Mr. T. L. CHURCH (Broadview):

Has the minister any statement to make to-day on the beef situation and the collapse of ceilings in Toronto? Surely the government has had time to make up a policy. This is a very serious matter and I should like to have a reply.

Hon. J. L. ILSLEY (Minister of Finance):

If the hon. member is directing his question to me-he did not make himself clear-I have no statement to make to-day.

Mr. CHURCH:

It is like the housing situation, you have it in cold storage.

Mr. MacNICOL:

When the house rose at

6 o'clock yesterday I was about to ask one or two questions, and I will now put them briefly. I believe it was the member for Temiscouata (Mr. Pouliot) who first brought up the question of the auditor general's report, and he was supported by the leader of the opposition and myself. I want to ask two or three questions in reference to the item that we are now discussing, amounting to $196,000 having to do with the auditing and checking of war accounts. I should like to have a break-down of the item when the minister replies and at the same time the amount of the similar item for 1941-42, because we have not yet received the auditor general's statement for 1941-42. Comparing this amount with the amount for 1940-41 I notice that in 1940-41 the similar item was $52,202.61. Therefore the present item is $143,707.39 more than the amount for 1940-41. Of course, it is natural to expect that it should be larger because the work of the auditor general's department has vastly increased over the last two years. In the auditor general's report of 1941 I notice at page 430 a statement from the auditor general, preceding his report on the Department of Agriculture, in which he writes:

These accounts have been examined and audited under my direction, in accordance with the provisions of the Consolidated Revenue and Audit Act, and subject to the observations in this report, I certify that in my opinion they are correct.

At page 435, referring to the travelling expenses of P. Dupuy, $1,693.20, these words follow: "Advances not accounted for, $465.70." I have been wondering how the auditor general can certify that the amount is correct if he has not the vouchers for this amount, and how many more amounts there are for which vouchers have not been presented. I often wonder if it is not possible to apply to government business the methods that county and township councils use in the conduct of their business. I am not speaking politically, because all governments have been the same so far as checking and inquiring into public accounts is concerned. But the

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ordinary township council could never conduct its affairs if its business were done the way we conduct ours. I know township councils that not only have no debt but have substantial amounts in the bank and large assets. They have to conduct their affairs in a business manner. I often look at these public accounts rather hopelessly. They are so hard to dig into, one reason being that they are always a year late. For instance, we have not yet the accounts for 1941-42, and yet the heading of this item we are now considering is, war appropriation 1942-43. Not much wonder the hon. member for Temis-couata has so persistently brought up the question of the public accounts; he deserves credit for it. The same is true of the leader of the opposition; he has been a very good second-perhaps I should say first, but I know that the hon. member for Temiscouata brought the matter up first. The leader of the opposition probably went him one better; at any rate between them they deserve credit.

I invite the minister to give a break-down of this amount of $196,000 and to tell us why the amount referred to on page 435 of the auditor general's report was paid without the vouchers being submitted, at any rate without their having been submitted in time. Let me give an example of something which I think the auditor general should refer to very strongly in a recommendation to the government as to how business should be conducted. I am not blaming the government; I am not saying this by way of criticism of the minister's department. On page 438-39 there are complete details of a transaction which took place a couple of years ago-I believe it was referred to on a previous occasion by the leader of the opposition, and I am not sure that I did not refer to it myself. I refer to the purchase by the government of 5,365 cases of lobsters. If one examines the figures in the auditor general's statement pertaining to this transaction he cannot help being amazed. If this is an example of how government business is conducted, then something should be done about it. I have no complaint to make as to what the fishermen got for their lobsters; if there is one class of people who deserve good returns for their hard and dangerous work it is the fishermen. I hope they really got more than they are entitled to, if anything-it would suit me just as well; but I am sure they did not. This transaction concerned 5,365 cases of lobsters. I believe the cases contain 48 one-pound tins. The total

cost, including the lobsters and all expenses associated with their disposal, was $168,379.18, made up as follows:

Purchase of lobsters $ 88,043 83

Governmental salaries and

wages

9,794 38Travelling expenses

3,782 42Advertising

50,244 73Sundries

16,513 82

I am not making any comment on those expenses, nor would I say that anyone got a cent more than he was entitled to. But the returns received by the government for the lobsters totalled $97,137.02, making a loss of $71,242.16, if my figures are correct. If this is representative of government transactions it is no wonder the country is in the financial boat that it is. I am wondering what the complete duties of the auditor general are. Should he have made a report to parliament, not only in connection with a case like this but in connection with many others, directing parliament's attention to an apparently improvident transaction?

