1939-03-16

Mr. W. A. FRASER (Northumberland, Ont.):: Mr. Speaker, by leave of the house
I move that the first report of the standing committee on public accounts, presented to the house on the 14th instant, be now concurred in, as follows:
Your committee recommends that it be empowered:
(1)	To print, from day to day, 500 copies in English and 200 copies in French of its minutes of proceedings and evidence, and that standing order 64 be suspended in relation thereto.
(2)	To sit while the house is in session.
(3)	To employ clerical and stenographic assistance.
(4) To sit, for a period not exceeding two days, in the city of Toronto, and that the payment of any travelling expenses incurred be authorized.


Mr. C. G. MacNEIL (Vancouver North):: Mr. Speaker, I move:
That the report be not now concurred in but that it be referred back to the standing committee on public accounts with instructions to delete clause 4 therefrom.
Under clause 4 authority is requested from this house that the public accounts committee may sit for a period not exceeding two days in the city of Toronto, and that the payment of any travelling expenses incurred be authorized.
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As one of the minority of that committee who protested against this procedure, I find it necessary to carry the protest in this form to the floor of the house. It is not my intention to obstruct the business of the committee but rather to protest against a plan which I believe will obstruct the true purposes of the inquiry.
I submit that this procedure is not within the intentions of parliament when the inquiry was authorized. As far as I can discover there is no precedent for it in the records of parliament. Not a word of evidence has yet been heard; and apparently the members of the committee are to be transported to Toronto and to be dazzled, or to be influenced, before any evidence is heard, by the sight of a humming industry. I submit that the present state of the plant is not in question. What is in question is the state of the plant in October 1936 and at the time the contract was executed in March 1938. This is an attempt to focus attention on that which has occurred since the execution of the contract, whereas the purpose of the inquiry is to deal with that which occurred prior to the execution of the contract. Since the execution of the contract, and according to the statement made by the minister in the house the other evening, a sum approximating $844,000 has been spent on the plant. It should be in good shape. If it is not in good shape, others should pass judgment on that matter. Apparently it is in such good shape that the John Inglis Company is in a position to advertise in all the trade journals that it is prepared to take on a great deal of other business. It is altogether too late for the jury to visit the scene of the crime.
I submit that the committee is not in a position to determine the ability of the company to execute the contract according to schedule. It has been contended that that should be the purpose of the committee at its outset. For that purpose experts are required, and if during the proceedings of the committee it be found necessary to secure evidence on any of these matters, experts should be secured. There are many on the committee-and perhaps I may include myself in the number,-who could not tell the difference 'between certain types of shaping presses and heavy duty boring lathes. If we are to determine whether or not the company is in a position to carry out the contract according to schedule, it will be necessary to examine production schedules. I can readily imagine that there would be objection to such a procedure, and in any event it is entirely beyond the resources of the committee. Appraisal and inspection companies

now employed by the Canadian government could carry out this work if in the judgment of the committee it were considered necessary.
Statements have been made repeatedly that discussion of this contract in the house has delayed the company in meeting the requirements of Canada's defence forces. What could delay the work in this factory more than to conduct through the premises at this time fifty members of a standing committee of this house, and to require that company to make preparations for such a visit? In addition, prominent officials of the company will later be required to give evidence at length before the committee.
I have also in mind the warning given on various occasions by the Minister of Finance (Mr. Dunning) that committees of this house should exercise care in incurring expense for printing and the calling of witnesses. Therefore the cost of this plan should be taken into consideration. And it should be taken into consideration on the basis of the outside liability. The phrasing of this report is such that it does not restrain hon. members who take the trip from submitting accounts for their out-of-pocket expenses. It has been the custom when members of this house are required to undertake journeys on public business of this kind that they seek reimbursement of their out-of-pocket expenses. The suggestion has been made that members of the committee might refrain from submitting expense accounts, but there is nothing in the phrasing of this report to restrain them, and therefore the outside liability should be considered. I have made a rough and ready calculation, and the lowest estimate of the cost of a two-day sitting in Toronto is something in the neighbourhood of S650. I can itemize that if any hon. member requires it.
In justice to all the firms concerned it follows that similar visits should be made to other plants-to Montreal in order to visit the premises of Montreal Construction Supply and Equipment Limited, and possibly to the dominion government arsenal in the city of Quebec. Certainly if proper comparisons are to be made, visits should be made under this precedent to other established firms in Canada equipped to do machining work of this kind.
I submit therefore that the ultimate cost of the policy for which this report establishes a precedent would involve a sum of over $2,000 to be paid out of the public treasury, and for no good purpose. For that reason the trip would be regarded simply as a junketing trip.
I desire to restate the purposes of this inquiry as I stated them when I moved the

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motion of reference to the committee. I moved the motion of reference because of specific issues raised by Mr. Justice Davis. He stated in his report that certain matters would have to be determined by parliament. The first was whether or not the Bren gun could be manufactured under public auspices or by private manufacture. The second was whether the conduct of the individuals concerned was above question, as referred to on page 35 of the report. The third was whether adequate reasons existed for the failure of the interdepartmental committee to report back to the government when the system of supervision of contracts broke down, as referred to on page 41 of the report. The fourth was to discover whether the procedure followed in negotiating this contract protected the public interest, as referred to on page 49. The fifth was whether proper steps were taken to ensure proper discharge of the responsibility assumed in the selection of one particular contractor, as referred to at page 50.
These were the main reasons I advanced in moving my motion of reference to the committee. I protest most vigorously against the proposal embodied in clause 4 of the report of the committee, inspired by the eminent and learned counsel for the defence on the committee, as being nothing more or less than a brazen window-dressing to obscure the real purpose of the inquiry.


Mr. ANGUS MacINNIS (Vancouver East):: I think little need be added to what has been said by the hon. member for Vancouver North (Mr. MacNeil) in regard to the motion and on the amendment now before the house; that is, that the committee on public accounts proceed to Toronto to take evidence there. I took the position in the public accounts committee that we should first proceed with such evidence as could be obtained and such investigation as could be made in Ottawa, and that if subsequently we found it necessary to go to Toronto and inspect the John Inglis plant, that the permission of the house could then be requested. I am sure there would be no objection from the committee if it became evident as we proceeded that that was necessary. However, the majority of the committee thought otherwise, and we have this motion.
I sumbit that there is no reason at this time for inspecting the John Inglis plant. The commissioner who was appointed to investigate this contract and who heard evidence for something like two months, did not at any time during that time consider it a part of his duty to go to Toronto to inspect this plant officially. As the hon. member for
Vancouver North has already stated, if this committee inspects the John Inglis plant it will be bound to inspect all the other plants in Canada that %re capable of carrying on this kind of work.
We have in the report of Mr. Justice Davis, on page 37, the evidence of Mr. Fraser Elliott of the interdepartmental committee. He said:
The committee began to take an active part in the sense of asking questions and getting to grips with the problem. In so doing the committee indicated that competitive bi'ds should be one of the main considerations, and one of the first considerations. We pointed out that there was a number of very substantial subsisting companies in Canada that were manufacturing precision tools, and had. had experience in xvhat we thought was this line of work. We felt that they should be consulted and given an opportunity to submit competitive tenders. . . . The committee also thought there would be considerable time required for further consideration of the contract.
I submit that if we go to Toronto to see the John Inglis plant, and if we draw any inferences from what we see there, we are bound to visit these other plants and find out for ourselves whether they were or were not in a position to bid on this particular work.
One of the members of the committee, a medical man, speaking in favour of the motion to inspect the John Inglis plant and take evidence in Toronto, stated that he was taught by his professors never to make a diagnosis without seeing the patient. This is not a matter of making a diagnosis without seeing the patient. This is a matter of justifying a caesarean operation, two years after it was performed, by having a look at the infant. I submit, Mr. Speaker, that we shall be merely wasting the time of the house, the time of the committee and the money of the people of this country by taking this trip to Toronto. There are many things in regard to this contract, as the hon. member for Vancouver North has pointed out, that need investigating; but at this time it does not appear that there is anything that can be learned by going to Toronto to inspect this plant, because the John Inglis plant as it is to-day is not the John Inglis plant as it was at the time this contract was signed. As the Minister of National Defence (Mr. Mackenzie) pointed out, I think on Tuesday last, something like $844,000 has been spent on this plant by the Canadian and British governments since that time.


Mr. SPEAKER:: Order. There is too much noise in the house. I would ask hon. members to converse in lower tones; I can hardly hear what the hon. member is saying.
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Mr. MaeINNIS: Some other members of the committee said they wanted to go to Toronto to see the John Inglis plant because of certain statements made in the committee to the effect that it was a boiler shop.


Some hon. MEMBERS:: A broken down boiler shop.
Mr. MaeINNIS: Yes, a broken down boiler shop. There is no question of that; that statement was accepted by the commissioner and by everyone connected with the commission as being correct.


Some hon. MEMBERS:: No, no.
Mr. MaeINNIS: Well, just let us see. Mr. H. S. Alguire, of the aircraft inspection detachment at Toronto, made a report which was filed with the commission, in which he said that the factory at the time the report was written, October, 1936, was inoperative and had not been in operation since April, 1936. There was no staff in the plant at the time, with the exception of three maintenance men; and he stated that the plant was equipped for making boilers and heavy machinery of that kind, adding that in view of the time the plant had been in operation, the machinery was in reasonably good condition.
That is not the plant we are going to see; that is not the plant we will see if we go to Toronto. The plant we will see will be an altogether new plant, containing nearly a million dollars' worth of machinery which was not in it when this contract was signed. That is why I say we should not take up the time of the committee or spend the money of the people of Canada in a junketing trip of this kind.


Mr. HARRY LEADER (Portage la Prairie):: As one of those who formed the minority in the committee in regard to this proposal I should like to make my position clear. When the suggestion that the committee visit the Toronto plant was first broached, I thought a smaller committee would be more effective and more economical. I voted for the suggestion of the hon. member for Halifax (Mr. Isnor) that a subcommittee go to Toronto instead of sending the whole committee. That amendment was defeated, and the main motion was carried. I did not vote for the motion, but so far as I am concerned if the motion carries to-day I feel that it will be my duty to proceed to Toronto with the rest of the committee. However, I still feel that a small subcommittee would have been just as effective and certainly less expensive.

Mr. KARL K. HOMUTH (Waterloo South): Mr. Speaker, the first thing that strikes me in regard to this matter is the fact that the Bren gun contract and the report of Mr. Justice Davis were referred to the public accounts committee over four weeks ago. Almost four weeks went by before the committee was even called; almost five weeks have gone by, and we have had only one meeting. At that meeting the proposal now submitted by the chairman of that committee was adopted by an overwhelming majority. As one of those who opposed it I want to make my position clear, and at the same time I want to point out to hon. members what to my mind is a ridiculous situation. There has been a great deal of comment by the press and by citizens generally throughout the country as to the waste of time and of public money. If we take this proposed joy ride to Toronto I consider that it will be one of the worst pieces of burlesque to which this house has ever been a party.
What is proposed? It is suggested that we should send this committee, consisting of fifty members, to the city of Toronto to look over a plant which has a contract from this government. The original motion was that we should spend not more than two days there taking evidence. Now I understand the idea is that we should not take evidence. What is behind the motion? So far as I can see, the only thing behind it is that hon. members who resent the criticism of this contract may be able to go back to their voters and say, " We saw a very well-equipped plant, which is making the Bren machine gun." Why is this proposal advanced? For no other reason, Mr. Speaker, than that these hon. members, without any particular knowledge of machinery, or the equipment of this plant, or what it can do, may be in a position to try to offset the criticism that has come from one end of this country to the other with regard to this contract.
What brought about this whole trouble? It resulted simply because a man obtained a very important contract through political patronage, and it has been shown very clearly who that man is. He is a promoter; he has been promoting companies, not for the general welfare of the people of Canada but for his own welfare.


Some hon. MEMBERS:: Order.


Mr. MACKENZIE KING:: I do not wish to call the hon. gentleman to order, but surely he knows that this matter is before the committee and that he is not at liberty to discuss, as he is discussing, matters that are at present in the hands of the committee.

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Mr. HOMUTH:: I still maintain that this motion is being made as a start. in the investigation of the Bren gun contract, and I am opposing this trip to Toronto for certain reasons. One of them is that throughout the whole thing we pointed out the inefficiency of the plant, the fact that it was not fitted to make Bren guns and that there was no assurance it was fitted to make any- kind of [DOT]ammunition. But as a result of getting this contract certain men who were promoting it and who got the contract and control of the business would have been in a position to make millions of dollars of profits, through stock manipulation alone.


Some hon. MEMBERS:: Order.


Karl Kenneth Homuth: I submit I am in order, Mr. Speaker; I am discussing the matter and pointing out the things that we as a committee are supposed to investigate as a result of the debate which took place in the house.


William Lyon Mackenzie King: It has gone far beyond that.


Karl Kenneth Homuth: If I am out of order, sir, I will abide by your ruling.	-


Walter Edward Foster: The hon. member should confine his remarks to the motion and the amendment before the house. The amendment is that the report be not now concurred in, but that it be referred back to the committee with instructions to delete a certain paragraph. That is the subject matter at present before the house.


Karl Kenneth Homuth: I abide by your ruling, Mr. Speaker. But I do say that we are asked to go to Toronto to investigate a plant-not the plant that was there when the contract was given, but a new plant which has been constructed, in which the Bren machine gun is being made. It is not being made in that immense boiler factory with ceilings sixty, seventy or eighty feet high. The Bren machine gun is being made in an addition-and a rather cheap looking addition at that-which has been built outside the old John Inglis Company plant. In that part they have spent $844,000 in machinery, much of the profit from which is going to those who are promoting this whole affair. The plant we would see is entirely different from the plant which was there when the contract was made.
There were lies told about the plant, and untruths told about the condition of the plant, in order to get the contract. One lie led to another, and the whole thing was a case of misrepresentation. We charge that the old John Inglis Company plant was not a fit place
in which to make the Bren machine gun. The very fact that they had to build a new plant is proof of that.


Walter Edward Foster: The hon. member is not discussing the merits of the question.


Mr. STEWART:: On a point of order, I submit it must be borne in mind that the reference to the public accounts committee is absolutely wide open. The reference to the committee included the Bren gun contract, the report of the commissioner on that contract, and all other contracts. The report of the committee suggests a visit to Toronto to inspect a plant. I submit every reason which can be urged against inspection of that plant i3 quite in order now on this motion.


Mr. LAPOINTE (Quebec East):: But that is not what the hon. member is saying.


William Lyon Mackenzie King: He is giving judgment.


Ernest Lapointe: He is
resuming the whole debate on the merits of the first motion to send the matter to the committee.


Hugh Alexander Stewart: No, no.


Ernest Lapointe: He is adducing arguments which were adduced at that time, and which have nothing to do with the proposal to visit the plant. Indeed his arguments show conclusively that it is important that the plant be visited.


Karl Kenneth Homuth: If there is a continuation
of the debate I say it is the fault of the government that there is any debate on this matter at all, and hon. members of that committee making any such silly suggestion as that of going to Toronto. We charge-


Walter Edward Foster: That is a reflection on
the government and members of the committee.


Karl Kenneth Homuth: Mr. Speaker, I did not
say members of the government were silly; I said it was a silly suggestion to make- and I still think so. I still say that the whole condition of the plant was misrepresented, and that what we will see in Toronto is a new plant equipped with government money. This government has $844,000 invested in the plant, and we do not know yet how much more will have to be invested in it before they are able to turn out Bren machine guns.


Mr. REID:: Go up and see it.


Karl Kenneth Homuth: If the committee wishes
to go to see the plant, then let us go to see some of the plants which were mentioned in the evidence.

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An hon. MEMBER:: Who mentioned them?


Karl Kenneth Homuth: Let us go and see the
plants which could have made the Bren machine gun. On the committee we have doctors, lawyers, farmers and insurance brokers, men who in their own professions are undoubtedly capable. I have been in industry all my life, but I could not go into any plant, and simply by looking at it and at the machinery, say whether or not it would be equipped to turn out any particular article.
With all due respect to their ability, I venture to say that members of the house could be taken into a washing machine factory and be told, "In this factory we can turn out pistols and machine guns," and they would simply reply, "Is that so?" What knowledge have the members of the committee with respect to the manufacture of a machine gun? No man on the committee, even if he has been interested in industry all his life, is in a position to go into a plant, inspect it and be able to say that it would be an efficient plant for the purpose of turning out the Bren machine gun. He could not do that unless he knew every operation necessary to turn out such a gun. These matters are all secret; they are not for the knowledge of the members of the committee. We have been told by the minister that they are so secret that they had to be very careful with respect to the men they employed in their plant at Toronto.
If the committee is going to make inspections, let it inspect the plants which could have done the work, without the government having to invest a million or more dollars to do it, and to build up a private enterprise for some stock promoters. Let them go and inspect plants which could have made shells such as are being made in Montreal. Let them inspect plants which made shells during the last war, which are equipped to-day to make shells and to make them cheaper than they are being made under contract in Montreal.
If hon. members and people throughout the country have any reason to protest against loss of time and waste of money, they will certainly have a great deal of reason to do so if the house decides the committee is to go to Toronto to investigate the plant. Personally I shall take no part in this joy ride. I will not be a party to this burlesque. I do not intend to go to Toronto to inspect the John Inglis company plant.


Mr. J. A. MARSHALL (Camrose):: Mr. Speaker, I do not wish to take up much time of the house or to hold up the vote on this particular question. As a member of the 
public accounts committee from time to time I have purposely refrained from making any statement or any remark on the floor of the house with respect to the Bren machine gun contract or the report of Judge Davis. I prefer to defer any comments until such time as the committee has completed its work and made a report to the house.
It has been stated that over S800.000 has been spent on the plant by the Canadian and British governments since the investigation took place before Mr. Justice Davis. It may be possible to visualize the condition of the plant before that expenditure was made, but I do not believe a casual inspection as is contemplated would enable me at any rate to form an unprejudiced opinion. Therefore, I shall support the amendment to the resolution, and all the members of this group will do likewise.


Mr. T. L. CHURCH (Broadview):: Mr. Speaker, the question before the house is whether the public accounts committee of some fifty-six members shall be authorized to proceed to Toronto to visit the Inglis plant and hold there a session of the House of Commons and a parliamentary inquiry. That is what it amounts to. There is an amendment before us to strike out paragraph 4 of the report of the committee. There has been a great deal of criticism of this house in connection with the appointing of committees and commissions and empowering other people to go all over the civilized world on public business. Very little is accomplished or learned. The reference to this committee was that it should find out whether or not this was a good contract and in the public interest. That is why the' committee was appointed and constituted. Now they want to go beyond their prerogatives and hold a session of parliament, a session of the public accounts committee at the factory of John Inglis Company on Strachan avenue, Toronto. How many members of this committee are technical men who would know anything about the plant nr its work.
If Canada were industrialized to the same extent as Great Britain, some object might be accomplished in inspecting this plant in Toronto. Ottawa alone is where this committee should sit. A royal commission was appointed under the Public Inquiries Act and considerable evidence was heard and the judge made his report. I may say that in England a parliamentary session was held at Aider-shot, according to pictures which appeared in Sketch for February. The whole membership of the House of Commons went to Alder-

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shot to inspect the armaments being manufactured there. But Aldershot is only a few miles from London and they were able to be back in the house the same day.
At the present time the Inglis plant is not fully equipped for this purpose, but will soon be. I passed there last Saturday and there was a large number of men at work. It is an old and splendid plant and is a most commendable idea if it is extended to provide work for all. I understand from the minister that he has had reports by his officials on 1,300 plants, but there are many other plants which were not inspected but which should be at once. This is a unit which is actively engaged in this work, but I cannot see the necessity for holding a public judicial inquiry in Toronto at present. Witnesses are to be heard and their evidence taken under oath. I cannot see how any good results can be obtained from such a visit. If the House of Commons is to hold a session in Toronto, they should hold it in the Toronto exhibition coliseum which is next door to this plant in Toronto. The members would then be able to inquire into a much more important question, namely, why 1,200 transient men are on relief and cannot get work. In my opinion unemployment is a much more important matter for us to deal with than the present business to be dealt with by this committee.
When the session closes we find our representatives travelling all over the world, on each one of the seven seas. We get very little good out of these joy rides as the press call them because that is all a great many of these trips are. So far as this committee is concerned, I was a member but I am not at the present time. I believe the committee would be better employed if it stayed here in Ottawa. A few members could be appointed to make an inspection of this plant if the government thought it necessary. It may be necessary to do a little later on what was done during the days of the war when a visit was made to the Baldwin plant and other munition plants in Canada. However, we are not yet far enough on with this munitions expansion at the present time. I understand the program of the minister on rearmament calls for an expenditure of several millions, and when we get far enough along perhaps it may be thought advisable for the House of Commons to appoint a committee, as was done during the war, to visit this plant and other plants later and make a report. As I understand the reference to the committee, the committee is to go over the evidence taken before the royal commissioner and his report. We are now being asked to delegate our powers
and permit sessions of parliament to be held in Toronto. If that is to be done, let us consider this more important question, the question of unemployment.
Mr. GORDON B. ISNOR (Halifax): Mr. Speaker, as a member of the public accounts committee I hesitate to take part in this debate because I understand it is not the usual procedure to discuss matters before a committee until a report has been tabled. As other hon. members have brought to the attention of the house, an amendment was moved by me iu committee to provide for the appointment of a smaller committee of seven members to proceed to Toronto to inspect the plant and then report to the main committee. I was quite willing to abide by the decision of such a committee. However, when that amendment was presented it was discussed by the various members and the majority thought that the committee as a whole should visit the plant. I do not feel this is a joy ride, as has been suggested by some of the hon. members who have spoken on this matter. This trip is necessary in order that we may vote intelligently on this important question. I like the attitude taken by the hon. member for Cam-rose (Mr. Marshall). The hon. member intimated that he had refrained from discussing this matter because he wanted to keep an open mind. That is my attitude with respect to this whole question. I want to hear every detail brought before the committee and then make up my mind to support the majority or minority report, as the case may be. I feel that we should visit the plant and I am supporting the recommendation made by the majority of the committee.


Mr. WOODSWORTH:: If the hon. member cannot vote intelligently without going to Toronto, how does he expect the members of the house generally to vote intelligently unless the whole house goes there?


Mr. ISNOR:: I think I can answer that to the satisfaction of the hon. member. One hon. member has said that an expenditure of SSOO.OOO was made on equipment. I should like to satisfy myself or have a report from a subcommittee as to whether that expenditure of 8800,000 was justified. I think that is a very important aspect of the matter.


Mr. J. R. MacNICOL (Davenport):: Mr. Speaker-


An hon. MEMBER:: The expert!


