Hon. FERNAND RINFRET (Secretary of State):: Mr. Speaker, I should like to refer to parliamentary reference No. 169, moved for by Mr. Pouliot. This order was for a photostat copy of the original copy of the letter of guarantee, dated May 31, 1933, signed by Right Hon. R. B. Bennett and addressed to Sir Charles Gordon, president of the Bank of Montreal, about the $60,000,000 loan to the Canadian Pacific Railway Company. Inquiries have been made in the Department of Finance, the Department of Railways and Canals, the Prime Minister's office and the privy council office, and the original copy of this letter could not be found in any of these departments.


Mr. POULIOT:: Hear, hear.



PRIVATE BILLS


Right Hon. W. L. MACKENZIE KING (Prime Minister) moved:: That for the remainder of the session all private bills when presented be read a first and second time and referred forthwith, and that standing order 105 respecting the posting of private bills be suspended.
This is the motion which it is customary to make about this time in the session.


[Stage Direction]
Motion agreed to.

[Stage Direction]
Bill No. 91, for the relief of Margery Brunhilde Morphy Dunton.
Bill No. 92, for the relief of Mania Leizerson Oberman.
Bill No. 93, for the relief of Milton Sand-ford Enoch Chase.
Bill No. 94, for the relief of Jessie Dansky Glazer, otherwise known as Jobeth Dansky Glazer.
Bill No. 95, for the relief of Mildred Eileen Champion Webster.

[Stage Direction]
On the order:
First reading of Senate bills-Bill No. 88 (letter 02 of the Senate), intituled: "An Act to incorporate Quebec and Montmorency Railway Company."-Mr. Parent (Quebec West and South).
Mr. W. A. WALSH (Mount Royal):: This bill, Mr. Speaker, is in the name of the hon. member for Quebec West and South (Mr. Parent). I do not know exactly how to proceed; I am under instructions from the Chair. I should like to have the bill placed under my name and given first reading at this sitting in order that it may be taken up by the railway committee some time early next week.


Mr. SPEAKER:: Mr. Walsh moves that Bill No. 88, from the Senate, to incorporate Quebec and Montmorency Railway Company, be read the first time.


Some hon. MEMBERS:: Explain.


William Allen Walsh: The purpose of the bill is to divorce 'the railway operations of the Quebec Railway, Light and Power Company from the operations of the tramway lines operated in the city of Quebec. They are two separate and distinct enterprises owned by the same company. One operates as the result of a franchise from the city of Quebec and the other is a railway operating out of the city of Quebec for a distance of about thirty miles, the principal points on that line being Montmorency and Ste. Anne de Beaupre. The Canadian National Railways have rights over that line to connect with their line leading down to Murray Bay. The object of the
C.N.R.-Branch Line

bill is to separate these enterprises into two distinct entities, owing to the interest of the city of Quebec in the operation of the Quebec street railway, and enable the parent company to maintain financial control of the two separately and to better advantage.


Jean-François Pouliot: Remove the watered stock and let the bill dry to death.


William Allen Walsh: Something has to be used to float it.
Motion agreed to and bill read the first time.



PRIVILEGE-MR. McIVOR

[Stage Direction]
On the orders of the day:
Mr. DANIEL McIVOR (Fort William):: As a matter of privilege may I direct a question to the Minister of Finance? I have here a telegram from two specialists in the medical profession in the city of Fort William, who specialize along lines that are important to the community. They have sent a challenge .to our baseball team-


Some hon. MEMBERS:: Order.


Daniel (Dan) McIvor: -and would like to know whether the minister is prepared to finance a team coming from Fort William.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
Hon. C. D. HOWE (Minister of Railways) moved that the house go into committee to consider the following proposed resolution:
That it is expedient to bring in a measure to provide for the construction, prior to the 31st day of December, 1939, of the following Canadian National Railways branch line:-
From Senneterre to Rouyn in the province of Quebec-estimated mileage, 99 miles; average expenditure per mile, $60,000; estimated cost, $5,940,000.
Motion agreed to and the house went into committee, Mr. Sanderson in the chair.
Mr. STEWART:: Will the minister give
some particulars of the project and the reasons for undertaking it just now?


Mr. HOWE:: This bill implements the
application made by the Canadian National Railways to the Department of Railways for an appropriation to build a branch line from Rouyn, which as we know is the centre of Noranda activity to Senneterre, through an area which has to-day ten producing gold mines, two mines that will be in production within a month or two, and some thirty very promising prospects now under development.

The Canadian National Railways were the pioneers in this district, which first came into prominence ten years ago with the discovery of the Horne mine which is now the Noranda property. At that time those interested in Noranda applied to the railways for service to the area. I am informed that an application was first made to the Canadian Pacific Railway, which approached the area as closely as did the transcontinental. The Canadian Pacific Railway was not particularly interested at the time and application was then made to the Canadian National, and with, the help of the province of Quebec and of the mining company a branch line was built into Rouyn through Taschereau on the transcontinental railway, which branch has been in operation since that time. The arrangement was that the operating deficit of the line was guaranteed by the province of Quebec up to $50,000 and by the mining company up to $20,000. Since that time there has been a very intensive mining development in that area. All these mines have been served by the National Transcontinental and they are all within thirty-five miles of that railway. They have been served by waterway down from the railway, by a highway that was built in the area, and by aeroplane. In any event the service there has been provided entirely from the Canadian National Railways. Recently two applications were made by private companies to the Quebec legislature for legislation permitting construction into this territory, one from a private company, controlled by private interests-called the Goldfields Company, I believe; however, that particular threat is not regarded very seriously. The other, a bill for the Temiskaming and Abitibi Company, is being sponsored by the Canadian Pacific Railway Company. That bill has passed the committee stage in the Quebec legislature. It was opposed by the Canadian National Railways, and it is to anticipate the construction of that line and to preserve territory which seems to be definitely the property of Canadian National Railways that the bill now before this committee is being hastened at the moment.
I have a long letter from Mr. Hungerford, the president of the railway, addressed to the chairman of the trustees, and I would be glad to puit the entire letter on Hansard, but it is quite long.
I will quote this one paragraph:
The development of the territory has now reached a stage where it becomes attractive to private railway interests, and if the invasion by such interests is permitted, the people of Canada will be deprived of the benefits for which they have already paid in capital cost and operating deficits. Instead of reaping

C.N.R.-Branch Line
the reward of a development project, boldly conceived, the people of Canada will have to recognize the National Transcontinental Railway as a permanent drag upon the finances of the country.
In the same letter the president goes on to say that the management has for many years planned to build an extension of the Noranda branch easterly to a junction with the National Transcontinental at Senneterre, and that the main reason for withholding such a recommendation has been the period of financial distress which has required that this desirable project be deferred.
The earnings of the Canadian National which would be placed in jeopardy by the construction of the Canadian Pacific into this field are very considerable. Limiting the territory affected to that between Senneterre and Noranda, the railway revenues for even the last four years of the depression have increased from SI,367,000 in 1932 to $2,066,000 in 1935, and the earnings for the first four month ' of 1936 are at the rate of $2,300,000 per annum. It is estimated that the earnings, apart from Noranda, will, five years hence, be much greater than those indicated for 1936, and in the view of Mr. Hungerford may reach $5,000,000-that is in addition to the earnings from the present development. Due to the fact that these earnings accrue from mining development which would be immediately adjacent to the projected lines, the railway authorities estimate that revenues commencing at $1,100,000 per annum in the first year, and rising to $3,000,000 in the fifth year, would be diverted from the Canadian National lines, while it would not be possible for the management to reduce operating expenses by more than forty per cent for each dollar of diverted revenue, so that the net damage to the publicly owned system would, on the president's estimate, be $660,000 the first year of competitive and duplicative service, rising to $1,800,000 by the fifth year. That loss, of course, would add just that much to the total deficits of the Canadian National Railways, with respect to which in recent years the chief executive of the Canadian Pacific Railway has been expressing such great concern.
There is the added and desirable feature that the proposal on the part of the Canadian Pacific flies in the face of the co-operative features of the Canadian National-'Canadian Pacific legislation of 1933, under part III of which it is provided .that there shall be arbitration in case of disagreement concerning railway plans and arrangements. For the purpose of this arbitration it is provided that an arbitral tribunal may be established
whose power and jurisdiction should extend, among other things, to:
Control and prohibition in respect of the construction of new lines and provision of facilities and additional services where no essential need of the public is involved, or where the result would be in the main the division of traffic already adequately provided for.
That provision of the 1933 act was intended to cover just such a case as the present, but the Canadian Pacific Railway, of course, escapes control by the act through recourse to a provincial government under the name of a subsidiary company.
I think, Mr. 'Chairman., that that covers the situation fairly well. I may say that when the Canadian National Railway built its line into Noranda it also took authority to build both east and west from Noranda. The line east from Noranda covers practically the territory in which it is proposed to build this line. The line west was taken by the Temis-kaming and Northern Ontario Railway Company, which built into Noranda shortly after the Canadian National Railways completed bheir connection.
The situation resolves itself into this. The Canadian government have built a line through northern Quebec which is intended as a development and colonization line, and now, after all the years in which it has been operating at a deficit and when this particular area promises to produce traffic which will in a measure justify that construction. I hardly think it can be conceived that this territory thirty-five miles from the National Transcontinental, and which is now being served by that line, and fairly well served, should be allowed to pass into the control of a competing railway.


Hugh Alexander Stewart: Can the minister inform the committee whether the application to the provincial government by the private company to which he has referred has been successful, and whether the bill in question has been passed? The minister has informed the committee that the Canadian National Railway management have been active in endeavouring to preserve this territory for the Canadian National Railways. Has this government made any representations to the Quebec government along the same lines?


Clarence Decatur Howe: The only knowledge I have of the position at Quebec is ohtained from the newspapers, from which I gather that the Temiskaming and Abitibi railway bill was referred to the railway committee of the legislature, where it passed with some amendment, and was referred back to the house.

C.N.R.-Branch Line

I have not heard whether the house has since dealt with it. So far as representations from the dominion government are concerned, beyond advising the Quebec government that we had an application from the Canadian National Railways for a bill and that we proposed to present that application to parliament, no representations have been made by this government.


