-François Pouliot: Mr. Chairman, I have been sitting here quite impatiently for the last fifty minutes and I cannot say that I have listened very carefully to what the right hon. gentleman (Mr. Bennett) has said. What he took fifty minutes to say he could have said in ten had he cut out all repetition. You are presiding, sir, over a committee made up of seventy-nine members of this house. May I ask each one of the other seventy-eight members of the committee if the hon. member for Calgary West has answered my .questions. They were fair, very easy to understand, and spoken in very plain language. I want an answer, Mr. Chairman. The right hon. member for Calgary West stated, according to page 2200 of Hansard of April 27, 1936, that he had realized that Mr. Hungerford was weak. Now he is the gentleman who appointed Mr. Hungerford as president of the Canadian National Railways, a most important job. I ask him now, When did he realize that Mr. Hungerford was weak, according to his own statement? I ask him if it was before Mr. Hungerford's appointment by the right hon. gentleman himself or if it was

after, and if it was after, why did he not discharge Mr. Hungerford on account of that weakness? This is no joke, sir. The right hon. member for Calgary West said, "I know whereof I speak." It was probably not the first time he said it, but he said it on that occasion. I should like to have an answer to those three questions, if you please.
Oh, no answer? I shall sit down then because I should like to have an answer; it is very important. No answer? There will be a long speech, a long lecture on everything, and I am surprised the right hon. member for Calgary West has not given us the name of the first locomotive between Montreal and Laprairie. He was telling the story of the railways, and he could have told us that, as well as the length of the locomotive, the number of wheels, and all that. That is the kind of story we listen to in the house when we have important business to carry on. Now I ask him a question concerning a position of the greatest importance, equal to that of the president of the Canadian Pacific Railway. I am not a rich man, but I am a good Canadian citizen, just as good as anybody else, and I should like to know why the right hon. gentleman appointed Mr. Hungerford as president of the Canadian National Railways if he thought he was a weak man, and I shall ask him, further, if it was not because he thought he was a weak man that he appointed him to that position.
Resolution reported, read the second time and concurred in. Mr. Howe thereupon moved for leave to introduce Bill No. 12, to provide for revision of the accounting set-up of the Canadian National railway system.
Motion agreed to and bill read the first time.

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



DEPARTMENT OF AGRICULTURE

[Stage Direction]
Dairying, $290,000.
Thomas Alfred Thompson: May I ask the minister the reason for the increase of 118,000 in this item, and what is the purpose of the vote?


James Garfield Gardiner: The item of $290,000 which the
committee is being asked to vote this year is made up of proposed expenditure on administration, $13,500, which is $1,900 more than was spent last year, but the largest item in the vote is for the dairy produce division, $226,000, an increase of $7,500 over

Supply-Agriculture-Dairying
last year. The estimate for the dairy markets division is 841,000, an increase of $6,300 over last year; the estimate for the dairy research division, $5,000, an increase of $800 over last year; the estimate for milk utilization service, $4,500, an increase of $1,500 over last year.
The increase of $1,900 for the administrative division comprises $1,400 for printing and stationery and $500 for travelling expenses. In the dairy produce division, there is an increase of $9,775, for travelling expenses, but against that there is a decrease in other branches of the service, so that the net increase is $7,500. In the dairy markets division there is a total increase of $6,300. There is an increase of $156.60 for communication services. In order to take care of the purchase of a thermograph and repairs to same, the amount for equipment has been increased by $500. Under miscellaneous current expenses there is an increase of $12.50, and other increases as follows: salaries, $2,166; general supplies, $225; refrigeration car service, $1,500; travelling expenses, $1,740- and that increase is largely to take care of the travelling expenses of the new supervisor of condensers-dairy research division, increase of $800-and this is made up of an increase of $181 for supplies for dairy research laboratory-an increase of $25 in transportation charges for materials, and it has been found necessary to increase the amount for travelling expenses by $594. In the milk utilization service the increase is $1,500. This includes an increase of $25 for communication services. There is also an increase of $25 in the amount for wages for assistants at exhibitions. The amount provided for travelling expenses for 1936-37 was found to be less than required, and it has been necessary to increase this amount by $1,450. This makes a total increase of $18,000.


Thomas Alfred Thompson: What does the minister propose to do in connection with dairy marketing? In what way is he going to expend the increased grant which has been made for that purpose?


James Garfield Gardiner: I just gave the explanation, in reading from the items that are contained in this appropriation: dairy markets division, an increase of $6,300. It has been found necessary to increase the amount for communication services by $156.60. That is a very small item of increase in the matter of communication expenses. In order to take care of the purchase of thermographs and repairs to the same, the amount for equipment has been increased by $500. That increase does not necessarily mean that there is any particularly increased service; it is a
matter of buying thermographs and paying for repairs to them. Under miscellaneous current expenses an increase of $12.50 is shown. In salaries an increase of $2,160 is made necessary on account of the appointment of a supervisor of condenseries. It is not an additional service. It shows an addition in this particular branch, but it has been taken out of another branch, and the individual who was doing this work before in one of the other branches is now appointed in this one, with this particular title. The other amounts are small.


Thomas Alfred Thompson: I asked the question because, although we hear a great deal about improved conditions, we have not improved conditions in the dairy business. As regards our butter and our cheese we are very slightly better off than we were a year ago, and the d,airy farmer is not receiving any participation in what is called the return of prosperity-It is true that we in Canada have been manufacturing the best cheese in the world. It commands in the British market a higher price than any other make except the English cheddar, and it has lately been displacing that, because they are not making it in such large quantities as formerly. The cheese we are producing and exporting is selling in the British market to-day at a premium of two cents per pound over the best New Zealand cheese. That speaks for itself. We cannot say so much for our butter. We cannot compete with New Zealand as regards butter, and if we were to export our butter to-day we should have to take at least five or six cents per pound less than we are getting on the local market. To-day our local markets are no better than they were a year ago. By that I mean that the dairymen are not participating to any very great extent in the return to prosperity.
In respect of the increase in salaries, I should like to know whether it represents increases in the salaries of the present staff or an addition to the personnel of the staff.


James Garfield Gardiner: So far as the references to the condition of the dairy farmer are concerned, I think the figures indicate that those statements are scarcely in accordance with the facts.
As regards the price of cheese, the average increase last year, taking the year through, over the previous year is 2-6 cents per pound. That is a very considerable increase when one remembers that a year ago cheese was selling at around ten to eleven cents per pound. The average increase over the year of 2-6 cents is a very considerable percentage of the price we were obtaining at that t'me.

The Late Hon. Charles Marcil


Mark Cecil Senn: May I ask the minister where he obtained those figures?


James Garfield Gardiner: I obtained them from the records of the department, and I believe an examination of the records generally will indicate that to be true. It is just six o'clock, and probably it would be well to discuss this matter at greater length after we return at eight o'clock.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.
Progress reported.



THE LATE HON. CHARLES MARCIL

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance): Mr. Speaker, since the house rose at six o'clock we have had word of the death of Hon. Charles Marcil, one of our members, the oldest in point of service in the house, and a former Speaker. On discussing the matter with such members as I have been able to reach in the meantime it was felt that it would be a fitting tribute to his memory if this house adjourned. I therefore move that the house do now adjourn.
Richard Bedford Bennett: I desire to associate myself with what has been said by the Minister of Finance. I think it is entirely fitting and proper that this chamber, out of deference and respect and regard and esteem for its oldest member in point of service, and one who has been the first commoner of Canada, should now adjourn.
Motion agreed to and the house adjourned at 8.0S p.m.
Monday, February 1, 1937