There is another item that I checked. It has to do with a motor car used in a government department.-it does not matter which-and indicates what the country is up against. In 1935 $154.94 was spent on repairs on a small car, a Ford or a Chevrolet; then immediately the car was turned in on another, plus an additional cash payment of $488.85. Then in 1936, $44.85 was spent on that car in repairs; $116.72 in 1937; $333.07 in 1938, and $175.82 in 1939, a total for repairs in those four years of $670.46. The car was then turned in for another with an additional amount of $610.22. The bank of Montreal could not afford to carry on business in that way. I should think it is the duty of the auditor general, no matter how much time it takes, to notify parliament of all such improvident transactions. That is what an auditor does in business concerns. The auditor of the company I was associated with would advise the directors of such matters. It may not be an auditor's duty, but we had a very excellent auditor and if he found anything that he thought was not as it should be he would inquire into it and notify us. He would look into every voucher submitted to him that he thought was too high.

Is that the procedure followed by the auditor general's department? Does his staff inquire into every single voucher before they pass it? I know it takes competent men to do this, but there are competent men in the department. I look upon the minister as the

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watch-dog of the treasury, and I know that so far as he is concerned he will do his duty. Yesterday someone said something about cost-plus contracts. Personally I am wholly opposed to such contracts. There are cases in which contracts have to be let on a cost-plus basis; but I have had a great deal to do with contracting, and I can say without fear of contradiction that by far the greater proportion of contracts let on a cost-plus basis generally cost much more than they would if they were let on a regular contract bid basis.

Mr. POULIOT:

Mr. Chairman-

Mr. ILSLEY:

If the hon. member for Temiscouata will permit me, the hon. member for Davenport asked a few questions which he requested me to answer immediately. First he asked for a break-down of the sum required, $196,000. That is made up as follows:

Temporary assistance $160,000

Cost of living bonus 8,000

Stationery and equipment 10,000

Travelling expenses 18,000

The item of $160,000 for temporary assistance is made up as follows:

1 unclassified $ 1,620

1 audit accountant grade 2 3,000

1 audit accountant grade 1 1,920

27 war audit accountants 72,400

14 clerks grade 4 22,680

1 clerk grade 3 1,380

22 clerks grade 2 23,760

21 clerks grade 1 16,290

1 stenographer grade 2

1,0802 stenographers grade 1

1,5601 typist grade 1

7202 office boys

885

To this has been added for proposed additional assistance the sum of S12.705, making $160,000 in all. This amount is larger than the amount required for 1940-41 because of the expanding requirements of the war. The amount estimated for 1941-42 was $151,000. The exact amount spent is not available; the accounts are not all closed.

With regard to the item of $465.70, which appears to have been the amount of an advance to an employee or official of the government not accounted for, as I gather it, I have no knowledge of the individual transaction, but I presume that was an accountable advance made near the end of the fiscal year which would be accounted for in the next fiscal year and which therefore has to be reported in the manner in which the auditor general reported it. In reporting that transaction in that manner there would be nothing inconsistent with the general words of the auditor general's report, because he made it

subject to the qualifying words which appear in the report. It would not be possible for him to do anything more than he did with regard to checking that transaction, if the facts are as I assume them to be.

Now with regard to the lobster transaction, if the merits are to be considered that is a matter for the Minister of Fisheries; but with regard to the question, which was whether it ought not to be the duty of the auditor general to express opinions as to whether or not transactions are improvident, I can only say that the duties of the auditor general in this regard are set forth in section 60 of the Consolidated Revenue and Audit Act. The specific duties are numerous, and then at the end there are general words to this effect, that the auditor general shall call attention to every case which he considers should be brought to the notice of parliament. Whether the auditor general should project himself into the operation of departments in such a way as to pass upon the providence or improvidence of the agreements they enter into and the policies they adopt, is very questionable. Personally I have no reason for thinking that there was anything improvident about this transaction. I cannot argue the matter, except that I know in a general way that the Department of Fisheries saved the market for Canadian lobsters, at a time when the English market had disappeared, by an extensive advertising campaign. That, of course, is a matter for the Department of Fisheries. But once the government by order in council, on the recommendation of the minister, who acts on the advice of the competent officials of his department, passes an order in council adopting a certain policy, I question whether the auditor general should review that question from the point of view of whether or not it is a provident transaction. He may do so in some cases, but in this case I do not think there was anything even prima facie improvident about it.

Mr. MacNICOL:

I did not mean necessarily that there was anything wrong, but that perhaps it was not good business.

Mr. ILSLEY:

The word "improvident" is moderate, and whether or not a transaction is improvident is a matter on which people have differences of opinion. I have knowledge of transactions in which there was far greater loss than in this case, in connection with other natural products, but those transactions had to be entered into in order to serve certain situations.

I believe the last item had to do with the automobile, and I think that is a case in regard to which a person should say nothing

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without having special knowledge. It is an individual transaction, and naturally I cannot answer it at all. I admit that it looks as though there were a great many repairs to that car, but I am convinced that the manner in which the government handle the purchase and sale of automobiles, the turning in of second-hand cars and the purchase of new ones, is pretty efficient. There is a committee of civil servants who keep very close watch and very tight rein on these automobile transactions.

Mr. MICHAUD:

Lest a wrong impression should go abroad with regard to the transaction referred to by the hon. member for Davenport, and mentioned in the auditor general's report, with respect to the steps taken to aid the lobster fishermen of the Atlantic coast, I think it well that I should bring to the attention of the committee what I believe was placed on record last year also.