Hugh Alexander Stewart: Then I take it that this government has up to the present taken no active steps to oppose the granting of the charter in the Quebec legislature.


Clarence Decatur Howe: That is correct.


Mr. PELLETIER:: I understood the minister to say that this measure would justify the construction of a certain line that had previously been built for development and colonization purposes. Am I correct in understanding that this new line is going to help out what has already been done for development and colonization purposes?


Clarence Decatur Howe: I referred to the fact that the National Transcontinental has built through northern Quebec from Montreal and Quebec westward, with the hope of aiding development and colonization in northern Ontario. Of course this branch line we are now discussing is to serve a definite traffic in an area where there happen to be more than forty active mining developments. That territory will be directly served by the line covered by this particular bill.


Mr. WOODSWORTH:: Mr. Chairman, the government is to be congratulated on bringing in a measure of this kind. The statement made by the minister, together with the letter from Mr. Hungerford, seem to me to make a very clear case indeed. We have heard so much about the deficits of the Canadian National Railways; we have been told that this system is a millstone hanging about the neck of Canada. Now it would appear that the great expenditures of the past may be justified, since this territory is beginning to develop. The public road has a perfect right to take advantage of that. When we hear so much about cooperation I do not see why the subsidiary of the Canadian Pacific should act as it has acted in this matter. This would seem to me to be a smart trick. The application was opposed by the Canadian National Railways, and I do not quite see why the government itself should have appeared earlier. The application was also opposed by the Ontario government. If the Canadian Pacific railway was sincere in its desire to cooperate the least it could have done was to bring

the matter to the attention of the board of railway commissioners or before a tribunal such as is provided for, or to come to this house with a bill. When we are urged to adopt a policy of cooperation it seems ridiculous that the Canadian Pacific should now enter a territory which is generally recognized as belonging to the Canadian National.
I do not quite see why there should have been two railways to serve that territory, yet now the Canadian Pacific want to get into the same territory. This goes on whilst in the west we have had tracks torn up and lines abandoned in order to promote some measure of cooperation. I think this proposal is very good business indeed from the standpoint of the people of Canada.


William Allen Walsh: May I ask the minister whether the measure now before the committee was brought to his attention prior to or subsequent to the introduction of the bill in -the Quebec legislature?


Clarence Decatur Howe: I will say at once that if the bill had not been introduced in Quebec this legislation would not have been introduced during this session. This matter was discussed last year with the executive, and my own feeling was that due to the position of the railways generally we should defer everything that possibly could be deferred, as we felt that we were giving reasonable service to this area as it was. I think next year in any event we would have applied for this power, but our hand is being forced at this time by the threat of a competing road to build into our territory.


William Allen Walsh: Was not the Canadian Pacific bill that was introduced in the Quebec legislature conceived on a much wider basis than the measure now before this committee? I understand that the Canadian Pacific bill dealt with a line of railway about twice the length of the one proposed here, running from the south to the north and covering a territory perhaps one hundred miles in length, through the Noranda district. That line, from seventy-six to one hundred miles in length, was to go through a colonization territory containing roughly seven thousand settlers, who would have been served by that branch line. Incidentally, the Canadian Pacific were going to extend eastward through the Noranda district in order to make the remainder of that line a paying proposition. As I understand it, these seven thousand settlers will not be served unless the Canadian Pacific get permission to build through the Noranda district. I am not encouraging the duplication of lines, by any means, but it seems to me, as the hon. member for Winni-

C.N.R.-Branch Line
peg North Centre suggested, that this is a splendid opportunity for cooperation Tather than competition. If one company would construct a line and give the other company running rights over it I imagine the seven thousand settlers in that area to the south of the Noranda district would get the service they have been seeking for a considerable length of time.


Clarence Decatur Howe: The Canadian Pacific application was for a line from Angliers to Rouyn, some sixty miles in length; then from Rouyn to Senneterre, some ninety-eight miles, then continuing into the Chibougamau district perhaps another seventy or eighty miles. But when they appeared before the railway committee in Quebec the Canadian Pacific immediately stated that at present they were not interested in building into the Chibougamau district. That reduced the line to the sixty miles to Noranda, in exactly the same territory to be covered by the line now proposed. I may say that, having developed that 'territory from the start and brought it along to its present state of productivity over a ten year period-that is, the territory between Rouyn and Senneterre-it is not the intention of the Canadian National Railways to divide it in any case.


Hugh Alexander Stewart: The only suggestion I have to put forward is that the minister should make the strongest possible representations to the Quebec government against granting that charter, which up to the present time they have not done.


Mr. McDONALD (Pontiac):: president of the company intimated to me very distinctly that if they were not given the charter from Noranda to Senneterre they would not consider building from Angliers to Rouyn.


An hon. MEMBER:: They were not worrying about the settlers.
Mr. McDonald (Pontiac): They claimed that the development to-day is not such as to warrant the expenditure in building merely to Noranda, which is already served by two railways. Personally, having regard to the development of the district, I should like to see the line built from Angliere to Rouyn, and I am also interested in seeing this line built eastward, whether it be by the Canadian Pacific or by the Canadian National, from Noranda to Senneterre, because in recent years the development of that section of the country, from the point of view of mining, has been phenomenal. And not only that, but in colonization also; because the Quebec government are sending into that district thousands of settlers, and eventually I believe they will all be successful farmers, finding a good market there in the mining districts. The minister referred to the number of prospects in the district, and also the producing mines. As evidence of the growth and development that is taking place I might say that the town of Val d'Or, which two years ago was not in existence, to-day has a population of about 3,000. The growth of that town is justified by the development that has taken place in the immediate neighbourhood-not prospects only, but producing mines.
I find myself in a rather difficult position. I am interested in the construction of the road by the Canadian Pacific from Angliers to Rouyn. I am also interested in the construction from Noranda to Senneterre, let it be by the Canadian National or by the Canadian Pacific. The decision rests with this committee. In any case I hope that when all is done we shall have both railways.


Mr. BERTRAND (Laurier):: By the Canadian Pacific proposal we would have direct communication between Montreal and this northern region, which is in the province of Quebec but has no direct communication with Montreal. Has any attempt been made to have the construction proceeded with as a joint venture, so that there would be direct communication between Montreal and this district?


Clarence Decatur Howe: The shortest and most direct line from the centre of this district to Montreal is via the National Transcontinental.
TMr. W. R. McDonald.]


Ernest Bertrand: I was told that it is seventy-nine miles shorter between Noranda and Montreal than between Noranda going around by La Tuque.


Clarence Decatur Howe: Possibly it is a trifle shorter, but I would not think it is seventy-nine miles shorter from Noranda. From the centre of this mining district it is a little shorter to Montreal via Senneterre and the transcontinental than by the Canadian Pacific, but the difference is so slight that I think the mileage would not affect the Montreal situation in the least.


Ernest Bertrand: I hope the government does not forget Montreal.


William Allen Walsh: I should like to congratulate the hon. member for Pontiac (Mr. McDonald) on the lucid explanation he has given in connection with the actual situation in that district. May I ask the minister if it is the intention of the Canadian National Railways to proceed immediately with the construction of this ninety-nine miles, or is this merely a covering bill to keep the territory for the Canadian National?


Clarence Decatur Howe: I think the bill, when it is before the house, will make that quite clear.


Mr. BENNETT:: Is there no method by which it would be possible to bring about cooperation in this matter? I remember the representations to which the minister refers as to the desirability of making some connection between-I am not sure whether it was the city of Montreal, but that district and this mining area. I was hopeful that something might be done through the action of the government to bring about what the hon. member for Pontiac (Mr. McDonald) described as the possible leasing of running rights. At any rate the construction of both roads would in my judgment be a calamity under present conditions, and if for traffic or other reasons the territory is entirely that of the Canadian National I think representations should be made to the Quebec government that it would be regarded as desirable not to charter the other road. If on the other hand it is possible to arrange running rights so that both roads might receive traffic which they justly believe to be their own, that might be worked out. I was struck by what the hon. member for Pontiac said in that regard.


Clarence Decatur Howe: When this matter came to the attention of the Department of Railways, as minister I wrote to both railway companies urging that every attempt be made

Department of Mines and Resources
to reach common ground, but I am sorry to say I was definitely advised that this could not be done.
Resolution reported, read the second time and concurred in. Mr. Howe thereupon moved for leave to introduce Bill No. 90, respecting the construction of a Canadian National railway line from Senneterre to Rouyn, in the province of Quebec.
Motion agreed to and bill read the first time.



