Mr. H. H. McLEAN:
What I am endeavouring to show now is Canada's financial position-the position in which we stand at the present time. I am satisfied, Mr. Speaker, and I want to satisfy the House, that our financial position is not such as will permit us at the present time to undertake these great obligations. For the purpose of illustrating my point, let me endeavour to strike a trial balance. Canada started business in 1867 with a gross debt of ninety-three millions and an interest liability of $4,500,000. In 1914 our debt had grown to $544,000,000; and our present debt, I believe, to be about $2,000,000,000 in round figures. There is another matter we require to look at. We have become a borrowing country. Canada must borrow money, enormous sums of money, to carry on. We have already borrowed great amounts, but we have to borrow more. We shall have to negotiate another loan after the present one -perhaps one or two more after that.
What is our financial position? Besides the great debt of about $2,000,000,000 that we owe at the present time our various provinces owe very large sums of money. I have here a statement showing the indebtedness of all the different provinces, and without giving the details I may state that the gross amount is $264,706,000. And you must remember that some of these are short-term obligations. You must likewise bear in mind that the provinces must also go into the market to borrow money. You must further recollect that we have got to raise in Canada
the money that requires to be borrowed now, because we have been told by the late Minister of Finance that we practically cannot borrow it outside; the only amount that we could borrow in the United States would be about $75,000,000, and on the last loan of that amount we had to pay a very stiff rate of interest. We cannot assume that we can borrow in the United States more than $100,000,000, therefore, we must take a survey of the financial position of this Dominion and the financial position of the several provinces. Let me go a step further and give you a statement of the municipal indebtedness, because that is a matter that must be taken into consideration. You have to go to our great cities and to our prosperous counties in order to get money from our own people. The municipalities will have to borrow money in the future; they have to pay interest on the money they have already borrowed; and they must renew these loans, which means more money to be borrowed. It is difficult to arrive at the municipal indebtedness, but I find that taking 62 cities and towns in Canada the total bonded indebtedness amounts to $456,000,000. The population of these cities and towns amounts to 2,598,000, making an indebtedness per head of $210.17. Now if these cities and towns are fairly representative of the whole of Canada, the latter figure would yield a key 'to the situation. The total population of Canada residing in urban communities of over 500 inhabitants is 3,281,000, and therefore the total municipal indebtedness for the Dominion, based on the figures I have already given, $210.17 per head, would amount to $689,500,000. That, of course, is an estimate. If any gentleman would like to have my authority for these figures I shall be very glad to furnish it, but I am quite positive the statement is absolutely correct. Now then, let us sum up: Canada's net debt at the present time is about two billions. The debts of the provinces amount to $264,500,000; and the municipal indebtedness $689,500,000; or a total for Canada of $2,954,000,000, almost $3,000,000,000.
But in addition to this we have to look after our other liabilities. Here is a statement made by Mr. Fred. Field of the Monetary Times, in regard to our external liabilities:
British capital invested' in Canada $1,878,900,000; United States capital invested in Canada $1,272,850,000 ; estimated Canadian flotations in London upon to 1918, over $937,000,000 ; or total liabilities of about $4,089,750,000.
Then there is our indebtedness to investors in France and Holland, which he estimates at about $5,000,000. These figures, of course, it may be said, have no bearing on the matter. But they have this bearing, and a very important one, too, that financial people when lending money to a country naturally want to know what are the liabilities of that country, and they would look not only at our national, but also at our provincial and municipal debts, because they know that in order to redeem these loans we have to go to our own people to raise the money. .
In his Budget speech of June last Sir Thomas White gave us the financial condition of the Dominion. He stated:
This is a war year and it was necessary also to add the estimated expenditure which has been and will be incurred on account of demobilization. This will aggregate the large sum of $300,000,000, including $92,000,000 for war gratuity. The entire estimated expenditure, therefore, of the year on ordinary account, capital account and for demobilization will reach the large total of $620,000,000.
And he gives the items making up our revenue for the year, which he fixes at $280,000,000. Then he proceeds:
While from the statement which I have just made it will appear from our total estimated expenditure, ordinary and capital accounts, and for demobilization, will amount to $620,000,000, our estimated revenue on the present basis will reach only $280,000,000. Putting it another way, our revenue would enable us to pay only our ordinary expenditure and leave a small amount to be applied to other purposes.
Sir Thomas White also stated that:
This year the I>ominion Government mU3t find not only its ordinary expenditure of $270,000,000, for which its revenue will barely suffice (in fact I doubt if it will meet the ordinary expenditure) but also the capital expenditure of $50,000,000. In addition to that, large expenditures in government railway systems, ship building programme and expensive credits which we have been obliged to give to Great Britain and other countries. The amounts involved are exceedingly large. Outside of England, about $106,.(HM),000>
of credits have been issued, viz.: to Belgium Prance, Italy, Rou-mania and Greece.
