Mr. NORMAN JAQUES (Wetaskiwin):

On Friday last I addressed a question to the Secretary of State for External Affairs, who said he would give an answer after he had time to read Hansard. I would ask when I may expect an answer to my question.

Right Hon. L. S. ST. LAURENT (Secretary of State for External Affairs): The question is framed in language which makes assumptions of facts as to which I have not been able as yet to obtain confirmation. That is the reason no answer has yet been given.

Mr. D. KING HAZEN (Saint John-Albert):

Mr. Speaker, I should like to ask a question of the Minister of Veterans Affairs, based upon a resolution passed by the Saint John trades and labour council on April 2 last. It states:

We consider that the request made unanimously by-

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Mr. SPEAKER:

Order. The hon. member must understand that he cannot refer to a resolution in that way.

Mr. HAZEN:

I cannot very well ask my question without doing so.

Hon. LIONEL CHEVRIER (Minister of Transport):

Mr. Speaker, I rise to take part in this debate fully conscious of the serious political and economic implications that the question which the house has been debating may have upon the country.

As I indicated in a statement made earlier in debate, there have been some definite contributions. to the discussion, some constructive speeches made by hon. members; and on the other hand there have been some destructive speeches. Some speeches unfortunately have been aimed at heaping abuse not only upon the judgment of the board of transport commissioners but also against and upon the government.

In the remarks I shall make this afternoon I propose to be frank and honest about the discussion now before the house, and that for more than one reason. But before entering upon a discussion of the three points with which I should like to deal today-first, the responsibility of the governor in council; second, the: decision of the board, and, third, the decision of the government to require or direct a. thorough and complete investigation of the inequalities in freight rates-I should like to dispel some of the misconceptions which seepa to me to exist on this question.

First of all there seems to be a misconception with reference to the decision of the board. The decision of the board deals with an application for an. increase in freight rates by the railways-and that was the only matter that came before the board at that time. The board on that occasion did not deal with inequalities in the freight rate structure, the so-called discriminations which have been mentioned in this debate. But the board dealt with and was faced purely with a revenue case.

Next, it was clearly stated, and I shall refer to this later, that in the discussion by counsel for the provinces they had no intention of submitting at that time an application for the disappearance of inequalities. Their arguments and evidence were directed clearly as an objection to the application of the railways.

Dealing therefore with the first consideration I mentioned a minute ago, namely, the responsibility of the governor in council, I should like to say this. Many hon. members, and I think no one more forcibly than the hon. member for Lake Centre (Mr. Diefenbaker), have taken the position that the responsibility was not that of the board of transport commissioners, but that of the governor in council. To use the expressive words used at that time, it was said that this was not only the responsibility of the governor in council but also that of the minister, that the baby was on the doorstep of the government, and that it was up to the government to deal with it.

I have no intention even in the slightest measure of backing away from any responsibility the government may have, and in anything I shall say I will not be back-pedalling from that responsibility. But I think the house should know that there is a definition respecting the responsibility of the government and the governor in council. That is what I should like to place before hon. members at this time.

Prior to 1903 the responsibility for rate fixing and for the rate structure in this country lay squarely upon the shoulders of what was then known as the railway committee of the privy council. That committee was charged not only with that responsibility, but with all other responsibilities having to do with transportation in Canada at that time. It soon became evident, however, as hon. members will immediately realize, that that method of dealing with freight rates, freight structure and1 the like was not only desultory but ineffective. Parliament therefore decided to obtain the opinion of a recognized authority on the subject, Professor McLean, who passed away only a short time ago. '

Professor McLean proceeded to make an investigation and to report to the government. This is what he had to say with reference to the inability and the ineffectiveness of the railway committee of the privy council to deal with this subject:

That committee has been unable, owing to its organization, to grapple effectively with the

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problem presented. It has been impossible, owing to its stationary character, to deal effectively with questions pertaining to rates and preferences. A more migratory body could deal more effectively with these matters.

The defects of the railway committee as a regulator of railway transportation I would place under the following heads:

1. It has a dual function, political and administrative.

2. The lack of migratory organization renders it impossible to deal effectively with complaints.

3. The distances to be travelled by complainants render the expense too great.

4. There is lack of technical training for the work.

5. The existing organization is not sufficiently permanent.

And still quoting Doctor McLean:

In my opinion, the only way to put the matter of railway regulation on a more satisfactory footing in Canada is by entrusting it to a railway commission composed of men of technical training, who shall receive salaries adequate to attract the most efficient, and who shall have a long tenure of office.

It was following that report made by Doctor McLean to the then minister of railways and canals that parliament decided to pass the Railway Act. That act became law in 1903. It contained comprehensive provisions with respect to tariffs and tolls of the railways, and established the railway commission to administer the act.

Section 52 of the act sets out clearly the responsibility of the governor in council with reference to the matter. It states that the government shall have wide and varied powers to deal with applications of this kind. And while the discretion is vested in the governor in council in proceedings under this section, the position of the governor in council is defined as one of a judicial nature.