DEPARTMENT OF MINES AND RESOURCES

[Stage Direction]
Right Hon. W. L. MACKENZIE KING (Prime Minister) moved the second reading of Bill No. 79, respecting the Department of Mines, Resources and Colonization.
Motion agreed to, bill read the second time and the house went into committee 'thereon, Mr. Sanderson in the chair.
On section 1-Short title.
Mr. CRERAR:: Mr. Chairman, hon. members might find less difficulty in discussing the bill if I furnished some details supporting the reorganization of these several departments into one administrative unit. It will be observed that the purport of the bill is to combine the Departments of Interior, Mines, Immigration and Colonization and Indian Affairs, and also the work entailed in connection with the administration of the soldier settlement board.
The chief work of the Department of the Interior at this time relates to parks, to the Yukon territory and to that vast area now known as the Northwest Territories. It has also to do with national surveys, dominion forest service, scientific investigation into forest growth, methods of conservation of our forests and the like. It has also to do with matters relating to water power and hydrometric surveys. In addition there are scientific surveys which come under the direction of that department. They relate particularly to the dominion observatories at Ottawa and Victoria.
The whole range of administration of Indian affairs from the Atlantic to the Pacific comes under the Department of Indian Affairs. At present there are approximately 112,000 Indians in Canada, and it is estimated that they increase at the rate of about 1,000 per year. That is probably due to the fact that better care is given in matters of medical attention and hospitalization, as well as in the field of education. In connection with Indian administration we have not only
problems of health, in which are involved hospitalization and medical care, but there is involved the administration of reserves, and the question of bringing the Indians as nearly as possible to a point where they may be selfsupporting.
In connection with the Department of Manes, geological surveys of a general character have been made covering the whole of Canada. As I stated earlier in the session when estimates of the Department of Mines were before the committee of supply, federal authorities are responsible for the maintenance of geological surveys in the provinces of Manitoba and British Columbia. There is also the matter of the geology of the Yukon where in recent years substantial progress has been made in the development of gold mining. Connected with the administration of the Department of Mines are certain technical services performed in the city of Ottawa. Those involve examination of complex ores, and the like, to find ready and sufficient means of ascertaining their proper treatment.
. The work of the Department of Immigration and Colonization has slackened in the last four or five years. Probably it reached its peak in the early years of the century. Last year the number of immigrants arriving m Canada was less than it had been in any previous year since confederation. While in the past the Department of Immigration and Colonization was charged with the task of popularizing Canada, and making facts about Canada known to the people of other countries, naturally in. the course of time that work has greatly changed. To-day immigration services are restricted to the examination of people coming to our country, and supplying them with the necessary entry, in accordance with the regulations laid down in immigration legislation.
I sometimes make the statement, humorously that the soldier settlement board is operating the largest mortgage business in Canada. I need not go over the history of the board, because I am certain it must be well known to hon. members. It was formed in 1919, immediately following the war, and up to this time something more than $150,000,000 has been turned into its administration. That figure includes the costs of administration. As hon. members are no doubt aware, there have been various reductions in the obligations of soldier settlers, but it is estimated that with those reductions there is still a residual value of approximately $50,000,000. That is a vast estate to be administered by the federal government. I am not making
3534	COMMONS
Department oj Mines and Resources
any prediction as to what ultimately may be realized, but I state these facts simply to impress the committee with the importance of that particular branch of the administration.


Richard Bedford Bennett: As it stands now, every dollar paid gets credit for two dollars?


Thomas Alexander Crerar: Yes. In discussing the need for reorganization I may be in a position to give hon. members useful information. As they are no doubt aware, in the departments indicated there are four deputy ministers with salaries ranging from $8,000 to $10,000 per year and four 'assistant deputy ministers. There are thirteen executives in classes with a maximum salary of over $5,000 per year, and thirty-one executives in classes which have a maximum salary of over $4,000 per year. In the immigration department there is a director of publicity with a staff of three; in the national parks branch there is a director of publicity with a staff of eleven, and there is also a large and well organized bureau in the Department of Mines for the dissemination of geological information. There are four legal officers, three in the Department of the Interior and one in the Department of Indian Affairs. In the four departments there are five editors and three assistant editors with the necessary clerical assistance. These staffs look after the publicity work in the different departments. In addition there are other officers who perform editorial work incidental to their regular functions.
There are twenty-three people in the staffs of the deputy ministers- There are ten people engaged wholly in work relating to personnel, and in addition part of the time of many of the executive officers is taken up with this feature. There are chiefs of records in each of the departments. Three of the departments have purchasing agents. The central purchasing office of the Department of the Interior has a staff of twelve; the Department of Indian Affairs has a staff of five and the Department of Mines has a staff of four. Supplies for the Department of Immigration are looked after by the staff handling the mail. There is an architect in the Department of Indian Affairs with an engineering assistant, draftsman and stenographer. In the parks branch there is an architect with an assistant architect, draftsman and stenographer. There are three survey units in the Department of the Interior: there is the geodetic survey, the international boundary survey and the topographical and air survey bureau. In the Department of Mines there are the surveys relating to the work of that department. In connection with the Northwest Territories, we have the Northwest Terri-

tories council that looks after and advises in connection with the administration of that vast area. There is also a council in the Yukon which has to do with that particular phase of the work of the department.
All this will give the committee some of the cogent reasons why the unification of these departments into one administrative unit should in the course of time effect very considerable economies in the cost of administration. I have further details which might be placed before the committee when we are giving consideration to the different sections of the bill.
So far as the organization of the new department is concerned, I am free to confess that I have not as yet had sufficient time at my disposal to analyze thoroughly the work of these departments and, in conjunction with the responsible officers of the departments, work out the most effective and economical method of administration'.
I may say that this reorganization will follow broadly the lines of having one deputy minister, and a number of directorships. The bill provides for eight directorships but I have in mind at the present time just seven. Without committing myself definitely to the branches to be set up, I might place before the committee the suggestions I have to make in this regard. There will be a mines branch, an, immigration branch, a lands and colonization branch which will include soldier settlement administration, a branch for Indian affairs, a branch for surveys, a national parks branch, and a forestry and water power branch. As to the extent to which the various branches to which I referred a moment ago may fall into these particular directorships, I am not at present in a position' to say. I am sure hon. members of the committee will appreciate the fact that in reorganization covering so many departments with so many related branches, the greatest care and study should be given to the matter if the maximum results in economy, efficiency and operation are to be achieved.


Richard Bedford Bennett: What is the total number of the staff in the various departments?


Thomas Alexander Crerar: The total number in the Department of the Interior is 1,162; in the Department of Immigration, 804; in the Soldier Settlement branch, 336; in the Mines department, 448, and in the Department of Indian Affairs, 1,095.


Richard Bedford Bennett: That would include both inside and outside?


Thomas Alexander Crerar: That includes all branches
of the service. The total is 3,845.
JUNE e, 1936	3535
Department of Mines and Resources


Mr. NEILL:: Could the minister give an estimate of what reductions in staff will be made possible by this reorganization?


Thomas Alexander Crerar: I would not attempt to do that at the motnent, but I shall have a word or two to say on this phase a little later.


Alan Webster Neill: Would the minister suggest a twenty-five per cent cut?


Thomas Alexander Crerar: I would suggest that ultimately it should be greater than that. Hon. members will appreciate that the readjustments which will be necessary cannot be made all at once. I am sure hon. members will also agree with me when I say that we must have regard to the positions of those already in the service. At this point I should like to pay tribute to many members of the service in these departments. There are many excellent civil servants in these departments, able and competent men.


Richard Bedford Bennett: And women.


Thomas Alexander Crerar: Yes, and women. I do not think we always appreciate fully the difficulties under which some of our civil servants work. At times their position is one of considerable delicacy and difficulty, but notwithstanding the cynical criticism that one hears from time to time, I do think it is possible in our civil service to have efficient and economical administration. That certainly is the goal in this reorganization. I am not boastful enough to say that this reorganization can be worked out by the minister who happens to be in charge of the department, but I do believe it can be worked out in cooperation with the officers of the different departments. So far as I have been able to gather any opinion from the staffs of the departments, I can say that they are just as anxious to secure efficiency and economy as are hon. members of this committee. I feel certain that I shall have their full and hearty cooperation in working to that end.
Just a word or two about the principle of the bill. There are only one or two features to which I desire to direct the attention of the committee. Under the Civil Service Act the reorganization of a department is a matter for the civil service commission, but under this bill we are departing somewhat from that procedure. It is not intended that the doors shall be opened for the entry of new people into the service, except in one particular. In the appointment of the directors we take the power under this bill to go outside the civil service. I wish to say frankly to the committee that at the present moment I have no intention of doing that so far as my information goes. What I
do desire to secure is efficiency in the operating heads of these various branches. What little experience I have had in business administration has led me definitely to one conclusion, and that is that the success of your administration depends in the main on the ability and character of the men whom you have in the responsible positions; and that is what we certainly aim at securing in the reorganization of this department. So far as the other members of the staff of the new department are concerned, I am asking the committee and the house to give me the authority to reorganize the department in the first instance without necessary reference to the civil service commission. In the making of appointments they must be drawn from the existing personnel in the different departments. It is not intended that new members of the staff will be introduced from outside of the civil service.


Richard Bedford Bennett: Outside of the existing civil service.


Thomas Alexander Crerar: Yes. In the reorganize tion of the work of these four or five departments I flatter myself, without any disrespect to the civil service commission, that probably, in conjunction with the responsible officers of the department, we can make a better job of it than some representative whom the civil service commission might assign with the best will and intention in the world. I hope the committee will agree to the recommendations in the bill in that regard. I think that covers, briefly, what I have to say at this stage.
Reference was made the other day to the title as being too cumbersome and I think perhaps there was some foundation for the criticism. In that regard, therefore, we propose to shorten the title; and since the bill does not stand in my name but in the name of the Prime Minister I move, seconded by Mr. Lapointe, that section 1 be amended as follows: That the words, in line 5, "resources and colonization" be struck out, and that there be substituted therefor the words "and resources," and that the words "and resources" be substituted for the words "resources and colonization" wherever these words appear in the bill. The effect is to shorten the descriptive title from "Department of Mines, Resources and Colonization" to "Department of Mines and Resources."


Richard Bedford Bennett: In common with every other member of the committee, we feel grateful to the minister for the clear statement he has made regarding what he contemplates doing under the provisions of this measure. He probably does know that the
3536	COMMONS
Department of Mines and Resources
former Minister of Labour and the Minister of the Interior worked out a plan together, and it fell by the wayside for one reason and one reason only. Under the existing economic conditions it would involve the release from employment of too many people. That is a pretty poor reason to give-in fact, it is not a pretty poor reason but a very poor reason-and yet, having regard to the conditions that prevail, it happens to be the real reason why it was impossible to carry it out. If the minister carries out the plans he has suggested to-day he will undoubtedly be compelled to release from employment a substantial number of people. If he retains them in the service he has accomplished no purpose.


Thomas Alexander Crerar: Except in getting started in the right direction.