John Ritchie MacNicol: I am persuaded to rise as much by the remark I have just heard from the opposite side as anything else, but particularly because of an article which appeared
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in the Toronto Telegram of Saturday last, March 11, apparently an interview with the officials of the Bren gun plant, justifying the plant. This interview says:
What precisely is the John Inglis plant like? Is it the broken down, empty boiler factory, the wretched ghost of more prosperous days, its critics say it is?
Anything I said about the John Inglis plant in the former debate was about the plant as I knew it and had known it for many years. I have known it from end to end and my remarks had reference to the plant as I knew it, not as it is now. In fact, the whole debate applied to what the plant was like before it was purchased. I continue to quote:
According to officials of the company that is an unfair and untrue picture of the situation, based upon rumour, gossip and miscomprehension.
I repeat that any references I made in the debate to the John Inglis plant were to the plant as it was before this contract was let, not as it is to-day. My remarks had no reference to the new part of the plant. Continuing the quotation:
They admit that the original purpose of the plant was to manufacture boilers, that it went into liquidation, but they claim that now, under new management, the plant is staffed and equipped to meet the demands made upon a competent engineering and ordnance organization.
I have nothing to say as to the competency of that company to manufacture to-day any kind of equipment, large or small, or the Bren gun. What I have to say refers to what the plant was when the member for Trinity (Mr. Plaxton) wrote to the Prime Minister (Mr. Mackenzie King).


An hon. MEMBER:: It is still the same.


John Ritchie MacNicol: The hon. member who said that really does not know what he is talking about.


Mr. McLEAN (Melfort):: Let us go and see it.


John Ritchie MacNicol: On the 24th of August, 1936, the hon. member for Trinity wrote the Prime Minister as follows-


Some hon. MEMBERS:: Order.


Walter Edward Foster: Order.


John Ritchie MacNicol: Very well, Mr. Speaker. The letter is in Hansard and has been quoted often; I do not need to repeat it.
I am going to describe what the plant was like at that time for I know it very well. It consisted of seventeen or eighteen or nineteen large and small buildings, some of them lean-to's. There were five main buildings.
f\Ir. MacNicoI.]
There was the office building. Then there was the machine shop, which is a large building that was used for manufacturing all kinds of steel and iron equipment that the John Inglis company made. They were splendid manufacturers of marine engines. That was their original business. They made hydraulic machines for mines and so forth, condensers, centrifugal and reciprocating pumps. They made tanks; they made boats-they made one of the ferry boats for the city of Toronto. They also made marine legs for grain elevators, and they made coal bunkers. The John Inglis plant at that time was well equipped for making all that kind of material.


An hon. MEMBER:: Hear, hear.


John Ritchie MacNicol: I hear a "hear, hear"
from a man who knows I am right, and I hope he is on the committee, because I know he knows what a plant means. It was the hon. member for Huron-Perth (Mr. Golding).
Building No. 3 was for making boilers. It was a large building and the boilers they made were, some of them, perhaps 20 feet long, some perhaps longer, and anything from 24 inches in diameter up; I believe they went as high as 100 to 150 inches in diameter in the boilers and tanks they made. These tanks and boilers had to be lifted away up and turned round and brought down again. It was a thoroughly equipped boiler plant, none better in Canada.
Building No. 4 was for holding the patterns of the company. I knew the company very well because the company I was with bought a vast quantity of material from the John Inglis company. Shop No. 5 was the forging shop. The company in later years made boilers and the boiler-heads were dished at the plant, and because of that the company had a very large forge shop for heating and dishing the heads and flanging the sheets that entered into the construction of a boiler. I see my hon. friend the hon. member for Huron-Perth (Mr. Golding) nods his head. He knows that is a large building.
There were five main buildings and a whole lot of small buildings, perhaps another dozen of small buildings or lean-to's. During the past months a sixth building has been added to the plant, at the rear, as I understand it, of the forge shop, part of it between the forge shop and the machine shop. That building, I heard someone say, is 582 feet in length. At its narrowest its width is 37 feet, and at its widest, in the centre of the building, approximately 140 feet. It angles off alongside the railway for a considerable distance, and at the west end is perhaps not over 45 or 50 feet in width. That new building may be all

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that is claimed for it. But at the time the contract was let that building was not there; it has been built since. This new building has tin on the outside, glass on the north side and glass on the south side, and it runs alongside the railway track. I believe the ceilings are about 14 feet high. The machines are assembled in the building alongside the windows on the south side and alongside the windows on the north side, with a row of machines down the centre. That is the new shop.
The company itself in its own advertisements in the Toronto papers endorses everything we said about the plant in the debate in this house. Here is a picture of an advertisement that appeared in the Toronto papers. It carries a cut showing the old John Inglis plant before the new building was added; in fact, the new building is not shown in the cut at all as I see it. This advertisement states what the company can do; and what does the company itself say? It is now referring to the old plant, described as a boiler plant. I do not remember whether someone said-I know that I never at any time said, and it is neither here nor there whether anyone did or not

that it was a broken down boiler plant. It was a good boiler plant in its day, none better in the country, but it stood idle for several years before it was purchased by the company which now owns it. This advertisement reads:
We are designers, engineers and manufacturers of machinery and equipment for mine, mill, power plant and factory.
Our skilled staff of experienced technicians is at your service. We invite particulars of your requirements.
John Inglis Co. Limited.
I have no doubt they can do all that, with their patterns and equipment in the old part of the plant. They did all that before, and no doubt can do it again, and if there is any business along these lines I hope, because of my warm feeling for the old company and the name of Inglis, they will get some of that business.
All our remarks in connection with the Bren gun were by way of opposition to the purchase of the old plant for the making of Bren guns; and we were right, because they are not making Bren guns in the old plant, they are making them in a new plant. I have no doubt that the plant they have put up is a good one; I have nothing but the best to say about it, and I hope that it turns out good guns. No doubt they have good workmen. I do not know any of the men who are working in the plant, but the machinists and other technicians employed in Toronto and elsewhere are, in my experience, quite qualified, and I have no doubt that they will turn out good equipment. The point at issue between ourselves and hon. members who want to make this joy ride is that if the committee go there now they will be taken into a brand new plant and doubtless will find it well equipped.


Ernest Lapointe: Does my hon. friend call a trip to Toronto a "joy ride"?


John Ritchie MacNicol: I have heard people say they spent a week in Toronto one Sunday; but to me there is no finer city anywhere. Perhaps others are just as good, but none is better.
I cannot conceive that the Prime Minister (Mr. Mackenzie King), for whom no one in the house has a warmer personal regard than I have, a regard which goes back a long time, and makes me feel for him in all this business -on this point Mr. Speaker stopped me a while ago, so I will not now continue what I might have said-will allow the committee to go to Toronto to look at a new building. Not that a new building as such is not worth looking at. The new building of any other company which might have made these guns with much less new equipment and with fewer buildings than the company which to-day has the Bren gun contract, would be worth looking at. What I am particularly opposed to is a joy ride at the country's expense. There are hon. members who do not take any stock in the leadership league movement, but in my judgment it is going to do a great deal of good. At least it will arouse the voters of this country to think of what their members are doing and what parliament is doing. I am convinced that parliament as a whole, irrespective of any party or group, is composed of as good men as can be found in any other parliament in the world. I have the highest regard for this house and its members. But the leadership league is charging us with doing nothing. What will they have in that vacant space to which on two or three occasions the Minister of Justice (Mr. Lapointe) has referred?


An hon. MEMBER:: They have dropped it out.


John Ritchie MacNicol: When this joy-riding delegation goes to Toronto they will put a line in that vacant space to the effect that the committee is there at the country's expense. Of course hon. members travel, at any rate as far as their tickets are concerned, free of charge. I appeal to the Prime Minister to put his foot down. As I have said, I have a high regard for him; I should like others to
1946	COMMONS
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have a high regard for him, but it will be impaired if he lets this junketing joy-riding delegation go to Toronto at the country's expense. If they wish to go at their own expense, let them do so. I have no objection to that. If any individual member wishes to go, let him go, but not, I say, at the expense of the country.


Hugh Alexander Stewart: Mr. Speaker, as a member of the public accounts committee I feel it my duty to speak briefly to this resolution.
There was in the committee a sharp division of opinion as to whether this inspection should be made. In the committee I opposed it. I took the ground that it was a strange proceeding. There had been a thorough investigation of this contract in all its aspects, counsel had been employed by the government and by all parties interested, and it was never suggested in the course of that investigation that anything whatever could be gained by making a trip to Toronto to inspect this plant. What can be gained at this late date? Very much less, I Submit, than could have been gained if an inspection had been made earlier. An inspection at this time, after the large expenditure of money that has been made, is useless.


An hon. MEMBER:: Why?


Hugh Alexander Stewart: In many cases it is desirable when a matter is in dispute to investigate the site of the trouble, and sometimes a judge orders it. But if the judge knows that all the conditions have been changed since the event occurred which is the subject of investigation, he declines to authorize an inspection.
What was the reference to the public accounts committee? The Bren gun contract, the commissioner's report, and other contracts were referred to the committee. I wish now to suggest to this house just what our duties are and why this inspection is unnecessary. Reading from page 49 of the report of the commissioner a paragraph or two which I think condenses and summarizes what we should undertake, I quote as follows: The contract is not for a fixed sum; it is on a cost plus basis. It is admitted that we do not know how much the guns are going to cost. There are, of course, adequate powers of inspection, supervision and control vested in the department under the contract and with the etsimates from Enfield of what the guns there are costing it should be possible to keep actual cost well within bounds.
No substantial objection can be taken in my view-
[Mr. MacNicol.l


Walter Edward Foster: Order. The hon. member should not go into the merits of the contract or discuss whether it was properly entered into or not. That is a matter for the committee to decide. I do not think that the hon. member should revive a general discussion of this subject which has already taken place in the house. The only question now before the house is whether or not the last paragraph of the report should be struck out.


Hugh Alexander Stewart: Mr. Speaker, I thoroughly understand the point you have taken and the objection you have made to certain statements being read. My contention that there should not be an inspection of this plant is based on what is contained in this report, and all I propose to do is to read one other paragraph as a basis of my argument that that inspection is useless and worthless:
No substantial objection can be taken in my view to the provisions of the Canadian contract, though in the absence of any competitive bids or terms of manufacture I am unable to pass upon the substance as distinct from the form of the contract. It is important, of course, that the contract be a good and businesskke contract; but what is more important after all is whether the procedure adopted in making the contract was that best calculated to protect the public interest and to secure the confidence of the people of Canada that there would be no improper profiteering in the private manufacture of war armaments for the defence of the country.
These are the subjects which are suggested for consideration and investigation by parliament. I submit that for the consideration and determination of these, an inspection of this plant is worthless; it is not helpful in any way. In what is parliament interested in connection with this Bren gun contract? I think we want to know, in the first place, why the manufacture of these guns was not undertaken in a government property and under government auspices. In the second place, if the manufacture of these guns was not to be undertaken as a government work, why were tenders not invited for the manufacture? Why was this particular firm chosen above all others when there were others quite competent and with ample equipment to manufacture these guns? Why was the interdepartmental committee's suggestion and recommendation-


Ernest Lapointe: What has this to do with the amendment?


Walter Edward Foster: I think the hon. member is dealing with the question of the Bren gun contract. The question before the house is merely whether it is advisable to accept or

Public Accounts Committee Report
reject one paragraph of the report of the committee. I ask the hon. member to confine his remarks to that subject.


Hugh Alexander Stewart: I accept your ruling, sir, but the argument I am trying to make apparently has not been appreciated by your honour or by the house. I am arguing that what we are in duty bound to do is to ascertain what I have been referring to rather than to inspect a new plant which has been built since this contract was awarded.


Walter Edward Foster: The hon. member should speak to that point.


Hugh Alexander Stewart: My contention is that if the committee goes to Toronto it will be seeing a plant which has been constructed since this contract was made. This will be of no assistance whatever in coming to a conclusion as to the condition of the plant at the time the contract was made.


Mr. YOUNG:: Does the hon. member
admit that the present building and plant is a satisfactory plant?


Hugh Alexander Stewart: Whether or not that is so can be easily established by calling one or two witnesses who know and can give expert testimony as to the condition of the plant. If this procedure is followed we can form a better judgment than we could by going to Toronto and inspecting the plant. To me this is a futile undertaking, a waste of public money. I opposed it in the committee and for the same reason I propose to vote for the amendment.


Mr. G. G. McGEER (Vancouver-Burrard):: I supported in the committee the resolution to ask the house for leave to go to Toronto to inspect the plant and the present operations of the John Inglis Company, as they apply not only to the production of Bren guns but also to the commercial activities of the plant.
I did so in order that we might have a firsthand view of the possibilities of coordinating war-time preparation activities with peacetime commercial activities, not only to secure efficient means for the production of arms in time of need but also to coordinate that kind of work and the reestablishment of peace-time industrial enterprise. It is important to consider this particular contract from the point of view of the policy of governmental cooperation with private enterprise to aid as far as possible the preparation for the production of necessary arms for defence and, as well, the reestablishment of industrial activity in Canada.
Any better reasons for the inspection of this plant than have been advanced by hon.
members who have spoken against the proposal of the committee, would 'be very difficult to find. I am amazed that those who have been responsible for the enormous amount of time that has been taken in investigating this minor item in British empire defence should now hesitate to go and examine, or allow a committee of parliament to go and examine, the thing that they have condemned as unworthy of confidence.


John Ritchie MacNicol: They would not know anything about it.


Gerald Grattan McGeer: Let me tell the hon. member for Waterloo South (Mr. Homuth) that this whole program is based on misrepresentation. When I read the Maclean's magazine article-


Some hon. MEMBERS:: Order.


John Ritchie MacNicol: That was in Hansard.


Gerald Grattan McGeer: Well, the picture I am referring to was not in Hansard. One thing that impressed me was the picture of the John Inglis plant, and because I saw that picture, I stopped off in Toronto on my way through to Ottawa and took a look at the plant. No greater misrepresentation could possibly have been made to the public of Canada than the picture which featured the article which by innuendo made the charges which have been under investigation for months.
What is this committee asked to do for parliament and for the people of Canada? It is asked to ascertain whether the plant was a broken down boiler plant, whether the personnel of the company was competent to carry out the contract. What better evidence can the committee have than to go and see the men carrying out the contract, the problems of production and of organization, and to have explained to them the manner in which those problems are being faced and carried out? In a matter involving much technical detail no man can form a judgment so well from the evidence of experts as he can by going and seeing for himself the problem and its solution.
We are told that the delivery of the guns will be indefinitely delayed, that the company's assets were not of the value stated in the evidence before the royal commission, that there wras gross misrepresentation as to the commercial value of the plant as well as its war-time value-


Hugh Alexander Stewart: On a point of order, Mr. Speaker, your honour has ruled that we should stick closely to the motion before the house. I submit that the hon. member is travelling far afield.
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Walter Edward Foster: The hon. member who is now speaking is as much in order as some who preceded him.


Hugh Alexander Stewart: There is this difference, that others were stopped and he is not stopped.


Walter Edward Foster: I stopped them, but they would not abide by my ruling.


Gerald Grattan McGeer: I wish to keep within the rules of the house, Mr. Speaker, and certainly I bow to any ruling you may make. But I am pointing out some things which as a member of the committee I feel we are required to report upon, and some things on which I believe we can form a better opinion by seeing with our own eyes than we can by merely calling experts whose views we may be unable to understand.
We are told that the plant and the company were not capable of being efficiently and economically converted into a production unit of arms for Canada, namely, Bren guns. What have we heard this afternoon? We have been told that a new building has been erected and that some $840,000 of public moneys have been expended on that plant. There is one feature of this particular kind of contract about which the committee by going to Toronto can get first-hand information. In the production line, which spreads over a very large building, a uniform temperature of 68 degrees Fahrenheit must be maintained, because this particular type of equipment, with its innumerable parts, has to move in production throughout under the same temperature. I am given to understand that, starting from a plant not in operation as against starting from a plant in operation, one of the reasons why it is wiser to adopt this course rather than the other-


Angus MacInnis: What other?


Gerald Grattan McGeer: -is that you can build a new organization and equip it having regard to the conditions that are necessary successfully to produce this kind of weapon. In any event, for any hon. member of this house to say that he does not want to go and will not go to examine a plant in which S840.000 of public money is invested and in which defence armaments are being produced, indicates in my opinion an extraordinary conception of the duties and responsibilities of a member of parliament. Let me say that while the hon. member for Waterloo South (Mr. Homuth) smiles-


Miss MACPHAIL:: We laugh.


Gerald Grattan McGeer: Yes, I know that.


An hon. MEMBER:: We are all laughing.


Gerald Grattan McGeer: I am glad of that. But when a man stands in his place in this house and says, "I will not agree with a majority of the committee; I will not agree with a majority of this house; I will stand alone; I refuse to go," he is bringing to this house something that at least borders on that from which the world is suffering so much to-day, namely the dictatorship of fascism.


Karl Kenneth Homuth: Mr. Speaker-


Some hon. MEMBERS:: Sit down.


Karl Kenneth Homuth: I would ask the hon. member to withdraw the reference to myself with regard to fascism.


Gerald Grattan McGeer: Oh, no, Mr. Speaker; I
did not accuse the hon. gentleman of being a fascist. I said that in my humble opinion his attitude bordered dangerously upon that from which the world is suffering to-day; because as I understand fascism, it is the dictatorship of one individual who declares his will against that of all others.
We have been told that these expenditures of public money are unnecessary. Well, I think an examination of the plant will give us direct information in regard to what must be done in order to bring into production an instrument or arm of defence such as the Bren gun. There are two other phases of this inquiry by the public accounts committee which I think are important. One is that the instigator of this whole investigation, Colonel Drew, has declared that this plant should be closed; and the leader of the opposition (Mr. Manion) has asked this house to cancel the contract. If we are to close the plant or cancel the contract, or consider whether or not we should do so-and' these are issues that are definitely presented to the public of Canada for consideration to-day- surely we should go and look at what we are going to close and understand what we are going to cancel.


Karl Kenneth Homuth: You will never close it.


Gerald Grattan McGeer: 
Gerald Grattan McGeer: I am inclined to think my hon. friend will suffer from that difficulty in connection with a great many phases of the activities of the committee.
Mr. MaeINNIS: This is the dictatorship complex coming out now. Let me tell my hon. friend that at the moment he is not in the city council of Vancouver.


Gerald Grattan McGeer: We appointed a steering
committee. That steering committee met. The hon. member for Vancouver North (Mr. MacNeil) is a member of that committee, and I am sure he will agree that I am stating the general idea of that steering committee, which was agreed upon this morning and which will be reported to the general committee to-morrow morning.
Mr. MaeINNIS: Then we will decide tomorrow morning.


James Alexander Marshall: I should like to ask the hon. gentleman whether all members of the steering committee were notified of this meeting which was held this morning.


Gerald Grattan McGeer: All were notified and a
majority were present.


James Alexander Marshall: I understand that I am a member of that committee, and I want to state positively on the floor of this house that I received no notification of the meeting.


Gerald Grattan McGeer: There is another feature
of this expense problem. Any member of that committee who does not think public money should be expended on this trip does not need to file a bill of expense; so that the total expense-and I think I can speak for the Liberal members of that committee-will depend upon the bills filed by the members of the committee from other parties in this house. There will be no expense as far as this side of the house is concerned.


Thomas Reid: That cuts out the joy ride.


Gerald Grattan McGeer: Anyone who would suggest a joy ride to Toronto at this time of the year has a strange conception of what a joy ride ought to be.
I do not want to prolong the debate,'which has continued much too long, but the events which are occurring to-day in Europe should
cause members of this house and the members of the committee to recognize a sense of responsibility, which every Canadian should realize is involved in every feature of our defence program. The time has come when the defence of Canada, as part of the British empire and one of the democracies of the world, should rise above the partisan desires and political ambitions of men who would sacrifice defence in the hope of gaining party . advantage. With regard to what has been said about the expense of this proposed trip of the committee to Toronto, let me ask hon. members of the house: What about the loss the Dominion of Canada has suffered as a result of the tactics of the instigators of this inquiry?


An hon. MEMBER:: And the Bren gun.


Gerald Grattan McGeer: My hon. friends complain
about the S400 expense to go to examine what is admitted to be an investment of
5840.000.	an investment which is to produce arms which are essential for the defence of Canada. But this investigation and the manner in which it has been conducted has probably cost the workmen of Canada some
550.000.	000 in war contracts which would go for the defence of the British empire.


Some hon. MEMBERS:: Order.


Walter Edward Foster: Order. The hon. member is getting away from the subject matter of the debate.


Mr. LANDERYOU:: Getting away? -he
has gone.


Gerald Grattan McGeer: I bow to your ruling,
sir, but what I would point out is this. Let us stop this bickering debate. Let us say. to the people not only of Canada but of the British empire and of the democracies of the world: Canada is united, and is moving, in proportion to her wealth and power to make her contribution to the defence of democracy. If we do that we need have no fear of leadership leagues or anything of the kind.
I ask the house to confirm the recommendation of the committee, so that there may be a report from a committee which has done its job fairly well by starting first with the most important feature of its obligation, namely an examination of the plant as it was at the time the contract was entered into, an examination of it as it is to-day, an examination of the organization which is operating, and the conditions under which the contract .is being fulfilled. If we do that one job we shall then be able to deal more intelligently with many other features of the investigation which we have been asked to make.
1950	COMMONS
Public Accounts Committee Report
Miss AGNES C. MACPHAIL (Grey-Brace) : Mr. Speaker, I am sure the government favour which the hon. member for Vancouver-Burrard (Mr. McGeer) is now enjoying will bring encouragement to all members of the House of Commons who are standing out, as some are- and particularly in the government party-against the majority opinion in their party. I say that because I can recall a time, and not so long ago, when the hon. member for Vancouver-Burrard was not-


Some hon. MEMBERS:: Order.


Agnes Campbell Macphail: This really has to do with going to Toronto. There was a time when the hon. member for Vancouver-Burrard was not in such high favour. But now, three times, we have seen him called in as the most able lawyer-


Some hon. MEMBERS:: Order.


Agnes Campbell Macphail: -pinch hitting for the government. Each of the three times has been in connection with the Bren gun. It is really a compliment to the hon. member for Vancouver-Burrard, and I am sure with his Irish humour he has already laughed to himself regarding it.


Ernest Lapointe: That is not fair. My hon. friend is in high favour all the time, and she usually opposes us.


Agnes Campbell Macphail: I thank the Minister of Justice (Mr. Lapointe); he is always very gracious.
I listened to the whole debate on the Bren gun, but until now I have said nothing about it. My opinion would be, however, that the committee is being taken-for I judge with the "small" majority the government has, the motion will carry-to Toronto to approve the government's action. There is no doubt about that. By going to Toronto now to investigate or to look over a plant, after $844,000 has been spent on it, you get about as much idea of it as you do from visiting an old house which has been renovated. I have not had much experience with manufacturing plants, but I have seen old houses renovated, wings put on, fireplaces put in, a picture window or two added, until you could not tell where the old house had gone; certainly you could not find it in the new one. I suggest it is the same with the John Inglis company plant at Toronto. After $844,000 has been spent the committee will not be able to see the old plant at all, so there is no use going to Toronto to see it. But if members of the committee have to go in order to 
know what to do, then all the members of the House of Commons had better go up on a Saturday. It would be a real joy ride; and if it were not a joy ride, we could have a joyous day after we got there.


Mr. DUNNING:: No expense accounts, though.