The intent of the legislation of 1903 was to invest the governor in council with these judicial powers by which he may, in his discretion, aid in securing and enforcing the provisions of the Railway Act, having due regard to the method of railway rate regulation by an independent commission, which was the outstanding innovation of the Railway Act of 1903, and has been preserved throughout the succeeding amendments which were made to the act down to the present time.

In other words, the powers of the governor in council are judicial in nature. These are not the only powers of the governor in council which are of a judicial nature. I do not think, and this is my own personal opinion, that it

was ever intended that the governor in council should interfere in the question of rate making or rate equality or rate discrimination. The very nature of the act indicates that that should be left to the technical and expert knowledge of the staff of the board.

Again, without in any way backing away from the responsibility of the governor in council, it w'ould not seem to be desirable, except under very extraordinary circumstances, that the governor in council should undertake to rehear or review the decisions of the board as to whether, upon the facts appearing in the evidence before it, in any particular case, the provisions of the statute with regard to rates have been complied with. That seems to me to be the proper interpretation to place upon section 52 of the act. In fact that is the history of the various cases. I believe that I am reliably informed when I say that from 1917 to date, in the cases wherein the increases were passed or ordered by the board following world war I, in no instance has the governor in council interfered to change the findings contained in the board's order.

In fact the contrary is true. In the 40 per cent case, to which I shall refer later, the decision of the board was dated September 9, 1920. It provided for an increase in rates of 40 per cent to be effective September 13, 1920; that is, four days later. An application was made to the governor in council to stay the order, but the governor in council declined to interfere with the effective date of the order. In other words, the point I am making now is that the governor in council should not substitute its judgment on a technical question demanding expert and technical knowledge and evidence for that of a board which parliament has created to do the job.

Mr. SMITH (Calgary West):

Will the minister permit a question? There was an appeal, was there not?

Mr. CHEVRIER:

I shall be glad to answer any question at the close of my remarks. I am afraid I shall not be able to make in forty minutes the remarks I have to make.

Mr. KNOWLES:

You have unlimited time.

Mr. CHEVRIER:

What I have said thus far is without prejudice to the right of the premiers of the various provinces of the dominion to make application by way of appeal for a review of the decision of the

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board. Nothing in what I have said affects that position. While the premiers have not thus far made that application, they have asked for a stay in the order. They have signified a notice of intention to appeal. When they do I can assure this house that their representations will be carefully considered. If it is thought necessary to hear them, they will be heard. In the light of what they may have to say then, as well as in the light of circumstances, a decision will be made having regard to the best interests of the country as a whole.

The next point with which I should like to deal is the decision of the board made pursuant to order 70425 of March 30, 1948, following application by the railways for a thirty per cent increase in rates. The railways applied as well for an increase of twenty, thirty and forty cents per ton on coke and coal. The application of the railways specifically excluded a long list of items which I shall not repeat but which may be summarized under three heads. The application of the railways did not include (a) rates on grain and grain products under the Crowsnest Pass agreement; Ob) rates on international traffic beyond the Canadian border; and (c) certain import and export rates on such traffic through Canadian ports.

What I should like to bring to the attention of the house is that the application for increases, instead of affecting an estimated freight revenue of $492 million for the two main railway lines in Canada affected a freight revenue of approximately $262,500,000, thus immediately eliminating nearly $230,-J00.000 of freight revenue. The application was predicated upon increased costs of operation. In other words, the board was faced with a revenue case. The railways claimed that because of higher wages, higher material costs, their revenues would be insufficient to meet their operating expenses, their fixed charges, their dividends and also the provision of adequate amounts for additions and betterments to their lines. After having listened carefully to the best expert evidence which could be brought forward, after having heard technical evidence by accountants and the like, the board of transport commissioners came to the conclusion that there was a substantial deficiency in the financial requirements of our two railways. They found that that deficiency amounted to $70,000,000 in 1947. For the

Canadian National Railways lines in Canada alone the deficiency was in the neighbourhood of $40,000,000.

Let me pursue that point just a bit further. In 1940 the operating revenues of the Canadian National Railways and the Canadian Pacific Railway put together amounted to $384,000,000 and these produced a net operating revenue of $80,500,000. In 1947, seven years later, the operating revenues of the same railroads was $693,000,000 which produced a net operating revenue of only $71,000,000. In other words, an increase in operating revenue of $300,000,000 produced a smaller net operating revenue. There in one word is the position of the railways in Canada today.

If one stops to compare the position of the Canadian National Railways alone in the year 1946 with that of the year 1939 one finds that wages have increased by 42-2 per cent; fuel by 51-4 per cent; ties by 47-3 per cent; rails by 27-4 per cent; other materials by 26-2 per cent, or an over-all increase in wages and materials of 40-1 per cent. Thus $60,000,000 more was paid for wages in 1946 than was paid in 1939 and this for the same level of employment. A total of $26,000,000 more was paid for the materials used in 1946. This comparison needs no adjustment for the man-hours performed nor for the amount of materials used.

How can anyone expect that under those circumstances the railways can meet such mounting costs without additional revenue? The comparison which I have just made is based on the year 1946, and everyone knows what increases have taken place since.