Richard Bedford Bennett: Quite so, but he is handicapped from the very start. That is one of the anomalies of our position and it is a real one. I wonder if the minister has taken the soldier settlement department as it stood. The former minister reduced the personnel by a very large number and created in it a measure of efficiency which I think the minister will agree is very striking. I think he will be certain on that point. But it created for the government a great deal of difficulty, and under the conditions that exist it was almost impossible to contemplate the release of large numbers from the public service. I wonder if the minister realizes that during the five years from 1930 to 1935 nearly 12,000 civil servants were released from their positions in this country. That is a terrible thing to say, and yet the service was more efficient by reason of it. And that is a still more terrible thing to say. Part of that-we must be frank-was at once attributable to the transfer of the resources to the western provinces. But when I heard the minister reading the familiar story to me of the editors and the architects and other officers in each of the several departments I could not help thinking of the effort that was made at one time by a very able man in the public service so to establish matters as to have under his direction a department of such a character that it would be a very powerful organization. When the transfer of the resources took place it became essential to cut down the numbers remaining in the federal service, and that created an exceedingly unhappy condition from which needless to say the government suffered very greatly. Nevertheless the work was done and the lessening of the numbers was by some 12,000 in those five years. I need not say

that that made 12,000 potential if not real opponents of the administration.
As to the policy of a deputy minister and seven directors, I can only say that the plan that had been worked out by the Minister of Labour and the Minister of the Interior in the late administration contemplated a somewhat lesser number than that. The minister has said he may use only seven and possibly he may not find it necessary to have that number when he concludes operations. I judge from what he has said that he has reached no definite conclusion in his own mind as to the number. But dealing with the question of mines, for instance, it is quite clear that the only mineral territory oveT which the dominion has jurisdiction is in the Yukon and in the Northwest Territories. We have no jurisdiction now over mines as such except in those territories, but we are carrying on geological survey work, under our constitutional obligation, in Manitoba and British Columbia. Unfortunately, however, there has grown up in this country the idea that while we did have vast mineral areas under our control and jurisdiction we should have issued valuable pamphlets and maps which the provinces did not care, and in fact could not at that time be called upon, to publish. We to-day are doing an enormous amount of work which normally would be done by the provinces of Ontario and Quebec. The minister knows to what I refer-the detail work. In British Columbia, having a constitutional obligation to maintain a geological survey, I suppose we are bound to publish the result of our observations and work in that territory from year to year. That is expensive. These books we get out, illustrated as they are and carefully prepared as they are, are expensive books to publish; they are not cheap books by any means. Geological maps require very great care in their preparation, and in the Department of the Interior, for instance, we have a map designer who is responsible for the preparation of the map that we use in connection with our electoral lists and the maps delimiting the boundaries of our electoral districts. Formerly that was not so; an officer attached to one of the other departments did that work.
The Department of Mines, to get back to what I was speaking of, has at the present moment a staff of between three and four hundred.


Mr. STIRLING:: Four hundred and forty-eight.


Richard Bedford Bennett: Yes, and it is difficult to justify that staff on the basis of our con-

Department oj Mines and Resources
stitutional responsibility, having regard to the fact that we have parted with control over all our mining areas except in the Northwest Territories and the Yukon.
As to colonization and immigration, was I right in assuming the minister proposes that immigration shall be under the control of a director? I thought the statute made that clear.


Thomas Alexander Crerar: Yes.


Richard Bedford Bennett: Colonization deals only with soldier settlement, and I have already mentioned what has been done in that regard. With respect to immigration, it seemed to be the settled view of the Canadian people as indicated in this parliament that no effort should be made to bring people into this country during the period of economic stress. In fact, there were very strong protests from some quarters against the numbers that did come in, and the number that came in last year, as the minister says, was less than it had been in any previous year since confederation. The fifteen or eighteen months preceding the beginning of 'the economic stress in Canada saw substantial numbers coming into our country, and I am sorry to say that a very large number of them have been under the care of the city of Winnipeg and other communities for the last four years, of which the minister perhaps has a clearer appreciation than I.
The Department of Indian Affairs obviously must have a director of its own. It is a special branch of our work, and I think one can say with perfect frankness, without going out of one's way, that that department has been very well conducted- It perhaps is overburdened with staff in some cases, but that I suppose is inevitable having regard to the fact that you have to carry on farming operations in some of the reserves; you carry on ranching operations in some of the reserves; you carry on coal mining operations in some of the reserves, and in some of the reserves the Indians have to depend on their hunting ability and the general activity of the members of the band to support themselves outside of the moneys that are paid to them and the rations supplied to them by the crown. I agree with the minister that a director of Indian affairs is essential in that he will have, whoever he is, a very great deal of work to do. Since the establishment of a medical service amongst the Indians, which was begun by the Minister of the Interior under the Prime Minister's last administration, and which has been extended since, there
has been, strange as it may sound, an increase in the number of Indians in this country. For a substantial period of time the Indians were gradually decreasing in number, as the minister knows, but owing to the steps that have been taken, sanitary and medical, there has been an increase in the number of Indians in this country. I was surprised to find from what the minister said that the increase now reaches one thousand per annum.


Thomas Alexander Crerar: That is estimated.


Richard Bedford Bennett: The figure was somewhat larger than I had expected. I shall not traverse the ground the minister has so well covered, but I do suggest to him that he will have great difficulty-not that I desire to magnify his difficulties-in dealing with this general situation. If he feels there is incumbent upon him the responsibility of maintaining all these staffs in their entirety, it would be far better to pay the staffs than keep them in the service. That may seem a very strange statement, but it will militate against the efficiency of the department if it is overstaffed, and it will be overstaffed as it now stands, and it would be better to make some arrangement in the way of the payment of a lump sum or of an annuity for a period of years than to continue people in the service who have no work or not enough work to do. I agree with the minister when he says that the selection of the director will determine the efficiency of the branch, and there can be no real efficiency if the director finds himself handicapped from the start with a staff which he cannot control as to numbers. These are hard words. They are not intended in any sense to indicate an unkind attitude of mind towards this problem, but there has grown up in the public service of this country in many departments an overmanning and overstaffing that can be dealt with only by the method I have suggested, because you cannot wait for the cruel hand of death and the superannuation act to take care of them all. I make that statement to the minister because I am confident that if we live another year and he comes back and tells us frankly what the situation is, he will admit, unless he deals with the situation in that manner or in somewhat the same manner that he has indicated with respect to other branches, that he has found great difficulties. I think no man who has been in business as he has been knows that better than the minister himself.
As to the name of the department, my colleague from Argenteuil (Sir George Per-
3538	COMMONS
Department of Mines and Resources
ley) the other day suggested what I feel, that the name is longer than it should be. In view of the fact that the government has committed itself to a name, and that it was intended to use the words "mines and resources," I think the compromise, if one might use that word, at which the government has arrived is a perfectly sound one. My preference-it is not a matter of importance now-is for Department of Internal Affairs. The Home Affairs department in Great Britain has been a distinctive branch of government for many years; it has been charged with responsibility for all home affairs as distinguished from foreign and other affairs, and it struck me, when I was giving some little attention to it, that as distinguished from external affairs you have here a department that has to do entirely with internal affairs-Indians and colonization, immigration, mines and minerals. It has to do with geology, with the observatory, with all the multifarious activities of the people under the control of governmental officers that might be summarized in the words "internal affairs."
I am not sure that the words "mines and resources" a.re sufficiently comprehensive as indicative of the range and activities of the new department. In fact to some extent they are words of limitation rather than of description, because in the very nature of things, having regard to the many activities with which the department has to deal in its seven or eight branches, it is quite clear that mines and resources is hardly indicative of the entire scope of those activities. In the Yukon and Northwest Territories the department is in a sense legislative; it creates a council which has power to enact ordinances, which ordinances, it is true, coming to the governor in council through the proper channels, have to be considered and dealt with; but in that case it has thrust upon it responsibility for the exercise of legislative powers. Then it has administrative powers. It has obligations with respect to education, obligations with respect to publicity. Above all else it has to do with an enormously important branch of our national life, namely our national parks, which in the redressing of an adverse trade balance have been singularly effective, inasmuch as every time a tourist tears from his cheque book a ten dollar banker's cheque he has contributed 810 to making up the adverse balance of trade between the United States and Canada, whatever it may be. That department of the public service is a branch that requires, Shall I say, most painstaking effort and involves, I am sorry to say, the

consideration of many problems that become too narrowly political. The minister will not misunderstand me, I am sure, when I say that success or failure, depending upon the factors to which I have alluded, will also de^ pend to no small extent upon what I may call the purely political viewpoint. If in the selection of staff and in the administration which is proposed-not by the minister, because with the best intentions in the world these things will happen; not by the government, which with the best intentions in the world may find itself handicapped by pressure from without-that pressure is not withstood I am bound to say that I think the very conditions .that have brought about the situation that now exists will continue to be imposed upon the administration with unfortunate results as far as the success of the effort is concerned.
I speak feelingly about that, because I do know whereof I speak. I could give striking illustrations that have come to my attention during the last three months. I do not think for a moment the minister desires that he should have a narrow political patronage viewpoint in connection with the administration of this great trust, but I am one of those who realize that no minister can get along at all unless he is aware that in the very nature of things his department and he personally represent a political party and that necessarily there must be some recognition of that fact. But if that becomes paramount to every other consideration the result is disastrous, and in many departments evidences are not lacking, which I could easily recall if it were thought desirable, that this pressure is becoming very great. In the very nature of things that was bound to be so. At another time this session I shall have something to say about that condition, which has manifested itself in many ways. Ever since 1896 we have had debates and discussions in this house about that matter, with efforts made to arrive at conclusions. We made a step forward in connection with our civil service commission and our merit plan in awarding positions to those who might be qualified, but of course there is still the difficulty as to who shall tender, who shall sell or who shall profit, and as long as human nature is as it is that is bound to continue. I only hope the minister will be able to resist it to the greatest possible extent. For instance, I could give an illustration in connection with insurance policies dealing with certain properties in this country, not under the minister. A notice is given terminating the insurance, with the short date return of premium. That means great loss. Instead

Department oj Mines
and Resources
of allowing the policy to run out, as it should, and then renewing it with your friends it is cancelled at once with the short date return of premium, with added cost to the country, Or in this instance to a harbour commission, and the additional expenditure for premiums.
I mention these things because unfortunately I have been through that experience. I hope the minister will be able to achieve his expectations and realize his hopes; for from the frank statement he has given the committee I think he has a clear appreciation of his difficulties and a determined mind in regard to accomplishing the improvements that he has designated. As far as the civil service commission is concerned in matters of this kind, with the limitation that the minister has mentioned-that is, having limited his field of choice-I think he should be permitted to make the necessary organization within that limited personnel, rather than submit it to someone else. I quite concur in the view that he has presented. It is the view that I should like to feel was held by any minister undertaking the work, or by myself if I were undertaking it. I think the limitation that he has imposed upon himself, that is, that he will make his choice as far as staff is concerned within the staff as it now exists, because of their vested rights, fulfils all that he might be reasonably asked to do, and the government have done all that might be reasonably expected of any administration under present conditions.
Amendment (Mr. Crerar) agreed to.
Section as amended agreed to.
On section 2-Definitions.