Agnes Campbell Macphail: I am not the sort of person who puts in expense accounts, so I would not mind that. Of course I would be on my way home, anyway. It seems to me the government is making an error in asking the committee to go to Toronto.


Ernest Lapointe: The government did not ask it.


William Lyon Mackenzie King: The committee asked it.


Agnes Campbell Macphail: Government members of the committee undoubtedly have asked, though, that they go to Toronto. I think it is an error. It would be far better to bring people to tell what the plant was like in the beginning. One cannot now see what it was like, even if one did go. Then the committee could have people come to tell what the plant is like at the present time.
It would look now as though the plant is being groomed as the seat of action for munitions. While I should like to see the manufacturing done under public ownership-and I must not continue with this, or Mr. Speaker will rule me out of order-it would appear that this plant is being prepared for the manufacturing of munitions. The government having spent $844,000, it is going to be difficult to pass over that company and give it to others.
The hon. member for Vancouver-Burrard struck a very patriotic note. I was afraid to laugh too much, for fear he would too, and that would have spoiled the effect. May I say to him that one need not have armaments in these days in order to win a war. Just walk in-there is not even a protest. So that the hon. member's arguments seem rather far-fetched. I do not think hon. members of the committee who do not want to go are any less patriotic than hon. members who do want to go. If I were a member of the committee-and I am glad I am not-I should not want to be taken there to see a new plant, and then be put into the very awkward position of saying that the plant was not a fit one in which to do manufacturing.
I be'lieve the committee would be well advised to forget about it, and, as is the usual custom with committees, bring experts here. Otherwise if the government is going to do

Public Accounts Committee Report
what we hope it is going to do, if it is going to be fair and give contracts in other places, this committee will have a great time travelling around the country. It will not be in a position to stop after the visit to Toronto; it will have to go to many different places.
I believe the good sense of the House of Commons, no matter how the vote goes, is that the committee would be well advised not to travel or to start on a roving commission.


Hon. R. J. MANION (Leader of the Opposition) :: Mr. Speaker, I wish to say only a few words in connection with this matter, and in doing so I shall endeavour to point out the real issue before the house.
In part, the motion moved originally by the hon. member for Vancouver North (Mr. MacNeil) and seconded by the hon. member for Weyburn (Mr. Douglas) was as follows:
. . . together with a copy of the agreement between the government and the John Inglis Company of Toronto for the manufacture of Bren guns, the report of the royal commission dealing with said agreement, and all related documents, evidence, vouchers and exhibits be referred to the standing committee on public accounts.
That was the reference to the public accounts committee. In other words that committee is to look into the contract and the manner in which it was given, and is to pass its opinion upon whether or not the contract was properly given.
The hon. member for Vancouver-Burrard (Mr. McGeer), in one of his usual eloquent speeches, has done everything he can as a lawyer to confuse the issue. He has dragged in a lot of material which has nothing at all to do with the investigation by the public accounts committee. For example, he said something to the effect that the trip to Toronto and the investigation was for the purpose of finding out if peace-time industry might be turned into war-time industry, or something along that line. I am not quoting his exact words, but that is one of the thoughts back of the expression he used. We all know that peace-time industry in this country can be converted into war-time industry; it has been done over and over again. Just a few days ago

I think the hon. member was absent at the time-I quoted from the Canadian Annual Review where they give the record of Canadian industry during the last war. I thought that this information should be placed on record. I showed from that statement that over a thousand million dollars' worth of war materials had been produced by Canadian peace-time industry during the last war, by converting those industries into war industries. I do not know that I can lay my hand on that 71492-123
statement at the moment, but I quoted from the same book a most complimentary reference to Canadian industry for the magnificent work it had done at that time. We do not need any committee to go to Toronto to find out whether peace-time industry can be converted into war-time industry. We know that without an investigation of any kind. The committee was not asked to do that, as the hon. member for Leeds (Mr. Stewart) points out. The committee was asked to make an investigation of this contract akin to the investigation carried on already by the Davis commission.


Gerald Grattan McGeer: Just on that point; in my argument I directed the attention of the house to the possibility of using war-time preparation in industry to assist peace-time industry.
I was not referring merely to the conversion; it was a matter of using the one as a backlog for the other. That is a different thing from what the hon. member is discussing now.


Robert James Manion: I do not know that the hon. gentleman has asked an outstanding question;
I would not even call it a leading question. Any plant can be converted either way; that is only common sense. Any industrial plant can be converted in the reverse direction. A [DOT] peace-time plant can be converted to manufacture war-time materials, and a wartime plant can be converted to manufacture peace-time materials.
The hon. member for Vancouver-Burrard said that I proposed cancelling the contract because of the inability of this plant to manufacture these guns, because it was an old boiler plant or something of that sort. I did not say anything of the kind. I admit at once that an old boiler plant could be converted into a good munitions plant if sufficient money were spent on it. I suggested that this contract should be cancelled because it had been improperly given. I did not go outside the evidence of the Davis report in making that submission. That was the reason why I suggested it should be cancelled. The hon. member says that we are missing $50,000,000 worth of work in Canada because the empire will not spend money here now. I repeat what I said in my argument on a previous occasion. The best way to get empire industries over here to purchase war materials is to show Great Britain that she will get a fair deal, that profits will be properly controlled, and that the implements of war can be obtained on a reasonable basis.
To get back to the issue; which is whether or not this committee should go to Toronto to investigate this plant, to take a look at the industry as it has been built up with the

1952	COMMONS
Public Accounts Committee Report
expenditure of a huge amount of money, the hon. member himself stated, as well as a number of others behind me and to my left, that something like $800,000 worth of government machinery had been put into this plant. Even an old boiler plant can be easily converted into a good industrial plant by the expenditure of money. It has been pointed out by the hon. member for Davenport (Mr. Mac-Nicol) and others that the plant in which the Bren gun is being manufactured is not the old Inglis plant at all; it is a new plant. I have no criticism even of that. I admit at once, and I think the whole house will admit at once, that if you spend sufficient money you can turn any kind of plant, or even no plant at all, into a good industrial plant for the manufacture of munitions. But I do question the utility of a visit by a parliamentary committee made up of fifty members to a plant such as this one. To my mind it would be the most futile trip in the world. So far as I know, in the public accounts committee there is only one member, the hon. member for Waterloo South (Mr. Homuth), who is an industrialist. There may be others, but he is the only one I know of at the moment.


Mr. McCANN:: What has the wool industry to do with munitions?


Robert James Manion: My hon. friend is supporting my argument, although I do not suppose that was his intention. Even though he is in industry, the hon. member for Waterloo South would not be able to tell any more about this plant after having visited it than he would before his inspection. All he would be able to say is that it looks as though it might be a good industrial plant. That is the reason he gives for not going. I submit that no other member of the public accounts committee is qualified to make an inspection, certainly not the hon. member for Vancouver-Burrard, and certainly not myself if I were a member. I suppose that he and I are average of the house in general, but I do not think that either, of us could visit that plant and give to the public accounts committee any opinion which would be worth while. In my position as minister and as a member of this house for many years I have had the opportunity, as have other hon. members, of visiting mines and industrial plants. That is the usual method of entertaining members of parliament when they visit industrial cities and towns. You go through a plant, you see a lot of wheels turning and belts going round, you see a lot of men at work, but you come out no wiser than you were before. Not one member of this committee will be able to go into this plant

on Saturday morning and be any wiser afterwards as to whether the plant will be able to manufacture Bren guns in a splendid manner.


Mr. GOLDING:: That is absolute nonsense.


Robert James Manion: The hon. member can make a speech if he wants to, but if he wants to ask a question, he should ask it. I am not going to have him get up and say that this is absolute nonsense. The hon. gentleman may make his own speech, and I am endeavouring to make mine.
I repeat that no member of this committee can go to Toronto and visit this plant and be any wiser afterward as far as the terms of this contract and the method of carrying it out are concerned. It is futile to do that.
The hon. member for Vancouver-Burrard "pooh-poohed" any talking about expense. Apparently hon. members have changed their minds since the committee framed its report. The fourth paragraph of the report reads:
To sit, for a period not exceeding two days, in the city of Toronto, and that the payment of any travelling expenses incurred be authorized.
That is the report, yet the hon. member for Vancouver-Burrard gets up here and castigates hon. gentlemen on this side because they criticize the expense. I criticize the expense.


Gerald Grattan McGeer: Was the hon. member aware that the statements I made about expenses to this house were made in committee, and that the expense item was left in the report so that no one would have the right to say, "I did not go because my expenses would not be paid." That was in the committee.


Robert James Manion: When I deal with any
resolution of this house I do not need to go to the hon. member for Vancouver-Burrard or anyone else to ask what it is. This resolution speaks for itself. Certainly some of our party got up in the committee and objected on account of the expense. I do not know what the others did. I object on account of the expense-not that it would amount to very much; members of parliament have their passes, so that their expense accounts would not be very large. I submit that if any hon. member wants to visit that plant on Saturday morning he should pay his own way. I do not think this country should have to pay one dollar of expense for a futile visit of this kind. I certainly hope that none of the members behind me will take advantage of this motion to the extent of even one dollar for expenses in connection with this trip. I say this, which is really all I have to say: The whole proposal to visit this plant is ridiculous.

Public Accounts Committee Report
I tried to think out what the purpose of this visit to Toronto could be, and the only conclusion I could come to was that it was a sort of smoke screen, to enable the committee to go up there and then come back and say: "Here is a fine industrial plant." Nobody questions that; I do not know whether it is or not, but I do not question that. It has no bearing at all on the Bren gun debate, which had nothing to do with the plant as it exists to-day. The debate had reference to the plant which was taken over by Major Hahn. It was a boiler plant at that time, and had been closed down-a plant which was not fit at the time the contract was let to produce munitions, as compared with other precision steel plants throughout the dominion which might have been in much better shape to produce the Bren gun. The past debate on the Bren gun had nothing whatever to do with the position of the Inglis plant to-day.
Now it is proposed to have this trip to Toronto, by fifty members of parliament, practically none of whom is an industrialist. One or two members may have sufficient engineering ability to judge a little better than the others, but I should think that forty-five out of the fifty members of that committee have had no industrial training to fit them to judge that plant or what it is doing. This whole proposal. I repeat, is not only ridiculous but is an imposition on the Dominion of Canada if one dollar is charged for the trip. I see no reason, by the way, if individual members wish to go to Toronto and look over the plant for their not doing so. It is interesting to see industrial plants, whether you understand them or not, and frankly, I really understand very little about them. But as to the government paying out money for this trip, and as to the trip serving any useful purpose, I say it is simply out of the question, absolutely and entirely.


Mr. PETER BERCOVITCH (Cartier):: Mr Speaker, as I happen to be the member who moved that the public accounts committee proceed to Toronto for the purpose of inspecting this plant, and as there have been questions asked by some of the speakers as to what the motive was, may I tell this house just what prompted me to propose that motion?
I know nothing about engineering plants; I say so at once. I know nothing about the manufacture of guns, be they machine guns or any other kind. I know nothing about the manufacture of munitions, and I know nothing about boiler plants. But when I sat here and heard hon. gentlemen say in the debate 71492-1231
that this was a broken-down old boiler plant which the government had got hold of, and that fortunes of money were going to be thrown into this broken-down old boiler plant; that the people who owned the plant and were parties to the Bren gun contract knew nothing about the manufacture of munitions, that they had had no experience in the administration of a large industry; when I was told that Major Hahn, who apparently was a prime mover acting for the Inglis company, had formerly been in the radio business, I felt that it was most important to members of the committee-'


Hugh Alexander Stewart: On a point of order, Mr. Speaker, I submit the hon. member is not discussing the resolution at all.


Some hon. MEMBERS:: Of course he is.


Walter Edward Foster: I understand that the hon. member is giving the reasons why he made his motion.


Peter Bercovitch: For the reasons I have just mentioned, Mr. Speaker, I felt it was of the utmost importance to the members of the committee who were called upon to judge so important a matter as the Bren gun contract that they should have the opportunity of proceeding to Toronto and seeing for themselves whether this was a broken-down old boiler plant and whether the people connected with that institution knew anything about the building of the plant.
Apparently, from what hon.. gentlemen opposite have told us to-day, they do not want to proceed to Toronto because so many improvements have been made in the plant. But I want to proceed to Toronto, Mr. Speaker, to see if this contract is being carried out properly, because it is just as important to the citizens of Canada to know that the contract is being carried out properly as it is to know whether the contract was a fit and proper one to make at the time it was entered into. My motive in making the motion before the committee was to give every member of the committee an opportunity of inspecting the plant. Even though I know nothing about munitions, know nothing about engineering, know nothing about manufacturing plants, I do know enough to be able to understand whether a plant is a broken-down old boiler plant or a plant in which such materials as are required for the Bren gun may be properly manufactured, particularly when later on, after inspecting the plant, I shall be in a position to examine or cross-examine some of the witnesses who come before the com-
1954	COMMONS
Public Accounts Committee Report
mittee, for the purpose of eliciting such technical details as we may require to supplement our own observations.
But, Mr. Speaker, there is an additional reason why I believe it is necessary that the members of the public accounts committee visit this plant. The members of the public accounts committee investigating the Bren gun contract have a most important duty to perform. As was mentioned in the committee the other day by the hon. member for Lotbiniere (Mr. Francoeur), when he read an extract from some dispatches that came through from England, the British government are 'being asked questions on the floor of the house regarding this very contract, and so it is of interest not only to the people of Canada but to the entire British population to know whether this plant is equipped to carry out such contracts as may be entrusted to it by the British government or by other nations in times such as these.
I did not really intend to speak on this matter, because I thought the motion would pass in the ordinary course; but in view of . the discussion, and seeing that I was guilty of having made the motion in the committee, I felt it my duty to say what I have just said.


Mr. A. G. SLAGHT (Parry Sound):: Mr. Speaker, it is difficult to understand the reasoning of hon. gentlemen who oppose the visit to examine this plant on a Saturday when the house is not in session, and under circumstances which will enable them to return to their parliamentary duties on Monday or even to return on the Sabbath for such observances as they wish to carry out in this city.
The hon. leader of the opposition (Mr. Manion) is running true to form in the attitude he takes with regard to this proposal.
Let me give what is to my mind the most important reason why the members of the public accounts committee should visit this plant in operation as it now is. They will walk through it, talk with the workmen, see the fine precision tools that are set up there, study the methods that are being carried out, and ascertain from Mr. Gillespie, the Lee-Enfield expert who is there in charge, as I had the privilege of doing a couple of weeks ago, whether or not this plant is efficient and up to the minute and able to carry out every obligation the company undertook; whether in view of its contract to supply 5,000 guns to the British war office and 7,000 guns to us, it is a plant which according to the doctrine and policy of George Drew and the leader of the opposition and his followers ought, according to Drew, to be closed down, and ought, according to the leader of the opposition, to have its contract cancelled. That is the

important reason why the members of this committee ought to visit the plant. At this stage of the empire's need, when only yesterday in Great Britain we find it put in this way, referring to Hitler's recent march-and may I digress to deal with an expression-


Some hon. MEMBERS:: Order.


Arthur Graeme Slaght: of the hon. member for Grey-Bruee (Miss Macphail)-and surely she was not serious-that there is no need to manufacture guns, because all that an aggressor has to do is to march into another country and take peaceful possession of it.


Walter Edward Foster: Order. The hon. member will stick to the motion and the amendment before the house.


Arthur Graeme Slaght: I bow to your ruling, Mr. Speaker. But if the hon. member thinks that Hitler's march was made without the rattle of guns- and other artillery and machinery, she is very much mistaken.


Mr. DOUGLAS (Weyburn):: Is that how the hon. member bows to a ruling?


Arthur Graeme Slaght: In Great Britain within twenty-four hours the issue was put in this way: henceforth the world and nazi Germany-


Some hon. MEMBERS:: Order.


Arthur Graeme Slaght: This is applicable because of the desire on the other side to close-


Some hon. MEMBERS:: Order.


Some hon. MEMBERS:: Go ahead.


Walter Edward Foster: I would remind the hon. member that the amendment before the house is to refer back the report of the standing committee. I must ask the hon. member not to wander about but to direct his remarks to the motion or the amendment.


Robert James Manion: Will the hon. gentleman permit me? I do not suppose he wishes to misquote me. I did not propose the closing down of the plant. What I proposed was the cancellation of the contract and the taking over of the plant, the' expropriation of it by the government, the government to carry on the work.


Arthur Graeme Slaght: Well, we must take the picture that we got from George Drew, who from the day he published his slanderous article demanding the closing of the plant, has continued to demand it. The leader of the opposition now desires to cancel the contract and to have us wend our way through expropriation proceedings which will last the next few months, although, when we read

Public Accounts Committee Report
what happened in England yesterday, we find that the armament race is being speeded up throughout the British empire with all possible rapidity. It is really a simple matter. Why put bandages over the eyes of the committee and refuse to spend a Saturday looking at the plant? When there is a bad case afoot, nobody wants you to see what it is all about. When there is an endeavour to cancel the contract, nobody wants, as one hon. gentleman says, to have the jury see whether the contract is being efficiently carried out in an up-to-date plant, or whether the slanderous imputations which have been circulated have any truth in them. No worse deception was ever practised than the photograph which my hon. friends are still trying to perpetuate, as a misleading idea in the public prints as to what this plant consists of. That impossible photograph taken from the railroad tracks at the rear of one of the buildings, giving as disreputable an appearance as possible to that plant, is in itself a reason why it should be demonstrated to be one of the greatest political frauds practised upon the people of the Dominion of Canada. If the computation of which we read is correct, the time occupied by hon. gentlemen on the other side of the house has probably eaten up more than the $400 which is suggested as an outside figure it would have cost this committee to go and view this plant.


Mr. MASSEY:: Will the hon. gentleman permit a question?


Arthur Graeme Slaght: Certainly.


Denton Massey: If the hon. member's argument is sound, why did not Mr. Justice Davis go to Toronto?


Mr. EULER:: Ask him.


Arthur Graeme Slaght: As I read his report, Mr. Justice Davis did not indicate why he did not go to Toronto. Without any disrespect to him, since we are having in this house innuendoes supported by pictures on the wall which do not exist-


An hon. MEMBER:: Pictures in magazines.


Arthur Graeme Slaght: -I think he would have had an even better insight into the situation if he had gone to Toronto. It does not appeal to me and it will not appeal to the people of Canada, that this committee should bandage its eyes and refuse to make one overnight journey to the city of Toronto to look at the plant before deciding whether they are going to recommend cancellation of the contract. That is the suggestion of the hon. member for Greenwood (Mr. Massey) who has just asked the question, and of his friend
George Drew, whom he so lustily supported for leadership, and who has been going up and down the country in the past few weeks preaching the closing of the Inglis plant. Does the hon. member approve of that? Let us go and look at the plant. Let us go down there and get a notion of what the evidence is about. I appeal to this house to support the report of the committee.


Hon. J. EARL LAWSON (York South):: Mr. Speaker, I happen to be one member of this house who up to this time has not spoken in connection with the Bren gun matter. I rise at this time, not because I desire t~ participate in a debate upon the merits oi demerits of the Bren gun contract, but because as one who did not actively participate in the debate when it was at its height, I might say to the members of this committee, without giving offence, that it seems to me they have drifted a long way from what I have always understood to be the points at. issue in this house in connection with the whole Bren gun matter. To my mind, if one will keep in mind what was the issue when the matter left this house, it will be found to have a very great bearing on the question of the wisdom or lack of wisdom of the procedure now proposed.
Let us go back for a moment or two. As I understood the situation, in 1936 the government declared in this house as a policy that they favoured the national manufacture of defence materials. I understood at the time that that was a declaration being made by the responsible minister of the crown, the Minister of National Defence (Mr. Mackenzie) . Then an article appeared in a magazine, and it was alleged that munitions were being made by private enterprise. As a result of that a royal commission was appointed and a royal commissioner made a report. The royal commissioner in his report made findings of the fact with respect to all but two matters. One of those matters, he said, was a question of policy for the government; the other was as to whether the contract was provident or improvident. Those two things, he said, were matters for the parliament of Canada. Hence it came back here; hence we had a reference to the public accounts committee. I submit that the reference was not made to that committee for the purpose of determining whether Inglis had or had not a plant. I submit the reference was not made to the public accounts committee for the purpose of reviewing the very things in respect of which a royal commissioner had made a finding. It was submitted to the committee for the two purposes which I have pointed out. Therefore I say that the issue, as I
1956	COMMONS
Public Accounts Committee Report
have always understood it, speaking from an absolutely non-partisan political standpoint, is this: What is to be the policy of Canada with respect to the manufacture of defence material? Will anyone tell me what earthly purpose is to be served by going to inspect a plant from the point of view of determining what should be the policy of this country? It is true that in the course of debate in this house critics questioned whether the contract made by the government was provident or improvident, but not because of the condition of the plant; that is beside the point. The criticism that was made in this house, as I understood it, was that gentlemen in private enterprise were permitted to take a plant which cost 8100,000, plus some balance of $110,000 in bonds, and by a process of valuation convert that into $1,500,000 and then extract 81.250,000 of the stock of that company-


Charles Avery Dunning: Order.


James Earl Lawson: I think I am perfectly
in order. I submit that was a feature of the allegation of providence or improvidence. I submit that is a question with which this committee should concern itself. But will anyone suggest to me how you are going to be assisted in determining that question by going and looking at a plant, leaving aside its efficacy or otherwise?


Mr. MUTCH:: What possible harm could
it do for the committee to see it?


James Earl Lawson: If by harm is meant harm to the gentlemen who may go and see the plant, I do not see how it can possibly do them any harm. On the other hand would anyone think I was in my right senses-


An hon. MEMBER:: You are not.


James Earl Lawson: Thank you for the compliment. Would anyone think I was in my right senses if I advocated, for example, that the civil service committee should go out as a body and view all the public buildings across Canada because this country has millions of dollars invested in them? An hon. member to-day was arguing with great vigour that we should go and visit this plant because the government has advanced 8800,000 odd for the purchase of machinery in it. That I submit is entirely beside the point.
Let me give my hon. friend the second phase of the answer to his question-and his question permits me to say something that I had no thought of when I got up in the first place. I will tell you the harm that will be done. You are avoiding-and when I say "you" I am using it in an impersonal TMr. Lawson.]
sense-the issue in this case, which should be kept clearly before the public, namely, what is to be the policy of Canada with respect to the manufacture of defence material-


Malcolm McLean: That is not
the issue at all.


James Earl Lawson: -and not whether the Inglis plant is a good plant or a bad plant, an efficient or inefficient plant. I have been long enough associated with my friend the hon. member for Parry Sound (Mr. Slaght) in the practice of our common profession to recognize the tactics of setting up a straw man to knock him down. That is a favourite practice of lawyers.


Malcolm McLean: Is that what
the Bren gun charges were?


James Earl Lawson: In my opinion that is
what is being attempted now, to set up a straw man, to introduce an issue which is not the real issue before this country.
I propose to vote against the house instructing this committee as an official act to go and visit this plant. I do not care if every individual member of the committee or every individual member of this house goes and inspects the plant personally. I wish to make clear to the house and the country my reason for the stand I take in this matter. It simply avoids the real issue which is before the public accounts committee, that issue being: What shall be the policy of this government and this country with respect to the manufacture of munitions, and was the Bren gun contract a prudent or imprudent contract in the circumstances?