Then he takes up the question of how we are to raise this money. He stated that our ordinary revenue is not quite sufficient to meet our ordinary expenditure. As to additional revenue from taxation, he states that the main source of our revenue is our customs, our inland revenue, our income tax and our business profits war tax. As regards our income tax, in his opinion, it cannot be made any higher. It is now as high as the United States' income tax. Then he points out the fact
that as regards income tax there is a provincial income tax in some of the provinces, a municipal income tax, and the federal income tax, and he gives as an example the province of British Columbia, where they have three sets of taxes imposed on income; and in Nova Scotia they have two. He also stated that our business profits war tax would be renewed. In view of the circumstances Sir Thomas White said he did not see any escape from our floating another loan. Out of the loan we were then making, he stated, $300,000,000 was due to the banks, and that they might agree to $72,000,000 of that amount standing over for another year, but that that would mean we would have to make another loan at least next fall.
If we are taxed to the limit now, what is left to us? Mr. R. W. Breadner, Commissioner of Taxation, and Sir Thomas White are of the opinion that practically the only further tax that can be levied is a tax upon land-and the farmers of this country may as well know the position we are coming to. Such a tax will mean that every farm will have to pay taxation according to a valuation. As pointed out by Mr. Breadner, it is a difficult tax to collect, because, it requires such a large number of people to make the valuation and collection. I have here also the statement of the Prime Minister (Sir Robert Borden) with regard to the financial condition of the country, but I shall not read it; it is in line with that which was made by the ex-Minister [DOT]of Finance (Sir Thomas White).
Now, to sum up, this is the way the case presents itself to me. We have great resources, and in order to develop those resources, we want capital. If we impose taxes which are too severe we shall prevent the investment here of the capital which is necessary to the development of our resources. Moreover, we have to raise large sums of money by way of loans, without taking into consideration at all any liability imposed upon us in respect to the Grand Trunk. There may be another large loan next year; shall we he able to raise that money in Canada? In view of these circumstances, this country ought to go slowly; in the words of the railway watchword, we must "stop, look, listen." There is no necessity for our rushing in and taking over the Grand Trunk at this time. The bugaboo is put before us :hat if we do not take it over the Canadian Pacific will take it. But in order to take over the Grand Trunk the Canadian Pacific must come to this Parliament for the
necessary legislative authority, and in that legislative authority we can impose whatever -restrictions we think proper. But it is idle to -think that the matter will be considered at all by the Canadian Pacific at this time. Besides, look at the obligations of the Grand Trunk in respect of the Grand Trunk Pacific. Do you think that any private company would take over the Grand Trunk with all those enormous obligations standing against it? The Government, as mortgagee, have the most absolute control over the Grand Trunk. They need not take it over; they can take it over two or three years hence just a-s well as they can do it now, and in the meantime they can go ahead and attend to the business that is in hand-that of developing and managing the Canadian Northern and the Grand Trunk Pacific, the latter being in the hands of the Government as receiver.
The Minister of Railways (Mr. J. D. Reid) says that the management of this road, should it be taken over, will be kept entirely out of politics; that no political influence will be exerted in connection with it in any shape or form. Well, who appoints the manager and directors? The Governor in Council.
Who fixes their salaries? The Governor in Council, I suppose. Who has to supply the money -for the deficits? The country, through the Government; we must supply the money. Do you mean to say that the Government are not going to exercise any control over the expenditure or the management of that road? If the Government wanted anything done, would the manager dare to refuse to carry out instructions? That reminds me of an old s-to-ry. Commodore Vanderbilt had bought some new cars for the New York Central. He called in his head painter -and said: " Now, Tom, you are absolute in your own department;
I would not think of interfering in any way. 1 want these -cars painted; I don't care a darn What colour you paint -them as long as you paint them red." It will be -something the same with the instructions that will go out -from the minister to the manager of the Government railway system: " You can do as you please-if you do so-and-so and so-and-so.''
I may add that throughout the country a spirit of distrust prevails with respect to the -management of the Government railway system. I have nothing to say against Mr. Hanna, the general manager; he seems to be a very capable man. But for ye-ars be a-cted for the Canadian Northern as the servant of Mackenzie and Mann, and nat-79
ur-ally one would think -that Sir William Mackenzie could exercise a great deal of influence over our general manager if he wanted to. Mr. Hanna and Mr. Mitchell will be practically in control of our great rail-way system. Of course, if they do not carry -out their work efficiently the Government can, and (probably will, make a change. But it is a fact that the country has not absolute confidence in t'he men who are managing our national railways, and this attitude is due to the -manner in which these men were educated in railway work by Mackenzie and Mann and to the fact that certain men- interested in railway matters are now their bosom friends. To these men they would naturally go f-or advice, and as I say these men could, if they wished, exercise some influence over them.
My other objection to the taking over of this road is based on my opposition to government ownership. For many years I have been opposed to public ownership. In 1891 when my partner and I bought the Daily Telegraph we published a number of articles against government ownership. In 1903-04 when the matter of the Grand Trunk Pacific was put before the country I came out on the hustings against government ownership and in favour of private control. I believe in government control through the Railway Commission,-and if that body did not have sufficient powers, I was in favour of giving full and ample power to them. I have always been strong and consistent in my opposition to government ownership.