The CHAIRMAN:: Shall section 2 carry?


Richard Bedford Bennett: With the necessary
changes.


Frederick George Sanderson: The amendment covers all the clauses, I think.


[Stage Direction]
Section agreed to.
Section 3 agreed to.
On section 4-Chief officer.
James Shaver Woodsworth: The minister has given the figure of 18,000 to $10,000 as the salary of the deputy minister. What will be the approximate salaries of the proposed directors?


Thomas Alexander Crerar: The salary of the deputy minister of course will remain at the level of the salaries of other deputy ministers. As far as the salaries of the directors of branches or divisions are concerned, at the moment I am not in a position to give the house that
information. I should say at once that probably they will not all be uniform, because I think the degree of responsibility will vary. As my own opinion in the matter I may say simply that with regard to the directors of these branches it would be a mistake to limit their salaries too greatly and as a consequence possibly fail to retain the services of efficient men.


James Shaver Woodsworth: It seems to me that if we are to have the savings that the minister suggests, the directors would hardly receive the salary ordinarily received by deputy ministers.


Thomas Alexander Crerar: No, they would not get the salary of a deputy minister.


James Shaver Woodsworth: Then in determining the salary, or in advancing anyone from any other department of the civil service to the position of deputy, has the civil service commission anything to say?


Thomas Alexander Crerar: Deputy ministers are appointed by the governor in council, not by the civil service commission.


James Shaver Woodsworth: I understand that, but the directors of this new branch of the service I understand are not to be appointed by the governor in council.


Thomas Alexander Crerar: Yes, they are.


James Shaver Woodsworth: Then will they be appointed oni the recommendation of the civil service commission?


Thomas Alexander Crerar: No.


James Shaver Woodsworth: Will the civil service commission have anything to do with determining their salaries?


Thomas Alexander Crerar: No.


James Shaver Woodsworth: It seems to me that is rather a retrograde move, a breaking in on the work of the civil service commission.


Mr. BOULANGER:: Hurrah!


James Shaver Woodsworth: The hon. member for Rellechasse (Mr. Boulanger) says "Hurrah!" He failed a little while ago with a particular bill, but I am well aware that he and a good many in this house would like to diminish the present work and importance of the civil service commission. This seems [DOT]to me like another move by which that might be accomplished. I cannot see how efficiency can be maintained throughout the civil service if the higher positions are to be given to men or women from outside that service. If the civil service commission is to be relegated to the comparatively unimportant
3540	COMMONS
Department oj Mines and Resources
work of appointing junior clerks, we ought to know it. I cannot see how men of ability can be expected to enter the civil service and remain in it if they know that the higher positions are to be granted to people from outside. I refer to positions as 'higher in the sense of, being of more influence and responsibility, and, what generally goes with that, commanding higher salaries. It is unfortunate if we are to put this new type of official designated "director" in such a position as that. The minister admits that there are too many people on the staff of these departments now and that the staff should be considerably reduced. I think that if it be at all possible, if there are competent men available in the service, men who have proved their efficiency in the service, they should be chosen for the positions now being created.


Thomas Alexander Crerar: The hon. member surely could not have been in his seat when I made my statement-


James Shaver Woodsworth: I listened very attentively.	.


Thomas Alexander Crerar: -because I definitely
stated, or at any rate intended to, that that was precisely the intention of the administration in creating these positions. I said I did not wish to bind myself absolutely as far as the directorships were concerned, but I can say that I think the directorships can all be filled from the present staffs. And may I add a further word. My hon. friend probably has not had much experience in administration of this kind, but any minister, in a vast department such as this, would be very foolish if he did not seek to get experienced and efficient men at the head of the divisions and branches. If he should allow any other consideration than that to govern him he would be piling up trouble for himself. I can assure my hon. friend that I certainly do not want to do that. As I have already stated, in a reorganization of this large department there are bound to be some disappointments; that I think is inevitable. But I have already said, and I wish again to make it clear, that in the reclassification of these positions or the reorganization of the whole work of these five departments, or four departments and one branch, the aim will be to work as little hardship as possible. The leader of the opposition (Mr. Bennett) was good enough to refer to that point. I am fully conscious of the difficulties in that regard. I do not expect that the economies that can finally be brought about by the reorganization that is to take place will be achieved in the course of a few months, possibly not in a year. Certainly there will be no additions in the [Mr. Woodsworth.J
departments. There is the lessening of numbers in the ordinary course; servants reach the retiring age and take their superannuation allowance; some resign to take better positions elsewhere, and lady members of the staff get married-all these causes in course of time will operate to reduce the staff. It may be, and I want to thank the leader of the opposition for his suggestion, that in certain cases special arrangements may have to be made so as not to work a hardship on any member of the staff. But I should like the hon. member for Winnipeg North Centre to appreciate that as far as I am concerned we shall work this out with the minimum of hardship. I desire to get the highest degree of efficiency possible in the administration, and I must ask my hon. friend, whom I have known for a good many years, and who has known me, to accept that assurance.


James Shaver Woodsworth: I am quite willing to accept the word of the minister; I have profound respect for his good intentions. But I want to be sure that the interests of the civil service are safeguarded, and I am always afraid when I see clauses introduced which contain the phrase, "notwithstanding anything in the Civil Service Act." We are constantly creating new types of service and new branches, and very often people from outside the service are brought in. It seems to me that, having a department that is overstaffed like this, when new services are created there should be found in the existing departments persons who are qualified to take the new positions. That is what I want to emphasize. I do want to keep that aspect of the case before the committee.


Richard Bedford Bennett: I think the minister has
overlooked one thing. The minister of course holds office during pleasure, but it is not correct to say that the deputy minister and other employees hold office during pleasure; for they have acquired rights under the superannuation fund and the Civil Service Act. That was definitely dealt with in a case that came up from Australia, in which it was pointed out that all servants of the crown, military and civil, hold office only during pleasure; but where under the provisions of a civil service or other act they have acquired rights by reason of payments to a superannuation fund, they do not hold office during pleasure. The words "during pleasure" as applied to the deputy minister and the directors and others would be improperly used in this statute. I am certain that the Department of Justice will so advise, because already that question has come under consideration in connection with another matter. It was dealt with in the Reilly case, in which the privy council held
JUNE 9, 1936	3M1
Department of Mines and Resources
that as the office had been abolished there was no office to which the former employee could render service and therefore he could not maintain a claim. The question of contractual rights they disregarded for the moment, saying they would leave it for further consideration. But they referred to the Australian case-I do not carry the name in my mind, but I think one of the parties was Stroud. That case had to do with a very important matter, the question of the right of one who has paid into the superannuation fund not to have his position destroyed without his being able to claim the benefits that accrued to him by reason of that statute. And to say that he holds office during pleasure I am sure the minister will see is at variance with the provisions of the Superannuation Act and the Civil Service Act. That does not apply to other than those who hold office under the Civil Service Act, but under that act they have acquired vested rights-perhaps that is not the accurate legal term, but it carries my meaning to the minister-which cannot be terminated at pleasure.
For instance, there is the age question. A moment ago the minister referred to the fact that when a civil servant reaches the age of sixty-five he may retire, but when he reaches the age of seventy, unless special steps are taken to protect his position, he must retire. As this clause reads you could eliminate a deputy minister on the assumption that he holds office during pleasure, and that applies to the directors too. It is true that that was so until there were civil service and superannuation acts, but I must repeat that the effect of the combination of the two is to create a right which is not terminable at pleasure. It must be terminable in accordance with the terms and provisions of the statute in that behalf. That overcomes the very point made by the hon. member for Winnipeg North Centre. As it stands to-day, unless something is done the question raised a minute ago in connection with reaching the ages of sixty-five or seventy does not arise at all. Notwithstanding this, the employment of anyone could be terminated. The law has intervened to prevent that, and I do direct attention to the fact that in drafting the bill it has been overlooked.


William Lyon Mackenzie King: May I say to my right hon. friend that the Department of Justice carefully reviewed the entire drafting of the measure, and the section in question was inserted deliberately. It would seem that the preceding words were sufficient. They are "shall be appointed or employed in the manner authorized by law." Surely that covers it.


Richard Bedford Bennett: From what is my right hon. friend reading?


William Lyon Mackenzie King: From subsection 3 of section 4.


Richard Bedford Bennett: But that subsection is limited in application to officers, clerks and employees. At present I am talking about directors and deputy ministers who pay into the superannuation fund. I noticed the words to which my right hon. friend has directed attention.


William Lyon Mackenzie King: I think it has always been recognized that when a deput} minister receives his appointment from the crown it is the prerogative of the crown t( have the position terminated at any tim, it considers necessary.


Richard Bedford Bennett: There was a time when they did not pay into the superannuation fund. I shall cite the case. Mr. Sifton desired to get rid of the then deputy minister of the interior. Certain questions arose, and I think if the Prime Minister will look up the correspondence he will then become aware of the circumstances to which I have referred. The declaration of law is that it is the prerogative of the crown to dismiss at pleasure any servant, military or civil. That is the whole principle which underlies our system. Bu where there is a statutory provision-and in this case there is created a statutory right-to superannuation, to which the crown itself contributes every year with respect to every officer, as distinguished from the minister himself, it is proper to say that the minister holds office during pleasure for he does not contribute to such superannuation fund. Other officers who pay into the superannuation fund acquire rights upon such payments being made, and the crown recognizes it by making contributions to that fund. Therefore that constitutes a contract, and is the distinction between the Australian case and the Reilly case, as was pointed out in the judgment of the court. I shall be glad to give the minister the reference to which I have referred.


Mr. LAPOINTE (Quebec East):: I have
the Reilly case before me.


Richard Bedford Bennett: The Australian case
referred to is Gould v. Stuart.


Ernest Lapointe: And is reported in 1896 appeal cases.