William Lyon Mackenzie King: My hon. friend who has just taken his seat (Mr. Lawson) says he objects to this house directing a committee to go to Toronto to view a particular plant. That is not a true statement of the position.


James Earl Lawson: May I change the word to "authorize"?


William Lyon Mackenzie King: Well, that
makes a very great difference, because what we are considering at the moment is whether we shall meet or refuse the request of a committee which was appointed for a specific purpose and which committee now has asked, in order to enable it to make its investigation as thorough and complete as possible, that it may have permission to go and view the premises that are a subject of discussion. The general rule in parliament where committees have been appointed for specific purposes is for the government to follow as closely as it can the recommendations of the committee.

Public Accounts Committee Report
In the event of opposing the recommendation of a committee the government should have very strong reasons for so doing. I would say therefore first of all that it is the duty of the House of Commons, where it has appointed a committee for a specific purpose and the committee asks for certain opportunities to pursue its work more intelligently, to support the committee's request. That would be my reason first of all for supporting the request of the committee and opposing the amendment which seeks to refuse what seems to be and is a very reasonable request.
Might I ask this question? Assume that no such motion had been proposed in the committee, that no such recommendation had been made to this house, and that after the committee had concluded its proceedings its report came back to this house, what, in all probability, would be the first thing said in criticism of the committee if they had not taken an opportunity to view the premises which were the subject of discussion in connection with the contract they had to consider? We would be told, as a very first argument we would hear from hon. members opposite, that the committee appointed to look into a contract which involved this old, broken-down boiler plant never even took the trouble to go near the plant, that in fact they had been very careful to keep away from the plant altogether. Why did they keep away from the plant, would be the next question to be asked, and the answer given would be that they knew very well that if they went to the plant a condition would be exposed there such as they did not desire to place before the house and the country. I leave it to hon. members if that is not exactly the kind of criticism that would be made.


James Earl Lawson: Would the right hon. gentleman permit a question?


William Lyon Mackenzie King: Well, there have been so many questions this afternoon I would prefer not to have further questioning, as my argument is going to be about the amount of wasted time in this house to-day.


Some hon. MEMBERS:: Oh, oh.


Robert James Manion: The same old story.


William Lyon Mackenzie King: Yes, the same old story.


Robert James Manion: There would not have been any waste time if you had not given the Bren gun contract.


William Lyon Mackenzie King: I am very glad the leader of the opposition has said " the same old story," because it is perfectly clear that there is a reason why it is the same old
story. The time of this parliament is being taken up too largely in discussions which are absolutely unnecessary and a pure waste of time. The discussion this afternoon, from beginning to end, has been of that character so far as enabling this house to pass intelligently upon the motion which is before it is concerned. The question is simply that this house shall say whether or not, when a committee appointed by itself asks permission to go to Toronto to view certain premises, it should foe permitted so to do. One hon. member could have made a statement, of the arguments against, and one hon. member could have replied, and upon hearing the two statements every hon. member would have been able completely to satisfy his mind.
But what do we find? One hon. member after another in the benches opposite got up and repeated the same statements as were made by previous speakers. Here and there others, going wide of the resolution altogether, had to be repeatedly called to order foy Mr. Speaker; all this time has been taken up discussing this small matter-because I think if necessary I can show in a moment how small it is-until, in order that it might not be said that the government had not even sought to reply, or could not reply, one or two members on this side have made the replies that were necessary.


John Ritchie MacNicol: Five. '


William Lyon Mackenzie King: If hon. members will read the list of those who have spoken during this debate they will see how many on the opposite side took part and repeated the arguments previously advanced before anyone from this side of the house said a word. I am sure I should not have been speaking at this moment if the leader of the opposition (Mr. Manion) had not joined in the debate; and if others, including ex-cabinet ministers, had not continued the discussion, talking at such length about this little question of whether or not a committee should go to Toronto to view certain premises, I am certain other hon. members on this side would not have said a word. I can vouch for this fact; for I was asked foy the whip of our party whether or not it was advisable for our people to take part in the debate, and I said, " For goodness' sake do not waste further time over this matter, unless it is necessary because of what other speakers have said."


James Earl Lawson: My right hon. friend is, giving away confidences.


William Lyon Mackenzie King: I have no objection to doing that. My objection is that my hon. friend is afraid to let anything be known or anything be seen. He does not want the

Public Accounts Committee Report
committee to have the opportunity of doing something which will serve to satisfy its own mind. I ask this question, with regard to people who are seeking in their own minds to understand a problem. Is it not a wise procedure, where there is a great question which involves matters of plant, industrial processes and the like, to familiarize oneself as quickly as possible with all essentia] features? I would say that the people of this country will think the committee have taken a very wise step when they have sought at the very beginning of their inquiry to get into their minds as clearly as possible the whole system of industrial processes essential to the production of this particular arm.
May I say to the hon. member for York South (Mr. Lawson), who spoke just a moment ago, that if the issue were-as it is not-whether it is better to have public or private ownership in respect of the manufacture of Bren guns and other armaments and military equipment, one of the first things which ought to be done by those who wanted to speak intelligently on the question would be to find out what the industrial processes were and what they involved in the way of expenditure on plant, equipment and the like. They would then be in a position to determine whether or not a government would be wise in undertaking a particular work itself or whether it would be better advised to leave it to private industry which has to equip itself for other purposes as well. So I think the recommendation of the committee is very wise and sensible, and I believe it will be so regarded by the people of the country.
If the government were seeking to oppose a committee of this house going to investigate a plant which was the subject of discussion and which had been talked about in the manner in which this plant has been referred to, I could quite understand why there would be very considerable debate and why the government in any such attitude would be strongly opposed. I must confess that I have not heard of many other cases, with the exception of those that have arisen this session, in which, when the government was seeking to let in more light, it was deliberately obstructed in so doing. That has been the nature of the tactics of hon. gentlemen opposite this afternoon, to prevent hon. members on this side of the house-even if others do not wish to go-from obtaining the additional information and additional light they wish to have in regard to the consideration of one of the great public questions of the day.


Robert James Manion: They could all go on their own, as individuals.


William Lyon Mackenzie King: What is to be gained by raising a point such as that, that they could all go as individuals? They are a committee appointed for a particular purpose. The most satisfactory way for a committee to deal with any question is to deal with it collectively, not to be going here and there as individuals. I do submit that what my hon. friend from Winnipeg South (Mr. Mutch) said a moment ago is wholly pertinent. He asked: Who is going to suffer, anyway, as a result of the committee going to Toronto? What harm is going to be done? If it was going to injure anyone; if it was going to destroy the reputation of the city of Toronto because a committee of this house were going up to investigate an industrial plant there, there might be some argument. But when there is nothing to be said against anyone and everyone in this parliament viewing a plant of this kind, for the life of me I cannot understand why a recommendation of this sort should be opposed. It seems to me the committee will have everything to gain and nothing to lose by the extra information and knowledge its members will gain.
Here, however, is the real question, the one the public is going to ask: In a matter of dollars and cents how much has this afternoon's discussion come to, as compared with the cost of having the committee go to Toronto? That is the kind of question in which the public of Canada are interested to-day. I do not wish to go into mathematical calculations at the moment, but I have not the slightest doubt that in the little space in the Globe and Mail devoted to what parliament has been doing we shall find a mathematical calculation giving the cost of this afternoon's discussion. How much of the people's money has it cost to have the discussion we have had in this house this afternoon?


Agnes Campbell Macphail: May I ask the Prime Minister if he agrees with the Globe and Mail, that every hour parliament meets costs so much money, that it can be reckoned in dollars and cents?


William Lyon Mackenzie King: No, I do not; I am far from agreeing.


Agnes Campbell Macphail: Then why seem to agree with it?


William Lyon Mackenzie King: I was not. I was simply asking: why give the Globe and Mail any reason to quote one instance which they may cite, which is obvious, as against

Public Accounts Committee Report
_________________________i

the very reasonable, right, proper and necessary deliberation of public questions by parliament by means of reasoned discussion and debate? I do say, however, that we shall have weighed by the people of this country how much time and money has been wasted in this parliament this afternoon over the trivial question of whether a number of members constituting a committee of this house should have the right to go to Toronto and come back, particularly when it is known, as has been said, that they all have railway passes of their own and that in addition most of them are themselves meeting what else there may be in the way of other incidental expenses. We have been almost-and if we were to have a recorded vote in connection with this motion I think we would be actually -half a day discussing this question.
May I add one further word. We have been told by some hon. gentlemen opposite that it is within the power of the government to control the proceedings of this house. That is so up to a certain point; but if hon. gentlemen in any part of the house seek deliberately to obstruct and unduly prolong its proceedings they can avail themselves of many facilities by means of which that may be done. What we have had this afternoon has shown how easy it is if hon. members wish to make a mountain out of a molehill; they can take up the time of parliament to that end, at great expense to the country.


Mr. GRAYDON:: I was paired with the hon. member for Victoria, Ont., (Mr. McNevin). Had I voted, I would have voted for the amendment.


Walter Edward Foster: Is it the pleasure of the house to adopt the motion?


Mr. J. H. HARRIS (Danforth):: Mr. . Speaker, I think I was on my feet just as fast as you were. Now that hon. members have decided to come to Toronto, may I on behalf of the city of Toronto issue a royal welcome? I do not know of any other place in Canada where you can spend two or three weeks on a Sunday afternoon any better than you can in the city of Toronto.
To get back to the main motion: Among other things, hon. members will have to consider a plant and the production of machine guns. It has been my pleasure to have known this Inglis organization for some thirty years. Many thousands of dollars' worth of machinery have come from that plant, but perhaps I am not in order in discussing it now that that portion of the resolution has been disposed of. I want to leave this one thought with hon. members of this house. If they will look around this chamber and take away all the frills we have here, they will have before them a room of about the size of the plant they are to visit. There will be a large crane in operation lifting up pieces of machinery; but they must realize that such a plant is not at all suitable for the particular job of work covered by this contract. Hence the necessity of building another plant with low ceilings to accommodate shafting, pulleys and what-not to operate the lathes, and so on, for the production of the precision machine covered by the contract.
It is only my purpose to speak for another thirty seconds or so, but before I take my seat let me say: Come up and see us some time. I have three little booklets which tell a whole lot about the city of Toronto, and I hope that you all have a pleasant time when you do come up to see us.
Motion (Mr. Fraser) agreed to on division.



DAIRY INDUSTRY ACT


[Stage Direction]
Mr. J. H. LECLERC (Shefford) moved for leave to introduce Bill No. 44, to amend the Dairy Industry Act.
Some hon. MEMBERS:: Explain.


Mr. LECLERC:: Mr. Speaker, the object of this bill is to prohibit the use of the word " butter," to the detriment of our producers, in the sale of products which are not butter- for example, peanut "butter."
Motion agreed to and bill read the first time.



PRIVATE BILLS


[Stage Direction]
Bill No. 41, for the relief of Edythe Marjorie Burke Atkinson.-Mr. Heaps.
Bill No. 42, for the relief of Marie Louise Rossetti Di Rosa.-Mr. Macdonald (Brantford city).

[Stage Direction]
st. Helen's island, Montreal, sand deliveries

Mr. MALLETTE:: What amount has been expended by the government on cadet services, per province, for the financial years ending March 31, 1930, 1931, 1932, 1933, 1934, 1935, 1936, 1937 and 1938, respectively?

National Defence


CAPE BRETON, N.S., GOVERNMENT AIRPORT
Mr. BROOKS:: 1.	Is the government constructing an airport in Cape Breton, Nova Scotia?
2.	If so, where is it located, and what are the dimensions and probable cost of same when finished ?
3.	From whom was the land purchased, and what price was paid for it?
4.	Was any of the land secured from the provincial government of Nova Scotia?
5.	If so, how much?
6.	What was the price paid therefor?
7.	What is the name of the broker or agent who arranged the transfer, and price paid for services, including fees ?


NATIONAL DEFENCE
[Stage Direction]
On the orders of the day:
William Lyon Mackenzie King: Yesterday the hon. member for Vancouver North (Mr. MacNeil) asked me this question:
Has the Air Defence Council of Canada communicated with the Prime Minister requesting the resignation of the Minister of National Defence (Mr. Mackenzie) because of unsatisfactory conditions with regard to air defence, as reported in the Winnipeg Free Press of March 10, in a news dispatch over the signature of Major Moore?
I replied at the time that I did not think the question was one to be asked on the orders of the day, but I said that I was not aware of any communication of the kind having been received, which was correct at the time. I have since sought to find out if any communication at all had come to my office, and I find that none has come.
I have also had opportunity for the first time since the question was asked to see the article itself. It invades to such an extent the privileges of this house that I think 1 should say a word with respect to it.
I also have received, wholly unsolicited, telegrams from members of the advisory air council, who are the parties referred to in the article. I think it is right that they should be put on record in answering the question of the hon. member for Vancouver North.
Let me first of all correct his designation of the particular council. He called it the Air Defence Council of Canada. It is the Advisory Air Council, and is so referred to in the article of which he made mention. The 71492-124-1
article appears in the Winnipeg Free Press of March 11 last, and is headed thus: ''Stultified?" Then there is a subhead reading: Advisory Air Council Reported Dissatisfied with Administration.
By Harold Moore.
The article is as follows:
Montreal, March 10 (Special).-It has long been common knowledge that the air defence council of Canada has been gravely concerned over conditions in the department of defence, and the council is now understood to have communicated to the prime minister its recommendation that the Hon. Ian Mackenzie be requested to resign as minister of defence.
The air defence council was appointed more than a year ago by the minister as an advisory body to see that Canada was being provided with adequate air defence. Its well known members have had outstanding experience in military aviation. By their steady application to a difficult task, they inspired in the public some confidence that proper measures are being adopted to give Canada air defence, and raised the hope that a lamentable situation would be corrected. The creation of the council and the selection of its members were offered by the minister himself as an assurance that progress in air defence would be made and that dubious practices in awarded contracts would not be tolerated.
These assurances were felt to be justified by the personnel of a council which includes: Hon. Air Marshal W. A. Bishop. Montreal; Hon. Air Commodore Redford H. Mulock. Montreal; Squadron-Leader A. D. Bell-Irving, Vancouver; Capt. H. J. Burden, Toronto; Squadron-Leader F. C. McGill, Westmount, P.Q.
The air defence council has not concealed that it met with many obstacles put in its way, and it is claimed to have despaired some time ago of being able to do anything effective so long as the present minister of defence insisted on sustaining elements blocking progress and seeming to countenance practices that have aroused disturbing convictions and suspicions.
Some members of the air defence council have candidly admitted that the situation confronting the council is baffling and unendurable, and they have not concealed their personal disgust and have at times individually threatened to resign.
The views held by the air defence council are no longer any secret, and must be the basis of any communication the council is said to have addressed confidentially to the prime minister. The only inference that can be drawn from that action is that, either the minister of defence and what he stands for must go, or else the air defence council should resign. The council has striven sincerely to do a good job of work, but its members cannot afford to submit to being thwarted by obstacles raised officially and sometimes unofficially.
Then there are some other paragraphs of lesser importance, and the article concludes with the following paragraph:
The air defence council makes no attempt to conceal its condemnation of the hopeless muddle it has discovered.
National Defence

The house will observe that this is a direct statement; it is not an assumption or allegation, but a direct statement. The article continues:
It is freely known to be dissatisfied with an administration at the top that is steadily ruining the fine quality found in most of the junior members of the R.C.A.F. It disparages without having the power to correct favouritism. It is said to demand a clean sweep to permit a thorough reorganization. Its disapproval of very much that has come under its purview is frank and unrestrained. Whether this has been conveyed confidentially to the prime minister may never he revealed, but the council's disapprobation of the present whole administration of the air branch of the department of defence is no secret.
I need not repeat that nothing of any kind such as is suggested in that article has ever reached me from any source whatever. I wish, however, to answer the article by telegrams which have come to me yesterday and to-day from the members of the advisory' air council. Let me repeat the reference in the article to the personnel of the council:
Its well known members have had outstanding experience in military aviation. . . . These assurances were felt to be justified by the personnel of a council which includes:
Then the names are mentioned.
Wholly unsolicited, I received late in the day yesterday the following telegram from Air Vice-Marshal W. A. Bishop, V.C., a name than which there is none more honoured in this country;
Montreal, Que.,
15 March, 1939.
Rt. Hon. W. L. Mackenzie King,
Prime Minister, Ottawa, Ont.
With reference to the questions asked you in the House of Commons this afternoon quoting the Winnipeg Free Press of March tenth last about alleged recommendations of the honorary air advisory committee as to the resignation of the Minister of National Defence or any other person in his department, they are not only absolutely false but entirely ridiculous. As a member of the committee I state with assurance that we are unanimously and strongly n support of the minister's actions and policy ind are confident that everything possible that can be done with the means at his disposal is being most efficiently done.
W. A. Bishop,
Vice Air-Marshal.
Then from Vancouver, British Columbia, I received another telegram, dated March 15, it was from Wing-Commander A. D. Bell-Irving:
Rt. Hon. W. L. Mackenzie King,
Prime Minister, Ottawa, Ont.
Having read article in Winnipeg Free Press of tenth instant relating to air advisory committee and Honourable Minister of National Defence I wish to assure you that as far as

I know the minister has the unqualified support of air advisory committee. Naturally committee hopes that further urgently necessary progress may soon be made in developing this service but report that committee has requested minister's resignation or even contemplated doing so is false and entirely without foundation in fact.
A. D. Bell-Irving,
Wing Commander.
Then from Montreal, also dated March 15, I received the following telegram from Wing Commander F. S. McGill:
Rt. Hon. W. L. Mackenzie King,
Prime Minister, Ottawa, Ont.
The article which appears in the Winnipeg Free Press under date March tenth 1939 stating that the members of the honorary advisory committee for airports matters were dissatisfied with the Minister of National Defence and demanding his resignation has just been brought to my attention. It is hard to understand how a paper of this standing would publish such a false statement without verifying its authenticity and I feel in all fairness to the members of our committee they should at least be forced to retract. We have always found the Minister of National Defence anxious and willing to cooperate and we feel he is the right man in the right place. There is no truth in the report that we asked for the resignation of the said honourable minister.
F. S. McGill,
Wing Commander.
This morning I received the following wire from Air Commodore R. H. Mulock. It is from Montreal:
Right Hon. W. L. Mackenzie King,
Prime Minister, Ottawa, Ont.
I understand questions were asked in the House of Commons re an article appearing in the Winnipeg Free Press on March tenth. This article insinuates or states that I have criticized the Minister of National Defence and his policies to you. This is absolutely false and contemptible.
R. H. Mulock,
Air Commodore.
There is one other telegram. It is dated Toronto, Ontario, March 16, and was received to-day:
Right Hon. W. L. Mackenzie King,
Prime Minister, Ottawa. *
Sir: The article in Winnipeg Free Press March tenth stating honorary air advisory committee is dissatisfied with Minister of National Defence is a falsehood and a reflection on our committee. The author and publisher should be severely dealt with for making statements without confirming them beforehand. Our committee is in complete accord with the Minister of National Defence both as to his policy and action. He has kept us informed of all matters pertaining to our service and rendered us every assistance. I speak for myself and the members of the committee when I say that we have nothing but the highest regard for the Honourable Ian Mackenzie.
H. J. Burden.

Defence Purchasing Board
Mr. Burden is a captain in the air force. The five persons from whom these telegrams have been received comprise the complete membership of the Air Advisory Committee. This record speaks for itself.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.


NATIONAL FILM BOARD
[Stage Direction]
Hon. W. D. EULER (Minister of Trade and Commerce) moved the third reading of Bill No. 35, to create a national film board.
Motion agreed to and bill read the third time and passed.

[Stage Direction]
The house resumed from Tuesday, March 14, consideration in committee of Bill No. 38, to establish a defence purchasing board- Mr. Mackenzie (Vancouver)-Mr. Sanderson in the chair.
On section 3, subsection 5-Salary of chairman.
Mr. STIRLING:: I want to ask the minister once more whether he would be good enough to give us some general idea of what the government has in mind in regard to the composition of this board. There has been a remarkable degree of unanimity with regard to the earlier stages and the general principle of this bill. No doubt as the discussion is carried along hon. members will express divergent opinions on the details. But the government could hardly have got to the point of setting up a measure to bring into being a board so remarkable as this from various points of view without at least reaching the point of discussion of the type of persons they propose should occupy the four positions on the board. Various opinions have already been expressed as to what sort of men they should be. The Hon. Mr. Justice Davis, the royal commissioner, expressed his view, and many opinions have been voiced as to how this unusual board should be composed.
Could the minister not give us some idea as to the direction in which the government's mind has been moving as to the personnel of the board?


Mr. MACKENZIE (Vancouver):: I appreciate the suggestion of cooperation in the remarks of my hon. friend. I did the other evening intimate that the government's opinion'is that the value of the board will depend almost entirely upon the personality of the chairman. It is, if I may say so, a tribute to the government that they have not too rigidly considered the essential nature of that appointment. As I said in my few remarks on the resolution, I shall be most happy to receive suggestions from hon. members, either in this committee or otherwise because I think the board should have the approval, in essence and principle and if possible as to personnel, of all hon. members of the house. As I said the other day, my own opinion would be-I am speaking entirely for myself-that we should have as chairman a qualified industrialist with business experience in purchasing, one who has been accustomed to dealing with business affairs in a business way, because this is really a tremendously large business concern. I can assure my hon. friend that in regard to any individual the government has a completely open mind.
With respect to the three assistants, as I said before there are no definitive reservations with reference to their occupation. We have before us the suggestions of the eminent jurist the commissioner, but we are not bound by them. I should sincerely welcome suggestions from this committee; the government will as far as possible meet the conjoint wishes of the house with reference to the type of person to be appointed.


Grote Stirling: The minister says that
the government have not given very much consideration to what type of people the other three members shall be. I do not think the minister has said whether it is the desire of the government that they should be chosen geographically, whether they will be handy to Ottawa where their meetings will usually be, presumably-


Ian Alistair Mackenzie: I think
the bill says that.


Grote Stirling: Of course that point has
some bearing on the matter of expense. Can the minister assure the committee that the choice of the three other members will have no connection with the political persuasion of the government? It is a common thing, we all know, that members of boards such as this are selected in accordance with the
Defence Purchasing Board

views of the government of the day. If the minister is in a position to give some statement on that point I think it would be appreciated by the committee.


Ian Alistair Mackenzie: I shall
be very glad to have the advice of any hon. member with reference to the other three members of the board, just as in regard to the chairman. It is emphatically my own opinion that they should not necessarily be appointed because of their political persuasion, but I do not think sympathy with the government should be a bar to appointment. I think that is a fair qualification.


Grote Stirling: The minister does not
mean that no Liberals need apply!