Just in that connection, some one said to me during the recess for dinner: " It is all very well for you to oppose this thing; you are solicitor for the Canadian Pacific." Well, I am like a great many other professional gentlemen in this House who have taken retainers from the Canadian Pacific Railway Company. I am glad to say that never at any time during which I have acted for the Canadian Pacific have they attempted in any way to influence my action on the occasion of an election. I will give you an example. On the occasion of the reciprocity campaign I was a candidate. I had then some heavy retainers from the Canadian Pacific in connection with large matters of business. Sir William Van Horne came to my county and spoke against me. But he did not attempt to influence me, and his attitude made no difference whatever so far as their having further dealings with me was concerned. Hon. members know whether the Canadian Pacific have been sympathetic with the Liberals or with the Conservatives during the
last number of years. Until the last election I had been a strong) fighting Liberal, but during all the time that I was active and aggressive as a Liberal the Canadian Pacific Railway Company did not attempt to influence my vote in any way or to do anything which would affect my position in politics.
I do not believe that the Canadian Pacific would in any way interfere with the solicitors who act in their interests. There are /horn, members sitting on your right, Sir, who can back -me up in that statement. From time to time, statements have been made that the Canadian Pacific conducts lobbies. I am not in the secrets of the Canadian Pacific, but I do not know personally of any such lobby having been conducted in this House, and I think I can fairly make the statement that no hon. member can say that he has ever been approached by any Canadian Pacific official endeavouring to influence him in this matter. As regards public ownership, the Canadian Pacific may have a different opinion from the one I hold; I do not think they hold such strong views in the matter as I do. For example, this is a statement given out to the press a short time ago by Mr. Beatty, President of the Canadian Pacific Railway Company:
The desire of every one is that Canada to-day should have a railway system, or systems, so administered that the hest service to the public will he obtained at the lowest rates consistent with fair wages, both for labour and capital. 1 say fair wages because without them efficiency, loyalty and enterprise cannot be obtained, and without these things the quality of work which ensures efficient operation and low rates cannot be secured..
I am sure that every one will agree with that statement.
The question therefore is: Will government ownership bring about this result? the question sounds simple but is in reality complex. Theoretically much may be said in favour of government ownership. Will those theories stand the test of practice? If those theories prove a failure initially but correct themselves, in course of time, as their exponents may urge, how long a time can the Canadian people afford to pay the losses on a demoralised railway service?
That seems a fair and common sense statement. He does not come out in favour of government ownership, but he says: There is what is required; will government ownership bring about this result? If it does not, it means on the other hand that tbe service will be demoralized. Then he says:
Do they wish to launch out on the experiment now. or wait until our near neighbours, the United States, have worked out their ex-
perlment a little more satisfactorily? The cost of our own experiment could not fail to he great, a cost certain to be collected, directly or indirectly, from the pockets of the Canadian people. Railway men have an admirable slogan which I feel inclined to commend to the attention of the people of Canada at this moment, namely, "Stop, look, listen."
That seems to be a fair, strong and able statement. Mr. Beatty goes on to give his own views:
X have my own views on public ownership of railways, but they are not unalterable. I am undoubtedly prejudiced by association with one company. That company has slowly developed to a point of efficiency and successful operation. Looking back over that history one is amazed at the importance of the part played by men whose enterprise, resourcefulness and tenacity of purpose could not, I think, have been stimulated and given rein in any civil service. It has taken more than thirty odd years to make the Canadian Pacific railway as efficient as it is to-day. It was not easy. The consciousness that it is so easily shattered is largely responsible for the constant and intense ambition on the part of officers and men to maintain, and even improve on, the tradition.
This much may, it seems to me, be said with confidence now, namely, that we do not know enough that is encouraging about government operation of large railway systems to justify any furl her excursions into that field at this time.
This man of great experience, head of one of the great railway systems, without giving a statement in favour of government ownership, but stating the facts as he' has done fairly and fully, says that we do not know enough yet about the operation of large railway systems to justify any further excursions into that field now, that is, the field of government ownership.
To argue from the experience of old countries where civil service obtains a much better share of the ambitious young men than in Canada, or to argue from the alleged success of comparatively local affairs, or government organizations dominated by exceptional personalities, is unfair-not to the railways, but to the country which has so much at stake in this issue. We can well afford to wait, to study dispassionately our own situation, and the experiment of the United States, before committing our country to serious changes in policy. The solution finally adopted in the United States will be of inestimable value to Canada, meantime too, the experience which Canada will now have of the present newly organized government system will demonstrate many things. It will indicate very largely the general nature of thfe results we may hope to secure from an extension of the system. . . .
I invite hon. members to consider carefully this statement made by the President of the Canadian Pacific Railway Company.
Subtopic: GRAND TRUNK RAILWAY SYSTEM.