Richard Bedford Bennett: Have I made my point
clear to the Prime Minister, namely that there is a vested right accrued by reason of the payment in of money to the fund? It would be all right if it were not for the fact that the minister has said he proposes to
3542	COMMONS
Department oj Mines and Resources
make his choice from within the class that has acquired the right. Having acquired the right it cannot be taken from them at the pleasure of the crown, if there is a provision in the statute dealing with the situation. There is provision in the statute as to age, one a discretion which may be exercised by the servant and the other a right to termination by the crown. It is automatic termination by the crown when he reaches that age, unless action is taken to extend it. There are cases of that kind in the estimates, as is known, and other cases appearing in the record. A servant who had reached the age of seventy-two or seventy-three was released from such service on the ground that a certificate could not be given that his services were indispensable to the department. The Civil Service Act covering this situation, as it does, you can no longer use the words "during pleasure." I believe I can satisfy the minister upon the point.


William Lyon Mackenzie King: Would it not be correct to say that any rights acquired by virtue of any statute and which were forfeited by the termination of a position would constitute a ground for compensation?


Richard Bedford Bennett: Yes.


William Lyon Mackenzie King: And it should be done. But that is a very different thing from assuming that once an appointment is made the appointee acquires the right to office for an indefinite term simply because some statute either compels or permits him to be associated with the crown in making a contribution towards a fund, such as the superannuation fund.


Richard Bedford Bennett: 
Ernest Lapointe: Is the wording of our statute different from the wording used in other statutes with reference to deputy ministers?


Richard Bedford Bennett: I was sending out for the statute in order to satisfy myself on that point. When you come to subsection 3 of section 4 you find these words:
Such other officers, clerks and employees as are necessary for the proper conduct of the business of the department shall be appointed or employed in the manner authorized by law and shall hold office during pleasure.
That should read "according to the provisions of the Civil Service Act and shall hold office in accordance with the provisions of the Civil Service Act." That is the real truth about that. Sir Richard Couch, in the judgment from which I have just read, I think states the position of the civil servants in this country, as well as of those in New South Wales, as clearly as it is possible to state it- if they conduct themselves with that measure of propriety which the statute provides for. their services cannot be dispensed with at the caprice of successive ministers or at the pleasure of the crown. Sir Richard Couch has said that their position is one that involves an exception being made to the application of that doctrine.


Ernest Lapointe: I read in the explanatory note that this subsection is in the usual form. I have no objection to looking further into the matter.
Mr. BENNETT; But the Minister of Justice sees what I mean about subsection 3?


Ernest Lapointe: Yes.


Richard Bedford Bennett: They are slightly inconsistent.


Ernest Lapointe: Subsection 3 is in the usual form.


Richard Bedford Bennett: It certainly is not in the usual form in which we have passed such clauses.


Ernest Lapointe: That is what it says, but I am quite willing to look into the matter.


Richard Bedford Bennett: The Minister of Justice will recall that we had quite a considerable debate on one occasion in connection with a certain bill, the title of which I do not recall at the moment. At that time we provided that the provisions of the Civil Service Act should apply.


William Lyon Mackenzie King: Perhaps this section could stand.


Alan Webster Neill: I have no doubt that this reorganization will effect a very great economy, and I believe it will result in improved efficiency, but I am also afraid that it will mean the dismissal of a large number of employees, probably more than 1,000. If this happens the government and the minister are going to be very unpopular in certain circles. I congratulate the government and the minister upon having the courage to do this at this time, and I congratulate the government and the Minister of Railways and
3544	COMMONS
Department of Mines and Resources
Canals (Mr. Howe) upon carrying out the reorganization of the harbour boards, an equally politically unpopular move. However, I am certain that that move will be of benefit to the country at large. I am sorry the Minister of Fisheries (Mr. Michaud) is not in his place, because I should like again to urge the necessity of cutting out some of the dry rot and superfluities in his department.
I am quite sure that if that were done it would result in greater efficiency and much economy. The fear has been expressed that these released men will be thrown upon the street, and I should like to ask the minister how many of them will be taken care of under the provisions of the Superannuation Vet.


Thomas Alexander Crerar: I cannot state the number at the moment. However, I know there are several who have reached the age of superannuation. Except in a few cases, these positions have not been filled for several months as we realized that when this consolidation took place we would probably have a superfluous number of employees. It is impossible for me to state at the moment just what reduction there will be in the staff of the new department as against the corresponding staffs in the other departments which are being merged. I can only say to my hon. friend that we propose to deal with this matter in the manner I have already suggested. The last thing on earth I desire to do is to work hardship on anyone who has been in the service for a number of years and has rendered faithful service during that period.


Alan Webster Neill: That is not the point. I was under the impression that the large majority of civil servants in Ottawa were contributors to the superannuation fund and that if they put in ten years' service they were entitled to superannuation. Is it not a fact that the great majority will be eligible for superannuation?


Thomas Alexander Crerar: Will receive superannuation if they retire?


Alan Webster Neill: Yes.


Thomas Alexander Crerar: Yes; I think that is true.


Mr. HEAPS:: The question of superannuation has just come up. Is it intended to superannuate any of the employees affected by this amalgamation?


Thomas Alexander Crerar: At present I cannot answer that definitely.


Abraham Albert Heaps: It is evident that some of the employees of the department will find [DOT] themselves out of work when this amalgama-

tion takes place. If I understand the superannuation act correctly, those persons who have been less than ten years in the service and have been paying into the superannuation fund are not entitled to receive back from that fund any of the moneys they have paid in. In the event of certain employees being no longer required, I am wondering whether some exception should not be made with respect to paying them back the money that they have paid into the fund.


Thomas Alexander Crerar: I regret that I cannot give information on the point the hon. gentleman has raised. Whether there is a limit of time within which superannuation becomes effective, I cannot say.


Richard Bedford Bennett: There is.


Abraham Albert Heaps: I am under the impression that if a person pays into the fund for a period of less than ten years and is dismissed or retires he is not entitled to receive back any of the moneys he may have paid into the fund.


Thomas Alexander Crerar: That, as I understand it, is only if he is dismissed for cause.


Abraham Albert Heaps: I believe it applies to all employees.


Richard Bedford Bennett: Section 3 of the Civil Service Superannuation Act reads:
This part applies to every person who becomes a civil servant after the 19th day of July, one thousand nine hundred and twenty-four, and to such other civil servants as elect under the provisions of any of the other parts of this act to become contributors.
Section 6 provides:
Except as hereinafter otherwise provided the superannuation allowance mentioned in the next preceding section shall be one-fiftieth of the average salary received by the contributor during the last ten years of his service multiplied by the number of years of his service, not, however, exceeding thirty-five years.
Then there is a provision as to how the calculation is to be made. Section 7 then provides:
If a contributor becomes disabled or otherwise incapable of performing the duties of his office, or if his office is abolished, and if he is ineligible by reason of age or length of service for a superannuation or retiring allowance under this act, the governor in council may grant him a gratuity not exceeding one month's pay for each year of his service; or, if he is required to retire on marriage, a gratuity not exceeding the amount of his contributions made under this act without interest.
Then there is provision with regard to gratuities to widows, mothers and so on.

Department oj Mines and Resources


Abraham Albert Heaps: Suppose a person has paid into the fund for a period of years and is retired from the service. Is there no provision for returning the moneys paid in?


Richard Bedford Bennett: The whole basis of the fund is that there shall be appreciation to it by reason of the fact that people have paid in and left- Suppose I have a policy in an insurance company and do not pay the premium after a certain length of time: no one suggests that I can get my money back unless I have a contract. That is one of the factors which assist companies in paying claims, because the cost of carrying after five years is commensurate with the money paid in. One of the factors which add to the superannuation fund is these payments that cannot be handed back. There were half a dozen cases of that kind which we had to explain at. some length, and with much unpleasantness.


Abraham Albert Heaps: Then a person who has paid in for seven or eight years might be retired by the government as a result of amalgamation of departments and would not be entitled to a refund of moneys paid in.


Richard Bedford Bennett: That is a special case, abolition of office.


Abraham Albert Heaps: Then the point is cleared
up.


William Lyon Mackenzie King: The provision which the leader of the opposition has read makes it clear that, where there is ground the governor in council may grant a gratuity to meet a case of that kind. And that is the general practice.


Abraham Albert Heaps: I assume that the general practice will follow in the case of amalgamation.


William Lyon Mackenzie King: Surely.


Abraham Albert Heaps: Where individuals may be affected?


William Lyon Mackenzie King: Surely.


Ernest Lapointe: I would point out that as regards deputy ministers the language of the Civil Service Act is the very same.


Richard Bedford Bennett: Yes, it is. I have it before me.


Ernest Lapointe: As regards other employees, section 20 has the *words "and shall be during pleasure." Then section 52, with regard to dismissals, provides:
Subject to the provisions of section 3 of this act, nothing herein contained shall impair the power of the governor in council to remove 12739-226
or dismiss any deputy head, officer, clerk or employee, but no such deputy head, officer, clerk or employee, whose appointment is of a permanent nature, shall be removed from office except by authority of the governor in council.
The authority exists, therefore, in virtue of the general law. The exception in section 3 merely mentions the commissioners of the civil service commission. I think that on the whole it is exactly the same wording.


Richard Bedford Bennett: The language is the same, but I submit that there has been no amendment of the statute, as there should have been when the Civil Service Act assumed its present form, because as pointed out in the judgment which I have read from New South Wales, the usual common law provision no longer obtains for the reason that by statute we have provided for this very contingency. However I am not going to argue the matter further. As the Prime Minister has indicated, the governor in council may grant:
(a) to any contributor who has served in the civil service for ten years or upwards and
(i)	who has attained the age of sixty-five years, an annual superannuation allowance to the amount specified in section six of this act, or
(ii)	who before attaining the age of sixty-five years becomes disabled or otherwise . incapable of performing the duties of his office, or who retires from the civil service by reason of the abolition of his office, an annual retiring allowance equal to the superannuation allowance to which he would have been entitled if he had attained the age of sixty-five years at the date of such disability or retirement.
In other words, the very contingency to which reference is made is provided for by the statute. That is abundantly clear.