Mr. ROSS (St. Paul's):: It seems to me
that there is not going to be close enough cooperation between the board and the Department of National Defence in connection with the letting of contracts. The department will requisition certain things from the board, then the board will look around and choose some contractor by tender or otherwise. The board is going to look at it altogether from a purchasing point of view. Where is the best place to manufacture these arms and munitions in case we ever get into trouble? Has it ever occurred to us, for instance, that in time of trouble we are likely to have sabotage? In any crowded city, what chance have we to guard against sabotage? We have foreign elements all over the country, and we know we are going to have a good deal of difficulty in connection with sabotage, in regard to power for example. When the board has to make its contracts without close cooperation with the Department of National Defence I do not see how it is going to be capable of choosing contractors and giving the proper recommendation to the finance department without having one member of the board sitting on the national defence council. I urge the minister to take that into consideration. For instance we have a contract under way in Toronto, which is probably going to be extended, and in time of war there would be danger of sabotage. We all know what subversive influences there are in the country.


Alexander MacGillivray Young: In Toronto?


Douglas Gooderham Ross: One of the members of this board should sit in with the Department of National Defence so that there shall be close cooperation. In that connection I was wondering whether this board is to have anything to do, for instance, with altering the policy of the chief of general staff. Perhaps the minister would answer that.


Ian Alistair Mackenzie: I think the first part of my hon. friend's suggestions was developed the other evening and we had a vote upon it. I stated then, and I repeat now, that personally I do not see any difficulty in having the head of this purchasing board attached to the defence council if in future that should be considered advisable, but that need not form part of this legislation. With regard to the second point, naturally the recommendations of the chief of staff and of the defence council will have the same weight they have always had. In regard to essential purchases those will remain, as will be seen from the legislation, very largely a matter of consultation between the head of the purchasing board and the expert advisers of the Department of National Defence.


Thomas Langton Church: With regard to section 4, to which the minister referred, which provides-


The CHAIRMAN:: Order. We are on subsection 5 of section 3.


Thomas Langton Church: If you read sections 4 and 5 together the procedure becomes rather complicated. The tender may be accepted where practicable, if it is the lowest. I have had a great deal of experience-


Frederick George Sanderson: I do not like to interrupt the hon. member, but we are now on subsection 5 of section 3.


Thomas Langton Church: It is hard to know what section we are on, because the sections are not read.


Ian Alistair Mackenzie: We are on section 3. Subsection 4 was allowed to stand, and we are now dealing with subsection 5. We will come to my hon. friend's point a little later.


Frederick George Sanderson: Shall subsection 5 carry?


Mr. POULIOT:: No. Just before this carries I should like to ask the minister if he has made sufficient progress since the other day to be able to state whether Hon. Wesley Gordon, former minister of labour, or Mr. Tom Moore, will ibe chairman of this board?


Ian Alistair Mackenzie: I have stated two or three times during the discussion of this bill in committee that as yet no individuals have been even considered by the government or by the minister with reference to this position. That is as definite and emphatic as I can make the statement.


Jean-François Pouliot: I thank the minister for his answer, but I wonder if he has received any applications or recommendations for the job.

Defence Purchasing Board


Mr. SPENCE:: He has hundreds of them, I guess.


Ian Alistair Mackenzie: No, as a matter of fact my hon. friend would be surprised; there have been very few applications or recommendations. It is possible that as a result this position will go to someone who may not apply for it.


Jean-François Pouliot: The minister may be sure that he will not receive my application for either position.


Douglas Gooderham Ross: Is it the intention that tenders will be called for, or will the contracts be let to picked firms?


Frederick George Sanderson: The hon. member is out of order. We are not dealing with contracts; we are still on subsection 5.
Subsection 5 agreed to.
On section 3, subsection 6

Expenses and allowances of members.


Jean-François Pouliot: Mr. Tom Moore incurred some very heavy travelling expenses when he was on the other commission, and I warn the minister about it.
Subsection 6 agreed to.
Subsection 7 agreed to.
On section 3, subsection 8-Equal votes.


John Ritchie MacNicol: This section reads:
In the event of an equality of votes at any meeting of the board the chairman shall have a casting vote.
Does he have two votes?


Ian Alistair Mackenzie: This subsection is inserted because the board consists of four members, and there might be an equality of votes. In that case the chairman would have a casting vote in addition to his ordinary vote.
Subsection 8 agreed to.
Subsection 9 agreed to.
On section 3, subsection 10-Meetings of board.


Grote Stirling: Does the minister anticipate that the meetings will be largely in Ottawa?


Ian Alistair Mackenzie: I think that will be necessary, but it would not follow that the suggestion made by my hon. friend a few moments ago with reference to territorial qualifications for these other commissioners would be debarred.
Subsection 10 agreed to.
On section 3, subsection 11-Oath of office.


Grote Stirling: Is this not an unusual
section? Is there any other instance of the kind in the public service in connection with any board?
Mr. POWER; I asked that very question and I was told there were other instances, in the Bank of Canada act and one or two pieces of legislation. I had never seen it before, like my hon. friend, but it does exist in other statutes.


Jean-François Pouliot: Is it because the government are not sure of the faithfulness of those to be appointed on this board that they provide for this oath?


Ian Alistair Mackenzie: It is
because the government want to be very sure of their faithfulness. I think it is a very good thing to have a suggestion like this, having regard to the efficiency of the public service.


Douglas Gooderham Ross: I did not hear the minister very clearly. Did he say the government were going to have the chairman of this board sit on the defence council, or is he just going to be consulted occasionally?


Ian Alistair Mackenzie: I
repeated exactly what I said the other evening.


Douglas Gooderham Ross: Then there will not be close cooperation between the purchasing board and the defence council. Is there any objection to having the chairman of this board sit on the defence council, or called into consultation with the defence council? It seems to me most important that we endeavour to obtain that close cooperation, for the reasons I have just pointed out. H the chairman of the board is just going to be asked to go there occasionally, how will you get that cooperation? It is not a matter of having cooperation once a month or once every two weeks, or something like that. It seems to me that as matters go along and policies are developed it would be of the utmost importance to have this prominent man, who will understand contracts and who will be an industrialist as well, on hand to advise this council, and that they should take his advice, more especially in connection with ordnance matters. I urge that something like this be done.


Ian Alistair Mackenzie: I can only repeat what I have said already, that when matters develop and progress, if it is
Defence Purchasing Board

considered necessary to carry out the suggestion of my hon. friend that can easily be done; but it is not necessary to make that part of this legislation.
Subsection 11 agreed to.
On section 3, subsection 4-Chairman to devote whole time.


Mr. POWER:: An amendment to this subsection was suggested by the hon. member for Weyburn (Mr. Douglas). I now move that subsection 4 of section 3 be struck out and the following substituted therefor:
(4) The chairman, who shall be the chief executive officer of the board, shall devote his whole time to the business of the board, and shall not, after his appointment as chairman, be an officer, or a director of any industrial corporation or company, or a shareholder of any corporation or company manufacturing guns, cannon, small arms, munitions, naval ships, military aircraft or other equipment or supplies used exclusively or primarily for war purposes.
I think that covers every kind of armament the draftsman could think of.


John Ritchie MacNicol: It does not cover what I asked; it applies only, as I see it, to an industrialist who might be chosen as chairman.


Charles Gavan Power: No. Anybody can be a
shareholder in an industrial corporation. I imagine my hon. friend, like probably dozens of members of this house, is a shareholder in several industrial corporations.


Thomas Clement (Tommy) Douglas: This is an excellent amendment; it considerably strengthens the position of the board and of the government. The point raised by the hon. member for Davenport reminds me that during the investigation by the parliamentary committee in Great Britain it was found that during the war, for instance, military advisers on the defence council were also directors of some of the armament firms. While there may have been nothing wrong with the relationship, the attitude in the public mind especially-


Mr.   POWTER@: So was the chairman of the British royal commission.


Thomas Clement (Tommy) Douglas: The feeling after the war, particularly when the peace settlement was so strong, caused a revulsion of feeling in Great Britain which has not gone yet. I think that on this amendment the government is to be commended.


Mr. PELLETIER:: I agree with the observations of the hon. member for Weyburn with respect to the amendment to the section proposed by the minister. I too feel it is very

important that no possible criticism should be attached to the chairman of the board. Criticism has been levelled against other persons occupying positions of prominence elsewhere, on the ground of their connection with the armament industry. For instance, we would not want the chairman of this board to be subjected to the criticism which has been made against one who is highly placed in the British empire. Referring to Mr. Chamberlain, one periodical has this to say:
Among his extensive financial holdings is a considerable block of Imperial Chemical Industries shares, 833 preferential and 5,414 ordinary ones. His son, Francis Chamberlain, is on the staff of Imperial Chemical Industries' sales organization at the main office in Birmingham.
I am glad to note the proposed amendment. When it is passed it will not be possible to level that type of criticism at anyone in a similar position on this board.


John Ritchie MacNicol: I am not yet clear on the point. The section distinctly states "or a director of any industrial corporation." I shall confine my remarks to the industrial corporation part of it, and will forget all the rest that has been said. Could the chairman belong to a corporation in any way associated with the financing of companies manufacturing goods, or could he belong to a legal corporation or legal firm, and as a partner of that firm-


Charles Gavan Power: He could not very well belong to the legal firm and at the same time devote his whole time to the business of the board.


John Ritchie MacNicol: He might not have very much legal business. If that were so he would not be the right type of man to have at the head of the board.


Douglas Gooderham Ross: I do not like to go back at this again, but I shall have to. The duties and regulations respecting these people are set out. First of all I should like to know to whom the chief of general staff is responsible. Is he responsible to the minister or to the Prime Minister?


Ian Alistair Mackenzie: To the minister-at least he is now.


Douglas Gooderham Ross: The chief of general staff as a member of the defence council is responsible for contracts. His responsibility is to the minister and to the Prime Minister. The chief of general staff may say, "We have to have such and such and so and so." We do not want to have any come-back in this matter. It would not seem proper to have the purchasing board coming back and saying, "We do not know anything about this; we will have to change it." If the chairman of the

Defence Purchasing Board
purchasing board, who is to be a full time man, sits in with the defence council, there will be cooperation which there could never be in any other way, and he would be fully conversant with everything that is going on.
I see the Minister of Pensions and National Health laughing at me, but I do not mind.


Charles Gavan Power: I was not laughing at the hon. member.


Douglas Gooderham Ross: The more coordination and cooperation we can get, without having too many people monkeying with it, the better off we shall be. I suggest the chairman of the board should sit in at the meetings of the defence council. I cannot see any reason why he should not be there, because he would be a full time man.


Ian Alistair Mackenzie: The hon. member has suggested that of their own accord the board could vary the requisitions or suggestions made by members of the defence council. If he will read the last part of subsection 3 of section 4 he will find that they are subject to revision by the board only upon approval of the minister. So that that suggestion falls to the ground.


[Stage Direction]
Amendment agreed to.
Subsection 4 as amended agreed to.
Section 3 as amended agreed to.
On section 4-Powers of board.
Grote Stirling: There is a point here I should like to have cleared up. The minister may receive information from his technical advisers that such and such a thing is required. When he is satisfied, the requisition goes to the board. When the board is satisfied, does it prepare the tenders, make all ready for letting and then submit the matter to the Minister of Finance, the Minister of Finance in turn submitting it to the council and the council in turn coming back with the permission to let?


Ian Alistair Mackenzie: Yes, that is about right.


Grote Stirling: Then is the requisition sent back to the board and put through the procedure of letting?


Ian Alistair Mackenzie: Yes.


Grote Stirling: And then the tenders are submitted to the Minister of Finance, and again go to council?


Ian Alistair Mackenzie: No; once the authority of council is obtained the board has complete authority to negotiate the contract.


Grote Stirling: The board finishes everything up?


Ian Alistair Mackenzie: Yes.


Grote Stirling: And then all that is required is the order in council?


Ian Alistair Mackenzie: Yes.


Mr. HEAPS:: I suppose a majority of the four members of the board might pas a contract, and the majority recommendation would go to the government for final approval. According to the terms of the bill the board comprises four men, one of whom is permanent and the rest temporary or part time employees who may come and go as the requirements of the board necessitate. I am not altogether enamoured of that kind of employee in a task of this type. If my own views were asked I should say I preferred three permanent men to a number of part time board members.


Ian Alistair Mackenzie: That is the intention, except that the chairman of the board is the only permanently or fulltime employed official. The rest of the members may be permanent for one, two or more years, but they are not fully employed. They are called in to advise with reference to various aspects or angles of a contract, and to assist the chairman in determining with regard to certain matters.


Abraham Albert Heaps: I do not think any one could regard them as full-time or permanent members of the board when they are to be paid a per diem allowance plus travelling expenses. One of them may live in Vancouver, and he may be called in to a meeting in exactly the same way as directors of the Canadian National Railways may be called in. The minister shakes his head, but if those persons are to be full-time permanent employees, let us say so in the bill; let us not put them on a per diem allowance, as is attempted here. Contracts amounting to $20,000,000 or $30,000,000 may be let by this board, and I do not think we ought to allow such important positions to be held by men who would come and go as required. When we have men on a temporary basis-and I still maintain they are only temporary-


Ian Alistair Mackenzie: They
are all appointed for five years.


Abraham Albert Heaps: That is true; I understand they are appointed for five years. But they are only on a day to day basis, so far as the board itself is concerned. According to the bill only the chairman of the board is to be permanent.
Defence Purchasing Board


Ian Alistair Mackenzie: Fully
employed.


Abraham Albert Heaps: I 'believe I am correct when I say that the other men are only part time employees. It may be said that those men may be in the city every day of the year, although I would doubt that. I think they would be called in from time to time and would give whatever knowledge they may possess when the letting of various contracts is under consideration. What I am suggesting to the minister and to the committee is that I would rather see three full time employees on this board. If these men were here all the time they could become familiar with the work. Previously the minister stated that we might have an accountant as a member.


Ian Alistair Mackenzie: That is a
possibility.


Abraham Albert Heaps: I do not know whether an accountant would be a proper person to sit upon a board of this kind. I doubt whether such a man would have the necessary qualifications. Men of experience in this type of business should be appointed; this would be preferable to appointments on a purely geographical basis, as is sometimes done in cases of the kind. If you have members who are only to come and go at the whim of the chairman or the government-


Ian Alistair Mackenzie: No.


Abraham Albert Heaps: Who is going to ask these men to come to Ottawa? How are they to know when they are wanted?


Ian Alistair Mackenzie: A quorum of the board must pass upon any contract.


Abraham Albert Heaps: That is quite true, but when are these men to come to Ottawa? Are they to come here only when a contract is to be let?


Ian Alistair Mackenzie: Not
necessarily.


Abraham Albert Heaps: I should like to find that out. Personally I would prefer to have this board something like the civil service commission, with its members here all the time and fully responsible to the government or to the house.


Douglas Gooderham Ross: This board is to be set up to give financial advice to the department. It is expected that its members will have experience with respect to manufacturing. It is to pass finally upon how these things are to be done. Subsection 2 provides:
No action shall be taken by the board leading to the negotiation of a contract except upon requisition made upon the board by the minister.

The bill then sets out the various objects of the board. If the chairman of this board is not fully conversant with all these things, let us see what might happen. The council may decide that something is needed. The chief of the general staff may decide on something. He goes to the minister and the minister issues a requisition on the board. The board may decide that they want more information. That is what may happen when the chairman is not fully conversant with these matters and is not able to give all the necessary information. A matter might be referred back to the defence council, and then the council might refer it back to the purchasing board. It may be referred then to the minister, and keep on going back and forth in that way. It seems to me logical that the chairman of the board should be a member of the defence council, and for the life of me I cannot see why he should not sit on that council. That is the only way you can have close cooperation between the board and the department.


Ian Alistair Mackenzie: For the fourth or fifth time I shall answer the same question. There is no objection whatsoever, in tbe light of the experience which may be gained, to carrying out the suggestion of my hon. friend, but this is not the place to do it, nor is this the legislation by which it can be done. It can easily be done afterwards if it is found necessary to do so.


Thomas Langton Church: In my opinion we have a
lack of responsibility in connection with these contracts under section 4, subsection 1. In preparing this particular portion of the bill the minister seems to have overlooked the lessons which were learned from the experience of the British munitions board in Canada during the great war. This new board can deal only with contracts of over $5,000. This board must report to the Minister of Finance, who in turn submits the report to the governor in council with his recommendations. I submit that there will be a lack of finality and responsibility under the restrictions of section 4, subsection 1. In any case it will be hard to fix responsibility should tnything go wrong. The board may say that ihey have been requisitioned, but as it was altered by the Minister of Finance or by the governor in council they are not responsible. Such a lack of finality will be fatal to a contract. The government should have been guided by what occurred in connection with the British munitions board. The final report of that board referred to the patriotism and the devotion of the tenderers and munition

Defence Purchasing Board
workers of Canada. It referred to the courage and sacrifices which had been revealed and which were worthy of every admiration. This board is not given a free hand. It is true they are to exercise some control in the public interest over specifications, but they do not have full power over the awarding of tenders, which is more important. It seems to me that- the whole procedure is cumbersome. It shows such a lack of responsibility that it is bound to lead to a number of innovations in the awarding of contracts.


David Spence: I rather share the views of the hon. member for Winnipeg North (Mr. Heaps), that it would be better to have three full time men on this board rather than a chairman and one or two other members * to be called in now and then. You cannot expect real efficiency from any member of this board unless he is familiar with every detail of the work. I understood we were to have a real purchasing board. My view is that this board should be composed of men who understand purchasing and who have a knowledge of business. I am sure that is the type of man the minister wants to have. You would get better service if you had three full time men rather than a full time chairman and four or five other members who are to be called at intervals. No doubt the chairman of this board will be a man who has substantial knowledge of the making of purchases. He should be qualified to purchase any article required by the department after a requisition is received from the council or the chief officials in the department. Once these men have decided what they want, they should make out an order to be sent to the purchasing board. It should then be up to the board to see that the article needed is obtained at the best possible price. The members of this purchasing board should be capable of carrying out that job. I think the board will be a failure if you have just a permanent chairman and two or three other men who are to be consulted at intervals. They may not know anything about the details of the work.


Frederick George Sanderson: Shall the subsection
carry?


David Spence: Carry everything, whether it is right or wrong. That is the only job you have.


Grote Stirling: Is there not an analogy
between this board and the work carried out by the directorates of some companies, or, if not by the directorates of these companies,
by their executive councils? They are definitely appointed. They meet perhaps once a week or once a fortnight or once a month or at the call of the chair, and the chairman cannot take the necessary action with regard to contracts without the acquiescence of a majority of his board.


Ian Alistair Mackenzie: Exactly
the same.


Grote Stirling: Is not the analogy to
that of a board of directors?


Ian Alistair Mackenzie: Absolutely. Exactly the same.


Jean-François Pouliot: Will the board be directly under the Minister of Finance, or under the deputy minister of finance?


Ian Alistair Mackenzie: The
language of the statute is plain, that all the recommendations and requisitions come in from the Department of National Defence. The board is responsible to the Minister of Finance, who carries the recommendations for decisions to council, and after the decision of the council is rendered the board has complete jurisdiction with reference to carrying out the terms of the contract.


Jean-François Pouliot: Yes. That is not exactly an answer to my question. What I want to know is whether the board will be directly under the Minister of Finance, or under the deputy minister?


Ian Alistair Mackenzie: The
Minister of Finance.


Jean-François Pouliot: The deputy minister of
finance has nothing to do with it? And will the chairman be a deputy minister or rank as a deputy minister?


Ian Alistair Mackenzie: That
is not provided for in the legislation.


Jean-François Pouliot: The hon. member for
Winnipeg North (Mr. Heaps) asked the other day a question which, I believe, has not been answered. He asked if the interdepartmental committee had gone out of business.


Ian Alistair Mackenzie: The
answer is in the negative.


Jean-François Pouliot: In the negative? It has
not gone out of business?


Ian Alistair Mackenzie: No.


Jean-François Pouliot: And will it continue?


Ian Alistair Mackenzie: Whenever this legislation is proclaimed the functions carried out by the interdepartmental committee will have been concluded.
Defence Purchasing Board


Jean-François Pouliot: Well, speaking to that,
I have just a word to say. It is to remind the minister what he himself has said with regard to the work of that committee. At page 1763 of Hansard he said:
The Skelton committee reported that profit control was essentially an administrative problem and advised that they were unable to recommend legislation which would cover all contingencies. They did make one important and valuable step forward-they recommended a court of review to advise the department directly concerned on the form of its contracts.
That is what they did. I assume that the minister was too generous in his praise of the interdepartmental committee when he continued thus:
I want to say here that the interdepartmental committee, whatever criticism may have been offered concerning them, rendered magnificent and devoted service to the government and the country in the work they have done in the last two years.
They have just suggested a court of review; that is all; and that was "magnificent service." Any child can render a service like that. I do not see why that committee is still in office, or what use it has been.
Subsection 1 agreed to.
Subsection 2 agreed to.
On section 4, subsection 3-Details of requisition.


Grote Stirling: As to the last few words of this subsection a little explanation is, I think, necessary:
. . . and any such requisition shall be subject to revision by the board upon approval by the minister.
Which comes first, the revision by the board or the approval by the minister; and what happens if the board and the minister very decidedly disagree?


Ian Alistair Mackenzie: There is no question in my mind that what would happen is this. The officials of the department will make suggestions with reference to a requisition to the board; if that is to be revised by the board it must have the approval of the minister, and if the approval of the minister is not forthcoming then, I take it, the original recommendation from the officials of the department would be validated.


James Alexander Marshall: What minister is referred to in this section? Is it the Minister of Finance or the Minister of National Defence?


Ian Alistair Mackenzie: The Minister of National Defence. It means, wherever "the minister" is mentioned, the Minister of National Defence. The Minister of Finance is particularly so specified.


Grote Stirling: I do not know that I am quite clear with regard to that point. It seems to mean that the technical officers advising the committee could override the board.


Ian Alistair Mackenzie: If they are sustained by the minister. If the requisition were considered by the board to be unreasonable, the board would refer the amendment of that requisition to the minister; if the minister then approved of the amendment of the board it would automatically go ahead to the controlling authority. If not, I take it, it could not go ahead at all; it would be amended or modified or altered as found necessary, doubtless after consultation between the defence council, the purchasing board, and perhaps the minister.


Thomas Clement (Tommy) Douglas: If the minister would carry that a step further: what machinery would be provided in the event of a deadlock? Would the Minister of Finance then take the requisition direct to the governor in council? That is, assuming the board did not agree to the requisition but thought there ought to be some modification of it, say for cheaper equipment, and the minister was not prepared to approve the alteration.


Ian Alistair Mackenzie: Of course, under the terms of the proposed legislation, if the minister did not approve it would not proceed to the Minister of Finance or the governor in council, but I imagine the proper procedure would be a conference in regard to any varying viewpoints which might develop as between officials of the department and the head of the purchasing board. I do not anticipate any great difficulty. If any requisitions were made which could not be fully and amply justified, they would not automatically go through; the board has authority to alter or modify them. The approval of the minister must be obtained before they go ahead.


Thomas Clement (Tommy) Douglas: Of course the minister will have the working of it out, so I will not elaborate it, but it seems that there ought to be a court of appeal.