The board gave careful consideration to all the arguments that were put before it. They sat for almost fourteen months. The hearings themselves began in February of 1947 and terminated in December of the same year. Sittings were held in every province. The provinces were represented by able and outstanding counsel. Expert witnesses were called and technical evidence was put before the board. From one end of the country to the other the board listened carefully and attentively to groups, associations and individuals who desired to present their cases.

There are six commissioners on the board at the present time. The board through the chief commissioner has delivered a clear and outstanding judgment in this case. One of these commissioners is a former attorney

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general of the province of Saskatchewan. Does anyone in this house think that that man was not fully conscious of the position in which he found himself or that he did not understand the implications which this decision would have upon the province of Saskatchewan or upon the prairies or the rest of Canada?

Another commissioner is the former president of the Farmers Union of Canada. He subsequently became president of the United Farmers of Canada. He also served as a commissioner on the royal grain inquiry. Does anyone suggest for a moment that that commissioner, equally with the1 member from Saskatchewan, was not fully conscious of his duties as a commissioner and did not understand fully the impact which this judgment might have on the economy of Canada?

A third commissioner is a former member of the government of British Columbia. He delivered a separate judgment. He agreed fully with the conclusions arrived at by the chief commissioner, but he made some distinction with reference to the mountain differential. True, he referred to the inequality which existed in British Columbia so far as the mountain differential is concerned, but he agreed in substance with the conclusions and with the decisions arrived at by the rest of the board.

Still another commissioner came from the maritime provinces and represented the railway brotherhoods from that section. Four out of the six commissioners represented provinces other than the provinces of Ontario and Quebec. Surely these men were as much interested and as much concerned about the decision which they might render as any hon. member of this house could be.

The board had to assist it expert advice and expert assistants. It had two bodies from which it could seek advice. First it had the traffic department of the board of transport commissioners, composed of some twenty men, headed by a traffic officer and an assistant traffic officer, both of whom have done nothing during the whole of their lives but study freight rates and their effect in various parts of the country. Does anyone suggest for a moment that these men were not fully conscious of their position in the advice which they gave to the board?

The other body which the board had to assist it is known as the bureau of transportation economies, established in 1946 to assist the board of transport commissioners in the freight rate case now under discussion. It comprises some forty employees, seven of whom are technical men fully versed in the economics of transport, whether it be from the accounting, the financial or the statistical standpoint. So when the statement is made in this house that the board of transport commissioners are a group of incompetent men who have made a mess of their task and should be fired, I say that those who make such charges are not fully aware of the facts, nor are they doing justice to themselves. They are making statements which are entirely contrary to the facts.

May I deal briefly with the changes in the rate structure in this country following world war I. I think it will be of interest to the house, because there are some parallels which might well be drawn.

The first increase in freight rates in this country following world war I came in 1917. It was known as the 15 per cent case. It was made as a result of an application by the railways to the, board of transport commissioners following the granting of a general 15 per cent increase in the United States. The increase then granted in Canada was generally 15 per cent in the rates, with a large number of exceptions too numerous to mention.

The second increase came in 1918. It was the 25 per cent case. It followed the McAdoo award in the United States; and hon. members will please, note this, that it was made by the direction of the cabinet to the board. The increase was a general 25 per cent increase all across the board, with a number of exceptions too numerous to enumerate.

The third increase, known as the 40 per cent increase, came in 1920. It was made on application of the railway association to the board and was heard from August 10 to August 23, 1920. It provided for a general increase, of 40 per cent in eastern Canada, 35 per cent in western Canada, and 33i per cent in transcontinental rates, subject to certain exceptions.

In January 1921 there was a reduction in the rates by five per cent. In December of 1921 there was a reduction of ten per cent, and finally in 1922 the increase in the 40 per cent case was reduced to 174 per cent in

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Mr. SMITH (Calgary West):

Are these commodities moving both ways?

Mr. CHEVRIER:

No, moving from their principal sources of supply.

Mr. SMITH (Calgary West):

Take tea.

Mr. CHEVRIER:

Yes. It depends on where it originated. If it originated in Quebec and was moving to Montreal, there would be no increase; but I shall take other items which will, I think, make the point clear in a moment. Take milk. Because of the decision the increase per quart will be one-tenth of a cent moving from various sources of supply across Canada to all the points mentioned in this document. The same can be said of butter. There the increase will be one-tenth of a cent per pound, and the increase is almost the same on cheese.

I do not want to refer exclusively to items which bear out my point. Let me take one which may have a different bearing on it. Let me take a Chevrolet car, which the average man does not buy. A Chevrolet car moving east from Walkerville or Oshawa to Quebec will have to bear an increase of $7.33; to Montreal, $5.33; to Halifax, $7.86; to Toronto, $2.40; to Winnipeg, $17.48; to Regina, $23.39; to Calgary, $29.73; to Vancouver, $31.26.

I should like to place this table on record for the information of the house.

Mr. SPEAKER:

Has the minister the unanimous consent of the house?

Agreed.