The venture of 1940 into tlie lobster purchase and disposal operations was not intended to be an ordinary business transaction with a view to making a profit, or with a view even to breaking even. The committee will recall that shortly after the declaration of war the British government prohibited the importation of canned or tinned lobster into Great Britain, by making the declaration that canned lobster was classed among luxuries the importation of which was forbidden.

Up to the autumn of 1940 Great Britain took about 85 per cent of our annual packs of canned lobster. Over night this market, which had been built up over a hundred years, and which had well taken care of the output of the Canadian canned lobster industry, was wiped out. A large portion of our population had depended on that industry for its livelihood, and as a result of that stoppage there was a real panic among lobster fishermen. They appealed to the government, pointing out that 85 per cent of their market had disappeared, and emphasizing the fact that there was no possibility or reasonable expectation that the Canadian market could absorb the high percentage which had heretofore gone to the British market.

The department availed itself of the best brains possible. We consulted those who were interested in the business and it was decided that rather than abandon the industry the government would encourage lobster fishermen and packers by assuring them that the government would make it its duty to find a market for the spring pack of 1941.

Mr. MacNICOL:

I think the government

was right in doing that, too.

Mr. MICHAUD:

We explored the possibilities of developing the domestic market to the limit, and considered an advertising campaign the best possible method of appealing to the sentiment of Canadian consumers. It was felt that at the same time we would educate the Canadian housewife and consumer concerning the quality of Canadian canned lobster. The sum of 150,000 was spent as a contribution to help develop the home market for this commodity. It was found however that the home market could not possibly absorb the whole pack, with the result that we had to develop a market in the United States which heretofore had been held by the producers of Russian and Japanese crab meats. We had to displace those products, or fight them in the United States market; and I must say that through the cooperation of good Canadian citizens who were in the business, and who established relations with large chain store distributors in the United States, we succeeded in establishing a market for the whole output of 1941.

This however necessitated organization. We had to convince the fishermen that they should continue to fish rather than ask for relief. We undertook to merchandise and market their output, and for that purpose had to hire help, establish an organization and the necessary machinery. We established an inspection board, because United States buyers would not accept any of our catch unless a guarantee of inspection was given by the government.

We purchased from the fishermen lobster to the value of $88,043.83, making it a condition that the packers should pay the primary producer a reasonable price. We considered it advisable to step up the price considerably, and felt that we had carried out that principle by establishing a minimum price of 51 cents per pound for live lobster. Prices had previously ranged between 24 and 4 cents, the latter price being the maximum which in very special cases had been paid to fishermen supplying lobsters sold for canning. Before the year was over the price had risen considerably above 5 cents. We had no difficulty therefore in this respect. The price to the primary producer was doubled at the start, and before the season was over it had increased considerably. Through the difference between the amount we paid the canner and the price we received in the market, we derived a profit of about $9,000. The amounts we actually expended went for inspection, administration, machinery, labels, and a labelling machine we had to buy to label the cans with the government certificate. Those operations had to be carried on in the following year.

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The actual deficit in the whole transaction during the year was $27,000; but the inventory showed that we had to carry an over-supply of labels and a certain amount of machinery, and we had to pay rent for a warehouse. We thought it was not fair to make that charge to the producers, because this was in the nature of an experiment, something which was undertaken for the first time, and should not be charged to the primary producer or the packer, who has shown a willingness to cooperate. It was not felt that in the first year they should be asked to absorb the whole of the overhead and cost of establishing the industry. It is not altogether fair, therefore, to say that this was an improvident transaction.

Mr. MacNICOL:

Had the auditor general's report included what -the minister has said it would not have looked so bad.

Mr. MICHAUD:

It was found to be a profitable venture. We have succeeded in establishing on this continent a market for the product of a Canadian industry. For a hundred years prior to 1940 producers as well as processors never thought that was possible of accomplishment. This year it was found necessary to buy scarcely any canned lobster from the packers, because the invasion of the United States market was continued. The government continued its assistance in improving the market situation, and, as hon. members know, the whole of last year's pack was sold at a high price.

I will give some figures which will enable the committee to understand the situation. In the spring of 1941 we established a minimum price of 5j cents a pound to the fishermen for the raw material. Before the season was over last year, the price was up to 10 cents a pound, and this year the opening price is 12 cents a pound. Now they are complaining that the price is too high. We set a price for canned lobster in 1941 of $18 per forty-eight pounds net weight of lobster, and $16 for a lower grade. Last year the price went from $20 to $30, and this year the price control board has established a maximum price of $28. But already American buyers are offering more to the packers than the ceiling price, although the packing season has been open for only one month. So that at the present time fishermen are getting from 12 to 13 cents a pound for their raw material and the packers are being offered from $28 to $30 a case for lobster.

The $100,000 which the government has invested within the last two years to help create a home market and a north American market for this valuable industry has been a good investment, and it is one that will not

have to be repeated this year. I think it is the best thing that has ever been done for the lobster industry.