Ian Alistair Mackenzie: I think we can rely upon its working out fairly satisfactorily.

Defence Purchasing Board


Douglas Gooderham Ross: This is not by way of interference with the defence council. But, for instance, if the defence council say "We must have this equipment," the purchasing board cannot come back and say, "You have this, and you have more than we think you require to have." There is not going to be any decision of the purchasing board as to how much the defence council should have: I do not know whether I have made myself clear. The minister makes a recommendation. So much has to be bought. Can the purchasing board, say, "We do not think you should have so much."


Ian Alistair Mackenzie: No, not necessarily.


Douglas Gooderham Ross: What I mean is this: there is no interference with the recommendation?


Ian Alistair Mackenzie: No.


Douglas Gooderham Ross: It is only for purposes of information that they can go back and find this out?


Mr. STEVENS:: That is scarcely correct, I think, because in the requisition it must declare the quantity of such defence equipment already in the possession of the government. So there is a measure of review.


Ian Alistair Mackenzie: My hon. friend will find, if he looks at the section, that there is quite a lot of review.


Thomas Langton Church: With regard to the details of the requisition is the minister going to assist the manufacturers by giving them advice? Will the details of these requisitions contain information for the manufacturer? Suppose there is a shortage of labour or a shortage of materials, or suppose he is not able to get power-three matters which the British munitions board found it very necessary to deal with in the specifications and the requisitions. In addition to this phase of it, there is another requisition difficulty referred to in the report. Take materials. Some manufacturers may have certain materials and other manufacturers may have other kinds, with the result that they cannot get the finished article provided for in the board's specifications; what is to be done about that to help tenderers out? What coordination will there be regarding plants? I understand the minister looked over 1,800. There will be a great shortage of power if an emergency should arise. Will the board help out the tenderers and by requisitions help to regulate matters?


Ian Alistair Mackenzie: Under section 8 of the bill the board has complete power to survey not only the requirements
of the department but also the various industrial plants in Canada, so that the various points he has raised have been fully met, I think, in the terms of the proposed legislation.


Charles Grant MacNeil: Where does the responsibility lie with regard to the supervision of a contract?


Ian Alistair Mackenzie: Entirely with the purchasing board. It is provided by section 6:
It shall be the duty of the board to supervise the performance of all contracts which may have been entered into pursuant to the provisions of this part with a view to assuring that such contracts are performed in accordance with their respective terms.


Douglas Gooderham Ross: Was not that the duty of the master general of ordnance before, or whose duty was it?


Ian Alistair Mackenzie: The duty of the minister, I would say.
Subsection 3 agreed to.
On section 4, subsection 4-Tenders.


Mr. BROOKS:: This subsection provides
for advertising. It says:
In respect of all contracts, the board shall, wherever practicable, invite tenders either by means of advertisements in the public press or otherwise.
I assume that the intention is, of course, that there will be no patronage. That is the idea of this board, but I would ask the minister what is meant by "or otherwise." Does it mean there will be certain specified firms who will be invited to tender?


Ian Alistair Mackenzie: That is a possibility under the interpretation of the section, but I rather anticipate that what will happen will be this. Tenders will be invited in the public press, or all available firms will be got in touch with through the Canadian Manufacturers Association or an organization of that kind, through lists supplied by them. There are two methods of tendering now: first, inviting tenders by advertisement in the public press; secondly, for many years, there has been the practice of inviting tenders from selected lists containing perhaps five or seven or up to twenty-five or thirty names.


Thomas Langton Church: Subsection 4 provides:
In respect of all contracts, the board shall, wherever practicable, invite tenders by means of advertisements in the public jjress or otherwise.
Then it goes on to clothe the board with powers:
The board shall recommend the acceptance of the lowest tender. . . .
Defence Purchasing Board

But that does not mean that the lowest tender will always be accepted. I think, Mr. Chairman, that there is so much distribution of authority that it is going to lead to untold innovations in the awarding of contracts, and I think it might be helpful to the minister to review what was done by the munitions board in the awarding of contracts. They went very carefully into the different methods of tendering and the awarding of contracts. With your permission, Mr. Chairman, I should like to quote from The History of Munition Supply in Canada, 1914-1918, by D. Carnegie, because it has an important bearing upon tendering and the awarding of contracts; and it is, of course, very important that the board should have the support of public opinion in their work, which is more or less a patriotic work. At page 296 Mr. Carnegie says:
With the exception of this fuse plant and a few others which will be referred to later, the board did not attempt to establish its own factories. The work to be done was parcelled out among Canadian manufacturers. In many cases it was carried on in factories previously existing, which were adapted to the purpose of munitions manufacture by more or less extensive changes.
There is a difficulty the minister may run into, and I think will run into. It goes on:
In other cases, manufacturers constructed new plants for munitions making, but were able to draw on their existing staff for labour, for supervision, and for skilled mechanics. The work of the board was to place orders for materials, or contracts for the execution of the various processes by which the materials were turned into finished shell; to assist the manufacturers with technical advice and to arrange for the interchange of information;-
That should be very valuable for the minister:
-and above all to see that they were kept supplied with material or with work in process up to the limit of their capacity, and not beyond it. One of the most important departments of the board, the distribution department, was entirely concerned with this latter work. The value of it was apparent from the experience of the United States, after that country came into the war and commenced the manufacture of munitions on its own account. There, also, the work was parcelled out among manufacturers. But no adequate - organization was set up at the commencement to arrange for the distribution of materials and of partly finished work.
Then here is where a mistake was made:
Consequently it was found that many manufacturers had plenty of material before they had capacity to use it, while others were left with plant and workmen idle because they had not a sufficient supply of material to be worked up. Another function undertaken by the board was that of advising and assisting the body of manufacturers with regard to their problems of production-both those of machinery and those of labour.
[Mr. Church.l
And this concluding sentence:
The knowledge gained from study of the problems of one manufacturer was thus placed at the disposal of others, and the comparison of many cases was used for the general improvement.
Then it goes on to refer to the board's powers. After contracts had been awarded sometimes a manufacturer, through no fault of his own, found that his power had been shut off and some tenderers got behind, and so Sir Henry Drayton was appointed to assist the government and the manufacturers, and he had the supply of power shut off from municipalities in many cases in order that the contractors might accelerate their work. Emergencies of this kind are bound to occur, and I should like the minister to explain what provision is being made for them. It is no good just going around in a circle with several different bodies having a measure of control over tenders. In practice the government will find that it will only be inviting trouble, and that unless proper measures are taken this board will not get the results that the munitions board got.


Ian Alistair Mackenzie: The
answer is this, that this is a measure for peace time, and I trust that it will long be used for that purpose. If an emergency arises, doubtless other measures will be enacted immediately to deal with the emergency.


Thomas Clement (Tommy) Douglas: This subsection provides:
In respect of all contracts, the board shall, wherever practicable, invite tenders either by means of advertisements in the public press or otherwise.
That is an excellent provision to prevent patronage in the giving of munitions contracts, provided always, of course, that all those capable of carrying out such contracts are allowed to tender, and that no obstacles are placed in their way. Let me illustrate by referring to a matter I shall discuss at greater length on the minister's estimates.
On the fourteenth of March of last year I placed some questions on the order paper and a return was brought down dated Friday, June 24. The last two parts of my question were:
6.	Whether any official of the Department of National Defence has refused to supply tender forms to any coal dealer in connection with the purchase of coal during the period from April 1, 1930, to date.
7.	If so, what coal dealer was refused, and the reasons for the refusal.
The answer that was brought down in the return, sessional paper 309, was that no dealer was refused tender forms. I have in my

Defence Purchasing Board
hand two affidavits. I have the originals and copies, which I shall be very glad to give to the minister, but I shall not bother him with them at the moment. One is an affidavit from a coal dealer in the city of Ottawa, and the other an affidavit from his secretary. The coal dealer states in his affidavit that he sent his secretary to the director of contracts of the Department of National Defence.


Ian Alistair Mackenzie: What
year was it, may I ask?


Thomas Clement (Tommy) Douglas: June 28, 1937. She went to the director of contracts, was refused an application form. The employer then himself went to the office of the deputy minister of national defence and was also refused a tender form. The secretary was told when she went to the director of contracts that the department did not know this particular gentleman, although he has been in the coal business in this city for a number of years. I have no personal knowledge of these facts, but I shall be glad to give to the minister copies of the affidavits and he can check them. On paper this clause looks fine, and I think the minister is quite sincere in what he has here; but if those capable of fulfilling a contract cannot get tender forms, the whole value of the section is destroyed.


Ian Alistair Mackenzie: Will the hon. member be good enough to give me details of those two cases?


Thomas Clement (Tommy) Douglas: I will give the minister the affidavits.


Grote Stirling: I suggest to the minister that he delete the words "wherever practicable." The subsection would then read: "The board shall invite tenders either by means of advertisements in the public press or otherwise." I think the main reason for the degree of unanimity that has been attained, to which I referred earlier in the evening, is that we realize and the public realize that in this matter we are dealing with commodities required for the defence of the country. Therefore it puts this piece of work on a different shelf entirely from other things required in various departments of the government. As we are dealing with munitions in the widest sense of the word, requirements of the Department of National Defence for the defence of Canada, and are setting up a most remarkable board to oversee that work, it seems to me that an argument can be made in favour of calling for tenders by public advertisement or otherwise for all requirements.


Ian Alistair Mackenzie: I am not opposing the principle of what my hon. friend suggests, but let me make one or two observations. I think he has had the same experience I have had in the department, that cases arise in the experience of all in authority in respect of which tenders, although desirable, are not practicable. For instance there may be secret designs. Another point is that under section 7 the taxation provisions apply only where tenders cannot be called for -in other words that peculiar type of contract which generally causes all the trouble, where it is not feasible to ask for public tenders, and you have to do it some other way, on the basis of an upset price, or unit price, or the cost plus system. It is under that limitation that all the taxation provisions enacted in section 7 of this legislation, apply. I should like very much if it were practicable to call for public tenders for everything; that is the ideal situation. But, especially in regard to difficult and intricate pieces of work, or where secret designs and processes are involved, the functioning authority will often find it impossible to proceed by tender, and that might lead to trouble.


Grote Stirling: I should be in general agreement with the minister if we were dealing with the ordinary requirements of government. But here we are dealing with the requirements of the defence of the country, which puts the matter on an entirely different plane. The minister referred to section 7; I do not know whether the chairman will permit me to link the two, but I shall do so if I may, because when we come to section 7 I am going to raise the question whether it would not be a good thing to apply this control of profits theory to all contracts. If it is adopted for one type of contract, I do not see why it should not apply also to the other type. I do not know how far I may go now on section 7, but I can hardly accept the minister's answer referring to clause 7 when I do not agree with that clause. Perhaps this may stand until we reach section 7, or may we discuss 7 now?


Ian Alistair Mackenzie: I have no objection.


Charles Gavan Power: I might point out that this bill, is to some extent based on the war purchasing commission which was in existence during the war. Section 7 of P.C. 1033 of May 1915, the order in council appointing the war purchasing commission and defining its duties, reads:
In respect of all contracts to be made by the commission or to be entered into on its behalf, the following regulations shall obtain as far as practicable.
Defence Purchasing Board

I think that is where we got the phraseology
(a)	tenders shall be called for; (b) purchases shall be made and contracts given at the lowest price. I think this bill was drafted on the war purchasing commission regulations.


Grote Stirling: If I may amplify that a little further, I visualize that this board is going to card index Canadian industry. That being the case, they will be possessed of all the information necessary in regard to all the various branches of endeavour which will be used in the defence of Canada. Therefore it will be perfectly easy for the board to acquaint itself with manufacturers who are able to tender. That being so, I do not know that I would stress public advertisement except for the reason that it gives the public information. But the board would have no difficulty in getting in touch with every concern that is capable of tendering for these requirements.
Coming to the tenders themselves, the further clauses of this subsection instruct the board as to what it may do with regard to the lowest tender. There are occasions when it is not desirable to accept the lowest tender. They may not be very frequent, but provision must be made for them. I have known instances in my own experience in which it was well known that the person who put in the lowest tender could not possibly carry out the work at the price stipulated. In this case the board has the right to state in its recommendation to the Minister of Finance its reasons for setting aside the lowest tender. The board is taking very considerable responsibility, and I see no reason why, if we are going to place implicit confidence in this new and extraordinary board, it should not also have the power to recommend that the lowest tender be set aside.


Ian Alistair Mackenzie: It has
the power mentioned, to state why the lowest tender has not been recommended.


Douglas Gooderham Ross: In respect to contracts where you call for tenders wherever practicable, in view of public opinion in these days would it not be wise to insert some provision limiting the amount of profit which may accrue under a contract, instead of just leaving it wide open?


Charles Gavan Power: That comes under section 7.
Subsection 4 agreed to.
On section 4, subsection 5-Duty of board where tender is not invited.


John Ritchie MacNicol: With respect to the first part of the subsection:
In respect of any contract for which the board has decided that it is impracticable to invite tenders, it shall be the duty of the board-

I should like some explanation as to the word "impracticable." I remember what the minister said on March 10, that sixty per cent of the purchases in his department during the last three years were made after tenders had been called for, and they amounted to approximately 87,785,000.


Ian Alistair Mackenzie: That
is, of those contracts available for tender.


John Ritchie MacNicol: Yes; that is what I
say. If sixty per cent amounted to that sum, the remaiing forty per cent bought without tenders would amount to about 85,516,000. This clause applies to munitions purchased without tender. I have been wondering as to the full significance of the words "fair and reasonable" as far as the government is concerned and "unfair or unreasonable" as far as the contractors, subcontractors or suppliers are concerned. In connection with many types of munitions or equipment bought by the department there must be from 25 to 250 or perhaps more subcontracts, because so many different items enter into the construction of any type of machine, and perhaps more particularly in connection with war machines. It would appear to me that it would be a very difficult job running down all those subcontractors in order to ascertain whether or not they were making unreasonable profits. If section 7 applies to the whole matter I will accept it at once.


Ian Alistair Mackenzie: It does.


John Ritchie MacNicol: I have been wondering
why you say "fair and reasonable" and "unfair or unreasonable" if the five per cent applies.


Ian Alistair Mackenzie: May I
correct an impression which perhaps my hon. friend formed from my remarks the other day. When I referred to the sixty and forty per cent, that dealt with contracts called by tender. The sixty per cent referred to contracts called by public tender and the forty per cent to contracts called by invited tender from selected lists. In addition to these two classes referred to the other day, as my hon. friend will find from my remarks in Hansard, there was a third type of contract which for the last two years has been referred to the interdepartmental committee; that is, contracts which in the opinion of the department could not be made the subject of either public or invited tenders. It is to that particular type of contract that subsection 5 applies. The element of fair and reasonable profit I think is governed pretty drastically by the taxation provisions of section 7, in both the

Defence Purchasing Board
positive and the negative way; in the first place what is a fair and reasonable cost to the government, and in the second place an unfair or unreasonable profit to a contractor, subcontractor, manufacturer, supplier or other person. I think my hon. friend will find that these general enunciations of principle are very carefully safeguarded by the taxation provisions of section 7.


John Ritchie MacNicol: Would not the two
types of contracts be the same; that is, the contract secured through public or advertised tender and the contract obtained after competing against half a dozen selected tenderers?


Ian Alistair Mackenzie: Yes, but this does not refer to them. It is competitive bidding in both cases, but in this case it is not. This is where it is impossible to have competitive bidding; therefore you need a peculiar type of contract, either cost plus or unit price, and that is where the element of establishing the principle of fair and reasonable profit comes in, there and there only.


Douglas Gooderham Ross: That is what I
had in mind, where you do not advertise for tenders but have two or three contractors who are invited to tender without advertising. In view of public opinion at the present time is it not only fair that some limit should be put on the amount of profit that might accrue under those contracts?


Ian Alistair Mackenzie: That
comes under section 7 again.
Subsection 5 agreed to.
Subsection 6 agreed to.
Section 4 agreed to.
On section 5-Contract to be approved by governor in council.


Douglas Gooderham Ross: That does not cover it; that is not what I mean. You have competitive bidding, but what I am talking about is where you pick out four or five contractors. There is no provision here which controls the profits they may make.


Ian Alistair Mackenzie: All contracts except those mentioned are subject to section 7. In other words all competitive contracts are referred to; otherwise contracts, other than those in connection with which competitive bids are possible, are covered by section 7.


Thomas Clement (Tommy) Douglas: Is that true of the selected lists as well?


Ian Alistair Mackenzie: All
selected lists are supposed to be subject to the general principle of competitive bidding, just the same as bids asked for by public tender.


Mr. COLDWELL:: Then there is no limit on the profits that may be made under contracts of that type?


Ian Alistair Mackenzie: The general supposition, whether it is right or wrong, is that wherever competitive bids are called for, whether from six or seven contractors or from the general public, the public interest is safeguarded.


Major James William Coldwell: But there is no limitation under this act?


Ian Alistair Mackenzie: No.


Grote Stirling: That brings up the point to which I was referring just now. Suppose you have only two tenders. Those of us who have had anything to do with the letting of contracts for public works have known cases in which tender No. 2 was a dummy bid. I see no reason why, if the government is adopting the principle contained in section 7, it should not be made to apply also to contracts let by tender.


Charles Gavan Power: I imagine that is what the board was created for, to see that there were no dummy bids and no flim-flamming. I do not know how you could avoid it otherwise. I do not think we could establish a minimum number. In all probability my hon. friend will know of certain articles which can be produced by only two people in this country, but the board is charged with the duty of seeing to it that the article is secured or the contract executed at a fair and reasonable cost to the government of Canada. If two people are in agreement, or a dummy bid is sent in, then the board only has to say, "We will not buy from you," or "We will buy outside," or "We will find some other means of getting it." That is exactly why we want a board of this kind, which will be free from all suspicion and able to go to anyone who appears to be trying either to deceive or to take advantage of the government, and say, "If we cannot get proper bids we will obtain the article in some other way."


Major James William Coldwell: That is to say, then, that this clause really only covers-


Frederick George Sanderson: In order to keep the record clear I think we should consider sections 5 and 6 before we discuss section 7.

Defence Purchasing Board


Major James William Coldwell: The point I was going to make was really in connection with the two sections. This section, I take it-


Ian Alistair Mackenzie: To
which section is my hon. friend referring?


Major James William Coldwell: Section 4.


Frederick George Sanderson: Section 4 has been passed. We are now on section 5.


Alfred Johnson Brooks: Subsection 4 of section 4 says, "The board shall recommend" and section 5 says, "All proposed contracts shall be submitted by the board to the Minister of Finance."


Frederick George Sanderson: The hon. member is asking his question in relation to what section?


Ian Alistair Mackenzie: My hon. friend is quite correct in that respect; he is connecting the interpretation of section 5 with a preceding section, as I understand it.


Alfred Johnson Brooks: Yes. I was asking to whom the board would make its recommendation. In section 4 it is provided that they may make a recommendation, and then section 5 provides that these contracts are to be submitted by the board to the Minister of Finance. Do they make their recommendations to the Minister of Finance, or do they simply submit these contracts to the minister for recommendation to the governor in council?


Ian Alistair Mackenzie: Under
section 4 the board shall recommend the acceptance of the lowest tender submitted, and then under section 5 all proposed contracts shall be submitted by the board to the Minister of Finance. The recommendation does not go to the Minister of National Defence, but rather to the Minister of Finance who, in turn, is responsible for submission to council for approval or otherwise.


Alfred Johnson Brooks: The formal recommendation goes to the Minister of Finance in every :ase.
Section 5 agreed to.
On section 6-Board to supervise carrying jut contracts.


Douglas Gooderham Ross: I see by this section it is the duty of the board to supervise the performance of all contracts. Whose duty was it before this time? Under the Department of National Defence was it the duty of the master general of the ordnance to supervise contracts?


Ian Alistair Mackenzie: Generally speaking it was under the supervision of the director of contracts, but in some cases the

director of technical engineering services would have jurisdiction for the actual carrying out of the details of a contract. It might be that in connection with the air service some other official had some power of supervision. In the present instance, generally speaking the board is charged with the supervision of all contracts.


Douglas Gooderham Ross: Does this section take away the power of supervision of those various branches? Is that not another instance of interference between this board and the Department of National Defence? I believe it is an instance of lifting responsibility to supervise from the department to the board. The board will have a pretty big job on its hands.


Ian Alistair Mackenzie: It is a big job.


Douglas Gooderham Ross: It does seem to me that "to supervise" is hardly the correct expression. I think the duty of doing that job should be left with the various branches of the department, and that the heads of those branches should have the last say.


Ian Alistair Mackenzie: I do not think in the actual performance of duties there will be very much change. The officers of the branches would do the practical work of supervision. But they shall report to the board, and authority and responsibility will rest with the board. The director of engineering services will, just the same as to-day, carry out the supervision; but the final authority for supervision and the final responsibility will rest with the new board.


Douglas Gooderham Ross: As it stands now it is the duty of the board to supervise. Will they not think it is their duty to set up a supervisory department to take care of these contracts?


Ian Alistair Mackenzie: No.


Douglas Gooderham Ross: Why not amend the bill to take care of that situation? Certainly you do not want interference from the board, nor do you want to build up a supervisory department. It seems to me there should be an amendment to take care of the supervision.


Ian Alistair Mackenzie: It is already taken care of in other sections of the bill. An officer of the Department of National Defence could be seconded to the board.


Henry Herbert Stevens: Would the minister consider as a substitution for the word " supervise "

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the words " ensure the proper performance " or " effective performance "7 I believe the word " supervise " is conflicting.


Ian Alistair Mackenzie: I would have no objection to that. Probably it would be an improvement.


Grote Stirling: Would it not be a good idea to refer to the actual examination or supervision in section 8 of the bill, and place supervision among those duties imposed on the board? Then it would be quite clear that the technical officers of the various branches of the department would be used for the purpose of inspection.


Ian Alistair Mackenzie: I see no objection to that. Perhaps my colleague would move the amendment suggested by the hon. member for Kootenay East, namely to delete the words " supervise the " in line thirty and insert in lieu thereof the words " to ensure the proper." Then the section would read " It shall be the duty of the board to ensure the proper performance of all contracts," and so on.


Mr. TAYLOR (Nanaimo):: Is not that duplicated in the latter part of the same section?


Charles Gavan Power: Yes, I think the hon. member for Nanaimo is quite right. They are going to supervise in order to assure the performance, or to assure that the contracts are performed in accordance with their respective terms.


Henry Herbert Stevens: It is obviously bad legislation to say in a statute that it shall be the duty-and the language is very clear and definite-to supervise, when we know that the supervising authority will be the officer of the department-where it ought to be. All the board should be asked to do is to ensure that the contract is properly discharged or performed, whichever term you may use. But I do not think the word "supervise" should be permitted to remain. Otherwise a conflict of interest would develop.


Ian Alistair Mackenzie: Let the section stand for the moment.


Grote Stirling: Would it be better to leave out the last part of the section, so that the section would read:
It shall be the duty of the board to ensure the proper performance of all contracts, which may have been entered into pursuant to the provisions of this part.