Abraham Albert Heaps: Is there any special reference to contributors who have been less than ten years in the service?


Richard Bedford Bennett: Yes. If they have been less than ten years in the service they have to be dealt with in a special way.


Mr. MacNICOL:: Will there be a special
director who will have general jurisdiction over the development of resources?


Thomas Alexander Crerar: There will probably be
several. There will be a director of mines, which is one of the great resources; there may be a director of parks, which is another great resource, and there will be a director of Indian affairs. I do not know that the Indian administration can be described exactly as a resource. Then there are lands, forests and water powers.


Richard Bedford Bennett: Very few lands and
forests, though.

3546	COMMONS
Department of Mines and Resources


Thomas Alexander Crerar: Not a great deal. We have some, for instance, like the Petawawa forest reserve and others.


John Ritchie MacNicol: What I had in mind was that under the former organization of the Department of Interior there was a branch set up specially to develop industry in this country. The minister does not appear to be familiar with this branch, and perhaps I should further explain.
In the course of making investigations as to the development of industry and discussing the matter with various industrial boards, the Toronto industrial commission, the Welland industrial commission and others, I learned from the directors of several of these boards that they had been helped considerably by a branch of the Department of Interior called, I am not sure that I have just the right name but I think it was the resources branch. One of these directors informed me that this particular branch of the Department of the Interior was more responsible than any other agency for the development in Canada of rayon, cellophane and allied industries.


Richard Bedford Bennett: I am afraid they were boosting for a job.


John Ritchie MacNicol: Perhaps they were. Nevertheless if that is a fact, there is a branch of the department which can render considerable service in Canada in providing employment. In the course of the development of the resources branch of the department, which is now going to be under the minister, a great number of discoveries will be made throughout the country, new finds, new minerals, something new that can be manufactured, and if these discoveries could be presented to industrial boards like the Toronto industrial commission, or the Montreal industrial commission, if Montreal has one, or the Welland industrial commission, or the Hamilton, industrial commission, perhaps some new industries could be started. But if capital is not made conversant with discoveries of that kind, new industries cannot be started in consequence. It appears to me that if this particular branch of the department were developed to the limit, much new employment could be given to Canadians. All I have in mind is that there is an opportunity in the development of the resources branch of this proposed department to create new employment; certainly that is something which is greatly required in this country, and they could do it by bringing to the attention of

manufacturers and investors, or groups of such men, the possibilities contained in such finds. If the industrial commissioners who informed me were correct-and I keep in mind what the right hon. leader of the opposition suggested-and if the resources branch of the Department of the Interior has done good work in bringing to their attention information whereby the development of industry in this dominion has been encouraged, then undoubtedly there is an opportunity to provide more employment in Canada by bringing to the notice of those interested the advantages of developing any new finds which the resources branch may discover. I am convinced that an opportunity exists there, and I urge the minister to develop this particular branch to the limit.


Thomas Alexander Crerar: I think my hon. friend has reference to the work carried on by the forest products laboratories, which carry on quite extensive research work as to the uses that may be made of different woods. They have, so far as my information goes, rendered very useful service to various branches of industry associated with forest products.


Richard Bedford Bennett: That is largely a testing laboratory, though.


Thomas Alexander Crerar: Yes, but it does investigational work. It is not the intention to do away with that. That work will be carried on. In fact, all the work carried on by the various departments will be carried on in the future, but we hope by organization to operate on a more economical basis, and, I trust, probably a more efficient, basis, because, of course, one probably can never reach the maximum of efficiency.


Mr. McCANN:: Does not the work outlined by the hon. member for Davenport (Mr. MacNicol) 'fall within the province of the national research council?


Thomas Alexander Crerar: It has been carried on for years by the Department of the Interior, and I am informed that more recently it has been carried on more or less in conjunction with the work which is being done by the national research council.


Richard Bedford Bennett: It is in Montreal.


Thomas Alexander Crerar: Yes. The leader of the opposition raised the point, when the estimates were under consideration, that there might be a further coordination, indeed a merging, of this work with that of the research council. I am not in a position at the moment

Department oj Mines and Resources
to say how advisable or inadvisable that might be. All I can do is to assure my hon. friend from Davenport that there is no intention to abandon that work.


[Stage Direction]
Section agreed to.
Sections 5 and 6 agreed to.
On section 7-Organization of the department.
Thomas Alexander Crerar: I have an amendment to move, Mr. Chairman, to section 7, as follows:
That in line 25, after the word "department" the following words be inserted, "and the classification of positions therein"; and that in line 28, after the word "department," the following words be inserted, "and the classification of positions therein including the establishment of rates of compensation for each class of position thereunder."


William Lyon Mackenzie King: I might say, Mr. Chairman, that the proposed amendment is being inserted because of a suggestion made only to-day by the Department of Justice upon further reviewing the measure. The memorandum of the deputy minister states:
There may be some doubt as to the power of the governor in council to provide for the classification of the service in each department on the immediate organization thereof in view of the fact that the word "organization" may be restricted in its meaning to that as used in the Civil Service Act, and in order to remove this doubt it is suggested that the bill be amended in committee.


Richard Bedford Bennett: I was wondering whether it were necessary to add, "notwithstanding anything contained in the Civil Service Act."


William Lyon Mackenzie King: I think this amendment will cover it.


Richard Bedford Bennett: I think perhaps it would.
Section as amended agreed to.
Section 8 agreed to.
On section 9-Department, minister and deputy minister substituted.


Richard Bedford Bennett: Might it not be desirable in subsection 2 of section 9 to say that the officer in charge of the branch of Indian Affairs may discharge all duties that have heretofore been discharged by the deputy superintendent general of Indian Affairs? I see that this has been provided for in one way, but perhaps the minister will recall that this official is called the deputy superintendent general of Indian Affairs, and it struck me as I read this section that it might be desirable to insert those words. Of course the minister will exercise his own view as to that.


William Lyon Mackenzie King: He is a
deputy minister just the same, is he not?
12739-226J


Richard Bedford Bennett: He has only the rank;
he is referred to as the deputy superintendent general of Indian Affairs.


William Lyon Mackenzie King: I think the
note on the opposite page explains the matter.


Thomas Alexander Crerar: As I understand it, subsection 2 of section 9 simply vests in the director who shall have charge of Indian Affairs the powers now vested in the deputy superintendent general.


Richard Bedford Bennett: Quite so. The only
question I was raising was whether or not this is an adequate expression of that intention.


Ernest Lapointe: My right hon. friend! suggests that we should replace the words "deputy minister" in line 37 on page 3 of the bill by the words "deputy superintendent general of Indian Affairs"?


Richard Bedford Bennett: Yes; that was my view.


William Lyon Mackenzie King: I think that
would be better.


Thomas Alexander Crerar: Then I move, seconded
by the Minister of Justice, that in line 37 on page 3 the words "deputy superintendent general" be substituted for the words "deputy minister."
Section as amended agreed to.
On section. 10-Territories and crown lands.


Grote Stirling: Were not these lands
under the control of the Department of the Interior?


Thomas Alexander Crerar: Yes.


Grote Stirling: Then why particularly
refer to them, after section 5? AH those things which were previously under the Minister of the Interior now come under the Minister of Mines and Resources. Why mention these particularly?


Richard Bedford Bennett: Section 5 refers to powers and duties, and this section refers to physical property.


Abraham Albert Heaps: Would the minister be good enough to tell me the population of the Northwest Territories and the Yukon at the present time?


Thomas Alexander Crerar: I am afraid I have not that information before me at the moment.


Richard Bedford Bennett: The minister put it on
Hansard the other evening at my request.


Thomas Alexander Crerar: My recollection is that
the population of the Northwest Territories is about six thousand and that of the Yukon-
3548	COMMONS
Department of Mines and Resources


Mrs. BLACK:: Not quite five thousand.


[Stage Direction]
Section agreed to.
Section 11 agreed to.
On section 12-Coining into force.
Richard Bedford Bennett: I am not sure that it
would no* be desirable for the minister to have in this measure a provision that on proclamation the whole or parts of the statute may come into force. Once the statute is proclaimed there might be some difficulty in administration in respect of some af these branches, whereas if the minister Drought the statute into effect by proclamation in respect to appointments and some other sections he might be able at a later date to deal with the question of directors. He does not want a hiatus between the time the statute is proclaimed and the time it is actually in effect. It will be recalled that we did that only the other evening in connection with another measure.


Thomas Alexander Crerar: I think that is a good
suggestion. I move, seconded by the Minister of Justice, that this section be amended in line 15 on page 4 of the bill to read as follows:
This act in whole or in part shall come into force upon a date or dates to be fixed-
And so forth.
Section as amended agreed to.
Bill reported, read the third time and
passed.



DEPARTMENT OF TRANSPORT

[Stage Direction]
Right Hon. W. L. MACKENZIE KING (Prime Minister) moved the second reading of Bill No. 80, respecting the Department of Transport.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Sanderson in the chair.
Section 1 agreed to.
On section 2-Department of Transport.
Richard Bedford Bennett: I suggested that the
name of this department should more appropriately be that of communications, for reasons which I think are apparent in section 5, but I am not going to do more than say I still believe that term would be more indicative of its real functions.


William Lyon Mackenzie King: In speaking on the resolution on which the bill is based I drew attention to my right hon. friend's preference for the use of the word "communications," but the government's view is that "communi-
[Mr. Crerar.l
cations" relates rather to the transmitting of information than to the transporting of persons or commodities which is the function of transportation in its different forms. Communications would apply to such services as telephones, telegraphs and the postal service, but the word "transport" signifies rather the conveyance and transport of commodities or persons. As airways and highways and railways and waterways are largely for the purpose of the transport of commodities and persons it is considered that the word "transport" is more appropriate.
Also I might point out that a similar department in Great Britain is known as the Department of Transport.


Richard Bedford Bennett: Yes; I am familiar with
that.


William Lyon Mackenzie King: And the reasons which governed there in the selection of the designation to be given this department of the public service seem to be equally applicable here.