Charles Gavan Power: 
Henry Herbert Stevens: I agree with the object, but-


Charles Gavan Power: Perhaps the language is not quite clear.


Henry Herbert Stevens: The clause should stand for redrafting.


Ian Alistair Mackenzie: Yes.


James Samuel Taylor: May I suggest the words " It shall be the duty of the board to accept the responsibility for the supervision of".


Ian Alistair Mackenzie: We will take all these suggestions into consideration; in the meantime I would suggest that the section stand.
Section 6 stands.
On section 7-Maximum net profit.


Major James William Coldwell: I believe section 7 is one of the 'most important sections in the bill. It deals with the supervision of profits, and lays down certain methods by which profits shall be controlled. I agree with those who have already said the limitation of profits should apply to all those engaged in fulfilling government contracts. I do not think it is sufficient to say that the tender method will regulate profits sufficiently. Already in Great Britain there has been some criticism of contracts which have been let not only by selection but also by tender. During the great war we know how scandalous were some of the profits made by firms which secured contracts by tender.
The other day in introducing the bill the Minister of National Defence spoke of the minority report of the senate committee of the United States. I think it is worth while drawing to the attention of the minister and the house something in the majority report which bears directly-


Ian Alistair Mackenzie: I spoke of both.


Major James William Coldwell: -on this particular section. The minister says he referred to both; I will clear that up. I realize that in a sentence the minister referred to the majority report, but he quoted directly and substantially from the minority report. His reference to the majority report was brief. I wish to draw the attention of the house to the considered opinion of that committee in regard to the type of proposal contained in this section of the bill. It said:
1.	Major accounting factors, such as costs and valuations, are extremely difficult to determine. To a large extent the government must rely upon industry for information. In
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the pressure of wartime, these accounting items are inevitably determined on a basis advantageous to industry.
2.	There are always many loopholes in profit-limitation schemes designed to apply uniformly to our immense and complicated industrial structure.
3.	No matter how effective a scheme may be on paper, it will be tremendously weakened by the administrative difficulties inherent in a wartime situation characterized by the necessity for speed and the vast volume of work which must be done.
The same thing applies to a peace-time program which has to be instituted quickly, perhaps because of certain international developments. I quote further from the senate report:
4.	Because of the necessity for flexibility, the character of war regulation is largely determined by negotiation between government officials and industry. Industry inevitably has the upper hand in these negotiations because of its superior information and the existence of a seller's market in war.
Those are some of the reasons why some of us, the members of this group particularly, have been insistent that as much of this work as possible should be undertaken by the government itself. I do not believe that this clause, well drawn as it may be -there are one or two grave defects in it, in my opinion-will remedy the disease which it seeks to cure. Consequently I wished to draw to the attention of the minister and the committee what has been said after very careful inquiry in another country. We may have something more to say regarding the profit referred to in subsection (b). I want to emphasize the arguments which we have placed before the committee, that the limitation of profits by bills of this type in connection with contracts of the sort contemplated is more or less ineffective. Moreover, may I emphasize also that the experience of the last few years has shown that less than forty per cent of the contracts will be subject to the provisions of this section.


Grote Stirling: Would the minister
explain why the government has not seen fit to apply the limitation of profits to all contracts? Where contracts are let without tender the board has almost inquisitorial powers to go into the financial details of the company concerned. After a contract has been let by public tender it may develop that the profits are larger than had been anticipated. Why should not the government take the power to apply these inquisitorial examinations to such a company ? Why should it not take the same

action with regard to that company as it provides shall be taken under section 7 for contracts in this category?


Ian Alistair Mackenzie: The
answer obviously is that competition is generally supposed to safeguard the public interest. The criticism we have heard in recent weeks with regard to a certain contract was with reference to the fact that public tenders were not called for. Whether they were feasible, of course, is a matter of argument. I think it is a fairly safe assumption that where the competition is not too narrow or too restricted, the public interest is generally safeguarded, unless there is collusion in regard to the tendering. My only suggestion is that possibly we might work out a system whereby when you resort to a selected list, as was referred to by the leader of the opposition (Mr. Manion) the other day, you would insist upon a certain minimum number ' of tenderers. If that number was not available or forthcoming, then other principles might have to be applied. I do think the principle of this legislation is sound. Where tenders are possible, I think they should be resorted to. I think the public interest is safeguarded in that way. Where public tenders are not possible, it is incumbent upon the board to explain to the governor in council and to the Minister of Finance why in their judgment they were not possible. Where you have the type of contract which in the last two and a half years we found necessary to refer to the interdepartmental committee for advice, then the principle of very drastic profit control by way of taxation would be applied. If the committee feels otherwise about it, I shall be prepared to give the matter further consideration. However, I do say that we should give to this our best judgment. In my opinion the public interest, which we are all seeking to advance, is safeguarded in this legislation by the principle of competition, provided it is fair and not collusive or restricted competition.


Henry Herbert Stevens: I hesitate to say what I am going to say for fear it may be misunderstood, yet I think it ought to be said. I am voicing now entirely my own opinion, and I doubt if there are many others who will share it. I say this after giving the full consideration to what we are doing that has been suggested by the minister. I should like to preface my remarks by saying that it is highly desirable that we should limit profits; and there is no thought in my mind to depart from that objective which, after all, is one of the main objectives of this bill. However,

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I should like to point out the danger, if the profit is really limited, of the efforts which may be made to discover some way of circumventing the discovery of what is the actual cost. In other words, genuine operators, unless they act for purely patriotic purposes, might hesitate to take a contract with a five per cent profit, particularly where they had to expend a considerable amount of capital in additional equipment in order to carry out the contract. I think it will be necessary, Mr. Chairman, to refer to section 7 as a whole.


Ian Alistair Mackenzie: Yes, I
think we shall have to discuss the section as a whole, because it is all interrelated.


Henry Herbert Stevens: Perhaps the chairman
might consent to our discussing the first three parts of the section as a whole. Paragraph
(a)	of subsection 3 reads:
(a) The average amount of capital of a person employed in the performance of a contract shall be determined by the board and shall be based upon the actual cost (less depreciation at a rate deemed reasonable by the board) of the physical assets including plant, machinery, equipment and working capital of such person-
Let us pause there. I am not sufficiently technically qualified to call to mind immediately an appropriate illustration, but I submit that contracts might be let where perhaps only a comparatively small portion of a plant already in existence would be used in manufacturing the articles covered by the contract.


Mr. McLARTY:: The bill provides for five per cent profit on the capital required in the production.


Henry Herbert Stevens: Who is going to determine what is the proportion?


Norman Alexander McLarty: The board.


Henry Herbert Stevens: Of course that is in the bill, but I am trying to point out that the task we are giving the board is an impossible one. I do not think anyone can say what proportion of a plant, what proportion of working capital, what proportion of the overhead charges of taxes and rentals, would enter into the performance of a specific contract which might not involve the use of more than ten per cent of the plant. That is almost an impossible thing to do. Inasmuch as it is provided by subsection 1 that profits shall be limited to five per cent, that limitation is subject to the determination of what proportion of the fixed plant and equipment and so forth is used, and of the proportionate depreciation of the plant that is to be calculated. I think under these circumstances a clever operator could, if he wished, very easily evade the five per cent provision.
Then there are some forms of contract or some classes of material where there ought to be a much wider profit than in other classes. In a large construction contract I suppose five per cent might be all right, or in manufacturing an article that could be turned over very quickly.


Norman Alexander McLarty: This applies only to
contracts over 15,000.


Henry Herbert Stevens: Quite so, but during the
last war there were many contracts for boots and shoes and clothing for uniforms, and if I might be permitted to give an illustration, in the province of Quebec a splendid firm was given a contract for the manufacturing of khaki cloth. They had had no previous experience in a contract of the kind, and I think they honestly gave the best price they thought was applicable to that class of work. But when they had completed their contract they found, and it is in the records of this parliament, that they had made a profit of seventy-two per cent. They were amazed. What was the reason for such a large profit? In the ordinary running of their looms they would run a certain web of cloth, or whatever the term is, for perhaps a few hundred bolts, and then they would have to change the loom, but on this khaki cloth contract the loom ran for month after month without having to be changed, and to their amazement they found at the end of the year they had made this huge profit. That is only indicative of the difficulty you may have in this sort of thing. I repeat that with some classes of materials five per cent may be too much, and in other classes it may be altogether too little.
Some contracts call for definite changes in plant and in capital expenditure, which would be a loss unless the business is a continuing one. There is an attrition there that is not and cannot be provided for, because to call such a loss depreciation does not cover it all. Therefore it is possible that the rigid fixation of five per cent may be too limited to apply to all contracts.


Ian Alistair Mackenzie: What
principle would my hon. friend suggest?


Henry Herbert Stevens: I confess it is difficult, but I make this suggestion, that in place of this long recital in subsection 3 we might adopt the principles applicable in the calculation of income tax, where for a great many years- and it is done not only in Canada but in other countries-certain principles of accountancy are laid down which ensure a fair interpretation of what profits really are. We might incorporate in this bill, if it is possible
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to do so, a declaration of the principles applied by the income tax branch in the calculation of income tax, or perhaps in the calculation of the sales tax.


Ian Alistair Mackenzie: May I
interrupt, to help my hon. friend in his argument? The income tax department is dealing with the whole range of the business of an individual or corporation, but here we are dealing with a limited portion of the business of an individual or corporation.


Henry Herbert Stevens: That is true, and that
is one of the difficulties I see in this proposal. But I do think that the principles that are applied by the income tax branch might very well be applied in this case. While I support the principle of the limiting of profits, I think we should give this clause very careful consideration.


Ian Alistair Mackenzie: We
want every possible suggestion we can get. There is nothing final about this clause. I do feel that as drafted it might be too drastic when taken together with the provisions of various other sections, section 7, for example; but on the other hand, I believe it is the general desire to be drastic. The only danger is that you might possibly drive your best industrial concerns away from taking orders of this kind; I frankly admit that.


John Ritchie MacNicol: I want to ask one or two questions with respect to this clause, and I hope that this time the minister will accept my intentions as sincere.


Ian Alistair Mackenzie: Always.


John Ritchie MacNicol: 
Norman Alexander McLarty: I wonder if I might ask the hon. member a question. In the use of the word " capital " as applied under this section, I believe he is thinking of the authorized or 
paid-up capital of a company as distinguished from capital engaged in the manufacture of arms or munitions.


John Ritchie MacNicol: Wholly engaged.


Norman Alexander McLarty: Might I suggest to him that it is not the authorized or paid-up capital in this case, but the capital which is actually employed in the carrying out of the contract. In other words the authorized or paid-up capital has nothing to do with this section.


John Ritchie MacNicol: Just a moment. I know a little about manufacturing. My hon. friend may know the legal point of view, but I know something of the practical point of view. Take a plant that is engaged in making shells and nothing else, and it is capitalized at half a million. Is not that the capital you have in mind in this clause, where the whole capital is engaged in the making of the shells?


Norman Alexander McLarty: There is a limitation on the capital employed in section 7 (3) (a), and the mere fact that on paper the company's authorized or paid-up capital is a certain amount does not mean that for the purposes of this bill that is definitely to be taken as the capital required and employed in the carrying out of any contract authorized under the act. May I suggest to my hon. friend this, and I am doing it simply to be helpful, not critical at all. The word " capital " generally is rather a loose term; for we speak of authorized capital and of paid-up capital. But the capital which is referred to under this section is the definite amount of capital which, as described in the section, is referable only to the amount that is employed-and that eliminates goodwill-in connection with the carrying out of a particular contract.


John Ritchie MacNicol: I tried to point out to the minister that the whole plant is engaged in making shells.


Norman Alexander McLarty: True, but the capital might not all be employed; or, on the other hand, it might not come within the definition provided by this section. But you see the limitation is five per cent on the actual capital employed.


John Ritchie MacNicol: It is going to be very hard to administer that if the whole plant is engaged in making shells. The minister knows very well that towards the end of the war, plants were set up to make shells; the whole of a plant was thus engaged. Right after the war every machine in the plant was scrapped and broken up and melted. What is the capital if it is not the whole plant?


Norman Alexander McLarty: If for example the capital consists of an asset which is capitalized as

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goodwill, then for the purpose of this act it is not considered as capital. That is the only point I am making.


John Ritchie MacNicol: The factories set up at the end of the war had no goodwill. They were built on contracts. Say they invested half a million dollars in building and equipping a plant and spent their whole time turning out shells. That is the whole of the capital, is it not, if the whole of the plant is engaged in that work? I started by saying that you could take two plants: one, well managed and well equipped, capitalized at half a million dollars; another not so well managed nor so well equipped, and having, perhaps, not so many machines, and capitalized at a million dollars, and they each turn out the same number of shells. What I am trying to think out is, will this encourage production in times of necessity when it becomes a matter of urgency to produce the most material in the quickest possible time, or will it retard production?


Ian Alistair Mackenzie: If my hon. friend is trying to be cooperative as far as possible-and I am sure he is-is he suggesting that the basis on which the profit is founded is incorrect or unfair, or that the amount itself is possibly too rigid?


John Ritchie MacNicol: I was just wondering whether it would retard production. Or would the setting by the government of a price per shell, a price they themselves determine as fair, with liberty to produce to the limit, increase production-for instance, if they said to the owners of a plant, "We will give you S3 a shell; go ahead and turn out as many as you can"? Or would production be more surely increased by carrying on under this clause?	.


Ian Alistair Mackenzie: I may be wrong, but I gather from my hon. friend's remarks that he rather thinks this five per cent is too drastic.


John Ritchie MacNicol: No. I passed no comment. I was thinking only of production.


Ian Alistair Mackenzie: The
question of production would depend very largely on the equity or inequity of the present proposal.


John Ritchie MacNicol: On what would be turned out.


Ian Alistair Mackenzie: The production and the capacity for production would largely depend on the equity or inequity of the proposed system if that system were in operation, although if an emergency arose overnight I am of opinion that this present
system would not arise. You would have to apply new measures immediately. Essentially this is a measure for peace-time production. Perhaps I might clarify this by submitting a note I had on this particular paragraph.
With regard to the selection of a base on which the five per cent profit should be allowed, the guiding principle is, as my colleague has just pointed out, that it should be based on the actual physical plant and the machinery actually playing a part in the manufacture or production of the article contracted for. It was determined that the base upon which this contract should be calculated should not contain anything in the nature of artificial, inflated, watered or unreal capital. With this guiding principle in mind, this bill provides that the calculation of capital employed shall be based upon the actual cost less depreciation of the physical assets, including plant, machinery, equipment and working capital.
Another problem arises, that of the proper valuation of these physical assets where the actual cash cost to the company is not determinable. If, for example, a company's assets were acquired through the issue of shares, then it might become a matter of some difficulty to arrive at the proper cash value of those assets. It was felt that a reasonable criterion of such cash value would be any previous recent sales of those same assets which might in turn have involved cash payments. Accordingly it is provided

I quote from one of the sections-
Where such assets were acquired for a consideration other than cash, the board shall determine their fair cash value at the time of acquisition having regard to any sale or sales of such assets within five years of their acquisition by such person and, in the event of no such sale or sales, to any other circumstances which in the opinion of the board may indicate their fair cash value.
These are the general principles underlying the subsection.


John Ritchie MacNicol: Has the minister any thought in mind in reference to what he said about a reasonable rate of depreciation?


Ian Alistair Mackenzie: Just "less depreciation," to be fixed by the board, I would imagine, in every particular case. It may be seen on page 5 of the bill.


Douglas Gooderham Ross: In that connection would there not be a little difficulty about determining what might be a legitimate sale and what might not be? It might be sold to a holding company, for example, on a distress sale.


Ian Alistair Mackenzie: That is one of the board's chief duties.
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Douglas Gooderham Ross: I feel that we should do everything we possibly can in this bill to convince the public that there is to be no profiteering in munitions. That is the point. Now, as to contracts which are to be made with two selected contractors, or half a dozen -and you might have a case involving just two contractors-as I said before, there is no provision for the limiting of profits. To my mind there is a reason why a limitation should be provided for, and I am perfectly certain that where you get two contractors to tender on munitions of this kind they will be quite willing to limit their profits to a reasonable figure. In order that the public, may be satisfied with what is being done in connection with setting up this purchasing board, it is important that some clause be inserted for the limitation of profits where two or three or four selected contractors are asked to tender, because there may be things upon which they will tender with the making of which they are not familiar, and therefore they must make their price fairly high in order to take care of the risks involved in the contract. I think it is only reasonable that something along the line of my suggestion should be inserted in the contract.


James Earl Lawson: Arising out of that question, I have been waiting for an opportunity to ask one which is puzzling me. The modifying words throughout this section 7 seems to be "to which this section applies."


Ian Alistair Mackenzie: Yes.


James Earl Lawson: "A contract to which this section applies." Where is there anything to indicate to which this section does apply?


Ian Alistair Mackenzie: In subsection 9, I think.


James Earl Lawson: Of this same section?


Ian Alistair Mackenzie: Yes. It is on page 6:
For the purpose of this section the word "contract" shall include contracts entered into under the authority of this part and subcontracts in connection therewith, but shall not include (a) contracts awarded as a result of competitive tender or subcontracts in connection therewith, and (b) contracts or subcontracts to the extent that such contracts or subcontracts are performed outside of Canada.
.Mr. LAWSON: "Contracts awarded as the result of competitive tender." That could be a contract then from a selected list?


Ian Alistair Mackenzie: Yes.


James Earl Lawson: Likewise it could be a contract let after public advertisement?


Ian Alistair Mackenzie: Yes.


James Earl Lawson: I am afraid I gathered a wrong impression. I thought you were providing for no limitation of profit on contracts obtained as a result of public advertisement, and were applying the limitation where the contractor should be from a selected list.


Ian Alistair Mackenzie: No, the principle of competitive bidding is presumed to exist both wThere you have public advertisement for tenders from everyone and where tenders are invited from a selected list. That was the point raised by the hon. member for St. Paul's (Mr. Ross). The only point of controversy that I see in the situation would be where you have say only two tenders and where there might be, as suggested by someone, I think the hon. member for Yale (Mr. Stirling), the possibility of collusion. It occurs to me that it might be practicable to safeguard that by insisting on tenders from four or five or possibly more tenderers.


Thomas Clement (Tommy) Douglas: Last Friday the minister pointed out that contracts subject to tender had been let sixty per cent by public advertisement and only forty per cent from a selected list. Speaking thereto later, my colleague pointed out that therefore this five per cent profit limitation will apply only to the sixty per cent.


Ian Alistair Mackenzie: No, that is not correct.


Thomas Clement (Tommy) Douglas: And will not apply to the forty per cent.


Ian Alistair Mackenzie: It will apply to the sixty per cent and the forty per cent; the public tender list plus the selected list. I was making a comparison between the percentages let by public tender and from a selected list. It would correspond largely with those outside the sixty per cent and outside the forty per cent, that were let by the department for the last two years, and reviewed by the interdepartmental committee, at a unit price or upset price or mostly on a cost plus basis.


Thomas Clement (Tommy) Douglas: What percentage of the contracts let by the Department of National Defence, say in the last year, would come under this profits tax?


Ian Alistair Mackenzie: I cannot give the percentage at the moment, but I can give the total value. The total value of contracts since the interdepartmental committee has functioned is about $9,700,000. I cannot for the moment compare it by way of percentage with the totals in the other two

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categories which I included the other day in the sixty per cent and forty per cent respectively. Is that clear?


Thomas Clement (Tommy) Douglas: Yes.


Mr. KINLEY:: Does the minister not think . that these profit clauses will operate to the advantage of an incorporated company as against the private individual in business? Paragraph (b) says:
The net profit of a person in respect of a contract shall be the aggregate amount received by such person under the contract, less such actual expenses and disbursements, allowances for depreciation and overhead charges as shall be determined by the board to be properly chargeable to the contract, but no interest on borrowed capital shall be deducted.
In the case of an incorporated company there is a board of directors whose members are entitled to salaries, and the man who takes the contract, probably the president of the company, is entitled to his salary, whereas the individual in business who takes a contract,
. if he is not actually engaged in the work, it seems to me would not be entitled to salary; so that these clauses are all to the advantage of the incorporated company as against the private individual in business. Take, for example, shipbuilders in Nova Scotia; some are companies, some are private individuals. In the case of a company there is the president, who would draw his salary. How about a private individual who builds a ship? All he is entitled to is five per cent profit and nothing more, and he must live in the meantime. The income tax law recognizes the salary of the officers as part of the company's expenses, but if you are a private individual in business you just take your profits. If there is no profit and you take anything out of your business, it is regarded as a reduction in capital. The man we should be careful to protect in this country is the man who takes his responsibility, who is not looking for the privilege of limited liability. I suggest that this section should be looked into very carefully with a view to seeing that the private individual in business is protected, because he is becoming much too rare. AVe need him to-day; there should be more personal responsibility in business.


Norman Alexander McLarty: If the hon. member will refer to section 2, subsection (eXt the definition of " person," he will see that-
"Person" includes any body corporate and politic and any association or other body, and the heirs, executors, administrators and curators or other legal representatives of such person, according to the law of that part of Canada to which the context extends.


John James Kinley: That is the general law.


Norman Alexander McLarty: I was dealing with the
specific definition of "person," because the hon. member was drawing a distinction between a corporate body and an individual, and I understand his impression to be that in some way we are prejudicing the position of an individual or partnership as compared with an incorporated body. He said that the incorporated body might pay large salaries. One thing that is essential in this bill and important that the committee should understand is that only the actual capital employed is considered. I do not care what the company is or whether its capital is authorized or paid up, the limitation prescribed in this bill is that they shall not receive in the way of profit more than five per cent on the capital actually engaged in the performance of the contract. The capital of a company might be a million dollars or two million dollars, its authorized capital might be still more, but the purpose and intent of this bill is that the capital on which the profit shall be calculated is not what you might call watered stock; the capital to which the five per cent shall apply is definitely limited to the amount actually used in the performance of the contract. For that reason I suggest that the question as to the salary paid by a particular company is not important.


John James Kinley: I do not want to discuss
corporate law with a legal gentleman, but I think it is admitted that a company is a "person" under the law. A private individual in business is also a person. But he has not the privilege of limited liability as has an incorporated company. He is the man that should be encouraged in business, the man who accepts his responsibilities. The hon. gentleman knows that the profit on a contract is what remains over and above the expenses. With a private individual there is no such expense as salary of the president or directors.


Norman Alexander McLarty: I must correct my hon.
friend. Under this act the five per cent is not a profit based on the contract price. It is five per cent on the capital employed in carrying out the contract.


Henry Herbert Stevens: After deducting all
charges.


Norman Alexander McLarty: After deducting certain charges, of course; but it is not a five per cent profit based on the amount of the contract. It is on the capital employed


John James Kinley: What I want to convey
to the hon. gentleman is this, and it is set

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out in connection with the income tax. When the president of a company puts in his income tax return, as an industrialist, he states the salary he receives from that company. Then, if he has received any dividend from the company, that goes into the income tax also. But if I am a private individual in business I must pay income tax on my profit; and if there is no profit the money I take out of the business in order to live is considered a reduction of capital.


Norman Alexander McLarty: I do not want to be in any way unfair to my hon. friend, but I would point out that in relation to this section the salary a particular company pays would have little bearing upon the amount of the tax under section 7. I do not want to embarrass my hon. friend; I only want to try to make it clear.
Mr. KINLEl :	I am not embarrassed at
all, but I think I know something about companies. This act says:
The net profit of a person in respect of a contract shall be the aggregate amount received by such person under the contract, less such actual expenses and disbursements, allowances for depreciation and overhead charges as shall be determined by the board-
I say the set-up as between an incorporated company and a private individual in business is altogether different. This will work to the advantage of the incorporated company, and I believe the private individual should be protected in the framing of these sections.


William Alexander Fraser: In view of the fact that we are discussing section 7, since I am not an experienced financier but only a dirt farmer from up country I must admit that I am a little mystified by paragraph (b) of subsection 3 of section 7, which concludes with these words: "but no interest on borrowed capital shall be deducted." I think the committee is entitled to have this point cleared up, and perhaps what I have in mind can be best illustrated if I do as some other hon. members have done and endeavour to employ some picture language.
For the sake of argument we will say we have an incorporated company engaged in the agricultural implement business, with $5,000,000 in plant and $2,000,000 in working capital, regardless of whether it is supplied by an issue of common stock or a bond issue; it is capital engaged, fixed and otherwise, in the performance of a commercial business. This company decides, either as a result of being approached by the Department of National Defence or as a result of submitting tenders, that it will build a million dollars' worth of tractors for the government. They set aside,

we will say for the sake of argument, $200,000 of their fixed assets in plant and employ those fixed assets in the production of a million dollars' worth of tractors. But, continuing the illustration, they find that at this particulal time of year they are using their capital to carry stocks of agricultural implements and credit, and they find it neeessary to go to the bank and borrow half a million dollars with which to purchase the supplies necessary for the production of a million dollars' worth of tanks.
I have had some experience with banks, and this company, in order to borrow that money, has to hypothecate its total assets, fixed and movable and its accounts receivable, with the family heirlooms thrown in. The banks require that, as was said a few moments ago in another connection, because they clearly realize that the human element enters into all operations; so the banks fortify themselves against fire losses, against the death of key employees and against all other contingencies that may arise in the ramifications of commercial business. At any rate, this company goes to the bank and borrows half a million dollars on the usual hypothecation, and using the credit of the company, to prosecute the production of a million dollars' worth of tanks for the Department of National Defence. Contrary to the impression suggested the other day on behalf of some hon. members of the house, they do this patriotically, believing it their duty to get into the munitions game and produce this equipment as part of the defence system of Canada and the British empire, as my hon. friend from Vancouver-Burrard (Mr. McGeer) said this afternoon.
The bank says, "All right. We will lend you half a million dollars in addition to the working capital you are using in your commercial business. Our rate is six per cent." I should like to know from the minister, or anybody else who is in the know, if this company is to be penalized one per cent for their patriotic desire to do business with the government; because this paragraph distinctly says that no interest on borrowed capital shall be deducted. The company borrows half a million dollars, and on that money, if the capital is employed for twelve months, interest is paid at the rate of six per cent compounded monthly. At the end of the year, after using that capital borrowed on the credit of our company, we find ourselves in the position of having to lose one per cent compounded monthly, which we charge to the loss side of our profit and loss account.


John James Kinley: That only means you cannot figure it in twice.

Defence Purchasing Board


William Alexander Fraser: You cannot deduct it.


John James Kinley: I think it is capital employed.


William Alexander Fraser: But it is borrowed capital employed.


John James Kinley: So you cannot figure it twice.


William Alexander Fraser: I am not figuring it twice. My hon. friend and the Postmaster General have tried to clarify this section, and I am doing my humble best to do the same thing. In addition to the capital employed in the manufacture of agricultural implements by this firm, to carry its credit, pay its wages and continue its operations, they have set aside $200,000 of their fixed assets, on which the government of Canada allow them five per cent or $10,000 a year. But in order to prosecute the production of a million dollars' worth of tanks, in addition to their binders, reapers, mowers and plows, the company has to go to the chartered banks and borrow money-and I understand that this is what the banks are for-in order to carry on this government contract. But, as I said a moment ago, the company pays six per cent compounded monthly, and at the end of the year it is told-


John James Kinley: How much do you pay?


William Alexander Fraser: I pay six per cent on my borrowed capital which I am using to carry out this contract; that is, six per cent compounded monthly.


An hon. MEMBER:: Too much.


William Alexander Fraser: If I borrow it in Regina I have to pay seven per cent compounded monthly, but I am talking about Ontario or Quebec, where I pay six per cent. Then when I submit my accounts to the accounting branch of the Department of National Defence at the end of the year they pay me five per cent. So for my patriotic duty I forfeit one per cent on the borrowed capital, compounded monthly, for the pleasure of building these tanks. If I am right, then all I suggest is that paragraph (b) should be clarified-at least for one member of the committee.


Mr. ROBICHAUD:: I think there is something to be said for the point raised by the hon. member for Queens-Lunenburg (Mr. Kinley). I cannot agree with the interpretation of the section given by the'Postmaster General (Mr. McLarty). Let me give an illustration. We will suppose that I own a plant, and that the capital invested in the 71492-125J
performance of a contract amounts to a million dollars. We will suppose I make $100,000 profit. If I am an individual I have to turn back to the government, in taxes, $50,000, because I am allowed only the five per cent maximum as profits. But if a company, then that $100,000 is the gross profit, not the net profit. Out of that $100,000 they are allowed to pay perhaps $50,000 as directors' fees. Therefore the net profit would be considered as $50,000, and they would be permitted to retain the $100,000 they make. On the other hand, in the case of the individual the $50,000 would be taken away, because he had not divided it in fees and in other ways.


Ian Alistair Mackenzie: With
reference to the point raised by the hon. member for Northumberland (Mr. Fraser), may I say that we appreciate and welcome suggestions and criticisms. But the viewpoint that was adopted in regard to the particular provision that we should not make any deduction for interest on borrowed capital was as follows:	The provision is not unfair
inasmuch as moneys raised by the corporation, through the issue of its bonds, will doubtless have been invested in plant equipment, machinery, and so on, and as such, such capital is owned by the company and, accordingly, is properly included in the total of capital employed by the corporation in performing the contract. In short, the corporation will be entitled to receive profits up to five per cent on the physical capital which, though owned by the company, is in fact the security against which bonds were issued. In view, then, of the fact that this capital may be included in the base upon which five per cent may be allowed, it follows that no allowance should be made elsewhere for interest paid on funds borrowed from third parties. That was the viewpoint which led to the insertion of this clause.


William Alexander Fraser: I appreciate very much
the explanation given by the minister with respect to that particular clause, and I accept it as being absolutely correct, so far as the details of the explanation the hon. gentleman has given are concerned. His explanation I submit covers only money borrowed on a bond issue invested in physical, fixed assets, or working capital. But I wish to point out again that the money mentioned in and covered by the explanation of the minister may be employed in the commercial end of the business, or in some other end of it. And they set aside, may I repeat, for the prosecution of the contract S200,000 of the fixed assets of the company covered by the very bond
19S8
Defence Purchasing Board

issue mentioned by the minister, on which they are paid five per cent and on. which they do not and are not rightly permitted to deduct the interest charged on the bond issue. I concur in that, and agree with it. But I go a step farther. I would suggest that at least fifty per cent of the industrial companies in Canada in the position I have mentioned would have to resort to bank credit to prosecute their business. The point I am trying to bring out is that the company, in addition to the $200,000 covered by the explanation of the minister, find that they have to go to the bank and borrow a half a million dollars in order to buy material, pay labour, and pay for fuel, overhead and so on, to manufacture tanks, guns, or whatever it may be, for the Department of National Defence. They pay on that half million dollars five per cent compounded monthly. If it is five per cent compounded twelve times a year it figures out to about five and three-eighths per cent at the end of the year. So if they pay the banks the exact rate of interest as covered and limited by the bill they still contribute three-eighths of one per cent, plus the operation of their business, to the provision of munitions for the Dominion of Canada.
I submit if my interpretation is correct that the Department of National Defence is defeating the purpose of the bill, because you cannot get people, in my humble opinion, to be sufficiently philanthropic, with the interests of their shareholders foremost in mind, to lose money simply to have the opportunity of building tanks or munitions of war. I submit with due respect, and I hope with a clear understanding and proper interpretation of the note the minister has read, that he has not yet answered my point.


James Earl Lawson: If the minister has taken
due note of the hon. member's suggestion-


Ian Alistair Mackenzie: I have.


James Earl Lawson: -I presume he will give consideration to it. I should like to come back to what I was speaking about some time ago. After giving serious consideration to section 7 it does seem to me, with respect to the limitation of profits, that in the final analysis it will apply only to contracts under B5.000. Now, let me see if I can make myself rlear.


Ian Alistair Mackenzie: Over.


James Earl Lawson: Over. In section 2 of the bill we say that a contract shall mean, among other things, any contract which
[Mr. Fraser. J
involves an expenditure by the department of a sum in excess of $5,000. In other words, it is not a contract under this bill at all, according to that, unless it exceeds $5,000. Let us start with that. In subsection 4, of section 4 I read that in respect of all contracts the board shall, wherever practicable, invite tenders either by means of advertisements in the public press or otherwise. So now in respect of all contracts in excess of $5,000, unless there is some very special reason, the board will invite tenders. Now I come to section 7, and I find that it applies to "those contracts to which this section applies." And then when I go to subsection 9 I find that we eliminate all the contracts which have been awarded as a result of competitive tender. What have we got left?


Ian Alistair Mackenzie: Just
those where tenders are not practicable, over $5,000.	' '


James Earl Lawson: All you have left, then, are those tenders or contracts over $5,000 in respect of which tenders have not been called.


Ian Alistair Mackenzie: Yes.


James Earl Lawson: Let us go back to subsection 4, where it is stated that in respect of all contracts the board shall, wherever practicable, invite tenders. Surely then this whole bill, so far as the limitation of profits in respect of defence contracts is concerned, will apply to only a very few contracts, and in very rare cases.


Ian Alistair Mackenzie: Where
tenders are not practicable.


James Earl Lawson: Yes, where tenders are not called for.


Ian Alistair Mackenzie: Not
practicable.


James Earl Lawson: You might think, after hearing the minister the other day, that we were really doing something" big.


Charles Gavan Power: You never understood him, right from the start. That has been your trouble.


Ian Alistair Mackenzie: It was $10,000,000 in the last two years.


James Earl Lawson: Without tenders?


Ian Alistair Mackenzie: I shall have the percentages worked out to-morrow.


James Earl Lawson: Without tenders?


Ian Alistair Mackenzie: Reviewed by the interdepartmental committee in the last two years.

Defence Purchasing Board


James Earl Lawson: In view of the acrimonious debates we have had this session in connection with contracts awarded without tender, I was rather hopeful that such contracts would be a great deal less in future years.


Ian Alistair Mackenzie: The
ingenuity of the point raised by my hon. friend does not alter in the slightest the explanation that I gave. First of all. there are two kinds of competitive tenders. This applies only where competitive tenders are not possible, either by public advertising or from selected lists. The board would be compelled to deal with the matter when they ruled that tenders were not practicable. This could be computed from a comparison between the amount of contracts awarded in the last two years through the interdepartmental committee and the total amount of contracts awarded by public tender or from selected lists.


James Earl Lawson: If we are agreed on that, then there is a great deal in the point raised by the hon. member for Queens-Lunenburg (Mr. Kinley). Let me give a concrete illustration. If I may say so, I think the Postmaster General (Mr. McLarty) was wrong in his interpretation. Let us take a corporation in connection with which the board, in pursuance of the powers conferred upon it by section 7, has fixed the actual capital used at $1,000,000. Let us assume the whole plant is being used to carry out a munitions contract. Let us assume that in the ordinary course of that business the general manager is paid $50,000 a year by the corporation, and the assistant general manager $25 000 a year by the corporation. That $50,000 and $25,000 and the other executive salaries enter into the cost of production.


Norman Alexander McLarty: My hon. friend assumes that the amount of capital to be employed is fixed at $1,000,000. The amount of profit or the amount of payment in connection with the contract is definitely fixed by his first assumption.


James Earl Lawson: No.


Norman Alexander McLarty: The capital employed.


Henry Herbert Stevens: My hon. friend is confusing law and accountancy.


James Earl Lawson: If the Postmaster General will just follow me for a minute, let us assume a corporation gets a munitions contract for $1,200,000. Let us forget all about capital for the time being. This contract is to make certain munitions and the whole plant is being used.


Norman Alexander McLarty: That contract is of course not the result of a tender?


James Earl Lawson: If it were the result of a tender this legislation would not apply. We are dealing with cases where there are no tenders. They have a contract for SI,200,000. They go ahead with the contract, and when they finish, the government auditor comes along, or some auditor under the board, and tells them they have made more than five per cent on the amount of the capital invested by the company. They say they have not, and they ask the board to tell them how much capital there is. The board looks into it and tells them the capital used is $1,000,000. The corporation then asks what it cost them to make the goods. That is the first thing that must be determined before we can get net profit, gross profit or anything else. Executive salaries enter into the cost. If the corporation shows costs of $1,150,000, including $100,000 of executive salaries, they would be subject to no penalties under the legislation because all the profit left would be a net profit of only $50,000 on a $1,200,000 contract. But if that contract had been let to an indivdual, he would not be permitted to pay himself an executive salary and count it in the determination of the cost. My hon. friend is right when he says there is a distinct handicap placed upon an individual manufacturer, while the corporation is favoured.


Ian Alistair Mackenzie: Are there any further suggestions to be offered? If not, it was my intention to let this section stand for further consideration and proceed with the non-contentious sections.


Thomas Clement (Tommy) Douglas: I think the general feeling throughout the country, judging by the press reports, especially when the minister made his announcement last Friday, was that this legislation was to apply to all contracts except those let by public tender. We now find that it is not concerned with contracts which are let from selected lists, as there is considered to be an element of competition there. I think that is debatable. For instance, two contractors might be asked to submit tenders. Quite apart from the use of the word " collusion," they might be following some trade practice when they submitted figures which were very close together. They might have agreements as to contracts whereby one would take one contract and the other another. This could be done without doing anything of a criminal nature. The company given the contract might make a very substantial profit, but it would not come under the five per cent profit tax imposed
Defence Purchasing Board

by this bill. If the minister is going to let the section stand I would ask him to consider seriously taking out paragraph (a) in subsection 9 of section 7, which reads:
Contracts awarded as a result of competitive tender or subcontracts in connection therewith.


Ian Alistair Mackenzie: I think you will find a section in the bill under which the board is authorized to keep complete lists of those available for various contracts.


Thomas Clement (Tommy) Douglas: I ask the minister to consider taking out that paragraph of that subsection and adding a clause which would make this profits tax apply, not only to contracts given without tender but to contracts given from selected lists.


Grote Stirling: I wanted to make a remark with regard to subsection 4, which contains a most unusual reference to the income tax division. I should like to know if there is any other such reference to the sacred secrets of the income tax department in any other phase of our public or private life? In the old country they have had more experience in connection with income tax, and they consider it one of the most dreadful things imaginable to suggest releasing any information contained in income tax returns.


Ian Alistair Mackenzie: I have never seen it in any other legislation, but it is just another drastic provision in this legislation to provide for the getting of complete information to ensure that the provisions respecting taxation will be enforced.


Douglas Gooderham Ross: The board might request the officers of the income tax branch to furnish the amount of capital and so on.


Ian Alistair Mackenzie: That will be considered.
Section 7 stands.
On section 8, paragraph (a)-Inquiry as to requirements.


John Ritchie MacNicol: Does this not limit the minisier's activities?


Ian Alistair Mackenzie: I hope so.


John Ritchie MacNicol: Does it not almost eliminate them?


Ian Alistair Mackenzie: It does not curtail the authority or responsibility of the minister in respect to following up contracts, or in the actual awarding of them.


[Stage Direction]
Paragraph agreed to.
Paragraph (b) agreed to.

On section 8, paragraph (c)-Surveying industrial plants.
John Ritchie MacNicol: Does this empower the board to send out someone to survey a plant as the department did?


Ian Alistair Mackenzie: That
work is done very largely now.


John Ritchie MacNicol: Because if it is, the
surveys may extend to Jericho.


[Stage Direction]
Paragraph agreed to.
Paragraphs (d) to (h) inclusive agreed to.
On section 8, paragraph (i)-General.
Grote Stirling: Is the minister going to consider inserting here a clause to cover the board's appealing to the department to furnish technical officers? The same question arose with regard to section 6, which stood.


Ian Alistair Mackenzie: My hon. friend raised that point earlier in the evening, and we allowed section 6 to stand.


Grote Stirling: Yes, and the same suggestion was made with reference to section 8, which lays down what the board can do in the carrying out of its powers. I think instructions should be given to the board for the carrying out of the inspection of the contract.


Ian Alistair Mackenzie: That is, in addition to recasting section 6, have a new paragraph inserted in section 8?


Grote Stirling: That is worth considering, I think.


Norman Alexander McLarty: Would not paragraph (i) cover it if you reworded section 6 along the lines suggested?


Grote Stirling: I leave it to the minister, but I should have thought it would be a good thing to say in section 8 that the board shall have the duty of carrying out the inspection and can seek the assistance of technical officers in doing so.


Ian Alistair Mackenzie: We will consider that, and if necessary reopen the section.
Paragraph (i) agreed to.


[Stage Direction]
Section agreed to.
Section 9 agreed to.
On section 10-Appointment or transfer of
civil servants.
John Ritchie MacNicol: With reference to subsection 2, which refers to "a civil servant who, at the time of his appointment," does that mean a civil servant who has been transferred to the board from some other department?


Ian Alistair Mackenzie: Yes.

Defence Purchasing Board


John Ritchie MacNicol: How are all the other employees of the board to be selected?


Ian Alistair Mackenzie: There is one clause dealing with the technical officers.


John Ritchie MacNicol: I mean the large staff of accountants, investigators, and so forth.


Ian Alistair Mackenzie: Except
for the technical officers, they will be seconded from the department or transferred from other departments, or, I presume, appointed by the civil service commission.


[Stage Direction]
Section agreed to.
On section 11 - Appointment technical officers.
John Charles Landeryou: What technical officers would be employed by the board? Would not the board have the advantage of having available any of the officers of the department?


Ian Alistair Mackenzie: Oh,
yes; and those officers with experience under the director of contracts would, I presume, be very valuable under the supervision of the board, but it might be necessary for the board on occasion to engage temporarily a technical officer outside. They might enter into a contract and suddenly need advice from a professional man, a lawyer or an accountant. and this section gives them the necessary authority.


John Charles Landeryou: It was the technical
men I was more particularly interested in.


Ian Alistair Mackenzie: This is
for exactly the same purpose.


[Stage Direction]
Section agreed to.
Sections 12 to 16 inclusive agreed to.
On section 17-Governor in council may borrow for capital expenditures.
John Charles Landeryou: Is the minister himself satisfied with the policy that is to be pursued of raising money for purposes of national defence as indicated by this clause? Is he in favour of this method?


Ian Alistair Mackenzie: I must
be.


Henry Herbert Stevens: This is,, of course, a very
important clause, and involves a radical departure from the usual procedure. I am not quite settled in my own mind as to whether it is a wise clause. The general idea of amortizing expenditures for defence may be novel and attractive and interesting from the point of view of inducing those who are opposed to this class of expenditure to swallow the pill a little less painfully. But when it comes down to real administration I have
very grave doubts of its value. Surely we ought to keep away from a statutory provision by which special borrowing can be done for one class of government activities. I do not like it at all. The first thing we know we shall have so many statutes-we have too many now-dealing with similar things affecting different branches of government that the result will be chaos. I sometimes think we ought to have a complete revision of all our statutes, eliminating a great many, and codifying the others. I do not want to block the passing of this legislation, but I definitely question the wisdom, from an administrative and legislative standpoint, of this provision.


Charles Grant MacNeil: Will the minister explain
how this section will operate and how the appropriations will be presented to parliament?


Ian Alistair Mackenzie: Section
17 empowers the government to borrow money up to the amount designated as chargeable to capital account in the annual appropriations of the department. It will be recalled that the estimates recently tabled provided under national defence for ordinary expenditures of 834,000,000 odd and for capital expenditure of $29,000,000 odd.
The present section further provides for borrowing power during the current year up to this limited amount, something just over $29,000,000. Subsection 2 of section 17 makes formal provision for making the principal raised by way of loan, and the interest charged thereon, a charge on the consolidated revenue fund.
Section 18, provides for the amortization of the amount borrowed for expenditure on defence. It is provided that the capital sum shall be repaid in ten equal annual instalments out of appropriations provided by parliament for the department, and that the interest payable shall be at the rate of three per cent. There is also a formal provision that the sums required to be paid shall be paid at such times and in such proportions as the treasury board may from time to time direct.
In regard to the principle followed in separating the items in the defence estimates to be financed by capital expenditure from those to be financed in the ordinary way, the principle is based largely on the question of durable value. The amounts required for the replacement of current supplies belong largely to ordinary account. Fortifications, guns, or something else to be acquired whose lifetime would be from ten to twenty years would be financed from capital expenditure, repayable over a period of ten years.
Defence Purchasing Board


John Charles Landeryou: There is provision for retirement of the expenditure, provision for a sinking fund. I understood the minister to say that this principle of repayment within ten years of the money we have borrowed would have to be set aside in the event of war, and drastic financial provisions would have to be made overnight. Just what drastic provisions would be substituted for this?


Ian Alistair Mackenzie: That, of course, will be a matter for the administration which is in charge when the emergency arises. There is no question that if a national emergency of any magnitude should arise, any government would be confronted with the necessity of providing large sums in x short space of time.
. Mr. ROSS (St. Paul's): Why is it that this principle of amortizing over a period of ten years the amount to be borrowed is not followed in connection with public works or other expenditures? Why should we depart in this particular case from what has been a recognized principle? I do not see any object in doing it, because it is only taking money from one pocket and putting it into another. It may make the expenditure for the year a little smaller, but the money is to be spent just the same as it would be on a public building.


Thomas Clement (Tommy) Douglas: It seems an
unusual procedure that one department should enter into this type of arrangement. It appears to me the procedure to be followed should be that the Minister of Finance would pay the money out of the consolidated revenue fund and, if required, float such bonds and loans as were necessary to repay it. It is unusual to tag what is really a financial bill on the end of a defence purchasing bill. Has the minister any reason for following that procedure? Is it customary?


Ian Alistair Mackenzie: I believe this is the first time we have done it in Canada.


Thomas Clement (Tommy) Douglas: Was there
any particular reason for doing it? I was wondering why it was done. I am not protesting, because I do not understand the minister's reason for doing it.


John Charles Landeryou: Could the minister explain the purpose of having this provision in the bill?


Ian Alistair Mackenzie: Considering the lateness of the hour I shall take due note of these profound questions and answer them when the committee sits again.
Section 17 stands.

Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Friday, March 17, 1939