[Stage Direction]
Section agreed to.
Sections 3 to 6 inclusive agreed to.
On section 7-Governor in council may make regulations.
Richard Bedford Bennett: I find it difficult to
understand why in the old statute the word "ascertain" was used or is a correct word to use in connection with tolls. The section says "other works under the management or control of the minister, and for the ascertaining and collection of the tolls, dues and revenues thereon." That is taken from the old statute, but I cannot see how "ascertaining" is applicable. It should be "fixing." How can the governor in council "ascertain" the tolls except by fixing them as provided by statute? The minister of transport now makes a recommendation for the fixing of the tolls. The word "ascertaining" is in the original wording but I cannot think it is apt.


William Lyon Mackenzie King: The reason for retaining it is because it was in the old section.


Richard Bedford Bennett: But is that a good reason?


William Lyon Mackenzie King: There is no
particular objection to changing it, but it has been deemed advisable to hold to the old language.


Ernest Lapointe: There
must be some reason for it.


Richard Bedford Bennett: My hon. friend is more
of a Conservative than I am.


Ernest Lapointe: If we are to change something I want to know why.

Department of Transport


Richard Bedford Bennett: The minister must fix
the tolls; there will be no "ascertaining."


[Stage Direction]
Section agreed to.
On section 8-Organization of the department.
Clarence Decatur Howe: There is an amendment required, exactly similar to that made in the previous bill.
Mr, CRERAR: I move:
That in clause 8. page 2, line 41, after the word "department" the following words be inserted:-
"and the classification of positions therein," and in line 44 after the word "transport" the following words be inserted:-
"and the classification of the positions therein, including the establishment of rates of compensation for each class of position thereunder."


Richard Bedford Bennett: What I said with respect to a previous bill applies with equal force to this. In previous statutes we have provided for a condition that has been modified by the enactment of three statutes, the Civil Service Act, the Civil Service Insurance Act and the Civil Service Superannuation Act, and the language should be modified to meet the new conditions. But I leave that for the moment. The only point I wish to make is: Have we the minister's assurance that in this measure, as in the Department of the Interior bill, all positions mentioned are to be filled from within the service as it now exists? That, I think, is provided for, but I want to be clear that that is the understanding.


Clarence Decatur Howe: I am glad to give that assurance. In fact I am advised that under the wording of the clause it is necessarily so.


Richard Bedford Bennett: That is what I believe.
Section as amended agreed to.
On section 9-Officer to perform duties under act or contract.


Mr. FINN:: I believe this is one of the most important bills that has been introduced, because it involves the merging of several departments, namely the Department of Railways and Canals, the Department of Marine, the branch of civil aviation and the radio branch. I have not had an opportunity to make a close study of the bill, but I should like to call the attention of the committee to the fact that the minister who is to administer the measure must do so in different departments. I understand there will be a special board to deal with harbours, a condition which has arisen out of the centralization of authority
in Ottawa instead of decentralization in various ports. In the second place the bill gives the Minister of Railways and Canals, who is to be known as the Minister of Transport, control over the railways of Canada, and a section of railway in the United States running between Chicago and Detroit. Further, it places under his jurisdiction a piece of railway in Canada which is not part of the Canadian National railway system, namely the Intercolonial railway. The Canadian National Railways is a corporation, a specific entity in itself. A fair, broad interpretation of the measure shows that there will be an appointment of seven gentlemen of whom one is to be president and one is to be chairman of the board. My understanding is that those officers will be named, and that the remaining five will serve under them.
The minister has been asked whether in his administration he will follow the example set by the two Conservative administrations which preceded the one headed by the present leader of the opposition, namely, whether he will adopt a process of decentralization. He was asked whether directors would be appointed to represent each province. The Right Hon. Arthur Meighen, now Conservative leader in the Senate, at that time stated clearly and specifically that the representation of the various provinces by men who were competent to sit as directors constituted the best kind of management. Such representation would entail nine members, in addition to the president and the chairman of the board. I asked the minister, further, whether or not in the appointment of directors consideration would be had for territorial divisions. In my view it is impossible for gentlemen sitting at Ottawa, Montreal, Toronto, Halifax, or any other single point, to follow developments and to note the improvements necessary in the various ports, and to realize the significance of the recommendation in the report of Sir Alexander Gibb to the effect that port managers should be appointed.


William Lyon Mackenzie King: The hon. member seems to be speaking with reference more particularly to certain provisions of the railway act. May I point out that this is a different measure, and provides only for the consolidation of existing departments. The situation to which the hon. member refers will not be affected one way or the other by the measure now under consideration. Possibly my hon. friend would not mind reserving any further observations he may have to make until we come to a discussion of the appropriate railway bill.

Domestic Finance Corporation


Robert Emmett Finn: With all due deference to the Prime Minister, may I say that the minister of transport derives his authority from the present measure.


William Lyon Mackenzie King: No, he already has authority, as Minister of Railways and Canals.


Robert Emmett Finn: Under the act passed in 1933 control of the railways is taken out of the hands of the Minister of Railways and Canals and put in the hands of three trustees.


Ernest Lapointe: This bill has nothing to do with that.


Robert Emmett Finn: I may be a bit hazy about
the matter, but I do not think I am.


Abraham Albert Heaps: Carried.


Robert Emmett Finn: My hon. friend says, "carried"; if he wishes to be carried he will find someone outside who will assist him. I am looking for light. I have no desire to delay the progress of the bill, but if hon. members will examine it they will find that the Minister of Railways and Canals will now become minister of transport and will have under his control railways and canals, Canadian National Railways and the administration of the Department of Marine and the branch of civil aviation, and radio. If it is the wish of the Prime Minister that the matter be discussed under the other measure, I would have no objection, but if the other measure does not offer an opportunity to discuss this subject I must ask the Prime Minister to permit a full discussion, so that we shall not be up against a condition whereby-


William Lyon Mackenzie King: I am afraid
the object sought to be served by my interruption is no longer possible as it is now six o'clock. When we reassemble, the hon. member may have all the latitude he wishes.
At six o'clock the Speaker resumed the chair and the house took recess.
After Recess
The house resumed at eight o'clock.



PRIVATE BILLS


[Stage Direction]
Mr. A. L. BEAUBIEN (Provencher) (for Mr. Chevrier, Ottawa East) moved the second reading of Bill No. 85, to incorporate Domestic Finance Corporation.
Hon. CHARLES A. DUNNING (Minister of Finance): Mr. Speaker, on behalf

of the government I rise to oppose the second reading of this bill to incorporate this small loan company. The house will remember that on the statute books there is legislation dealing with small loans generally, and it is the opinion of the government that this legislation does not adequately control the rates of interest which companies of this class may charge. During this session a committee of the senate has been investigating the matter of small loans, with, I believe, the object of recommending to the government constructive amendments to the general legislation governing small loan companies. My information is that the committee of the other house has reached certain conclusions which, I must say, are not adequate from the standpoint of the government. So far as I can understand, the conclusions reached by the senate committee in reality involve an increase in the nates of interest which may be charged by these small loan companies. I must be fair and say that these conclusions do not involve increases all along the line, but according to the best calculation that could be made by departmental officials, it would indicate that the increases would involve about forty per cent of the loans at present outstanding and payable to the companies which fall within the purview of the small loans' legislation.
The government holds the view that in these times of declining interest rates it is doubtful wisdom for parliament to incorporate more companies empowered to charge these high rates of interest. It is true that the general legislation enacted a few sessions ago endeavoured to set maximum rates and it is natural that the companies incorporated by parliament should in their advertising attach some importance to that fact. The impression has gone abroad, among certain sections of the public at all events, that parliament, by the general legislation now on the statute books, has authorized the charging of the maximum rates. I know that such was not the intention, and for this, among other reasons, the government was gratified to see the study being given to this matter by a committee of the other house. However, for the reasons I have indicated, the government cannot accept the solution proposed by that committee.
It is evident, Mr. Speaker, that this matter of interest rates and the conditions applying to small loans must again engage the attention of parliament. It is the intention of the government to initiate, between now and the next session of parliament, a further examination of the matter with a view to

Atlantic Loan and Finance Company
amending the existing general legislation. In the meantime, I must oppose the second reading of the bill now before the house which, to summarize, provides for effective annual rates of interest ranging from 24J per cent up to 94 per cent. I am sure that the house will regard such rates as excessive. It is true that in the general legislation now governing the matter the rates are expressed in terms of monthly rates, but there are various other charges, such as chattel mortgages and so forth, which operate to add to the annual interest charge or the monthly interest charge which the borrower has to pay. In connection with this bill and the one that follows, the government suggests that the house should reject them at this session on the principle that we should not incorporate any more companies of this kind until the general legislation can be brought more into harmony with present day conditions, so far as the cost of money is concerned.
Mr. T. L. CHURCH (Broadview):: Mr. Speaker, I am glad to see the minister opposing this sort of bill at the first session of a new parliament. Ninety per cent of these loans are made to industrial workers who are charged as high as 120 per cent. Not even by the widest stretch of the imagination could anyone say that these bills are for the general advantage of Canada. They are purely provincial. These companies came to parliament ten years ago. They took themselves out of the Companies Act; they took themselves out of the Usury Act and out of the Interest Act; they got private bills put through and then they went back home and held up the industrial workers. I am opposed to permitting interest rates of 40, 50, 60, 70, 80 and 90 per cent.
I happened to be in a building in which one of these loan companies is located and I heard eight or ten poor women complaining about what they had to pay. The riding which I represent is overrun by these shark loan companies and I wish to protest against this particular type of legislation. The senate has proposed interest rates of two per cent per month, but 24 per cent per annum is too much. These companies not only charge exorbitant rates, but make the applicant take out chattel and other kinds of mortgages. This type of loan has been criticized by the county judges in the division courts of Ontario. I wonder how these bills got through parliament, and it is time parliament stopped this sort of thing. Farmers and fishermen are provided with loans at low rates, but the industrial worker who makes up fifty per cent of the people of this country has to depend
upon this type of company for a loan, instead of a government loan. The industrial worker should be given reasonable rates of interest just as the farmer and the fisherman were under the Farmers' Creditors Arrangement Act.
I am glad to hear the minister oppose these bills. This legislation was enacted for the first time ten years ago when the present government was in office. These shark loan companies should never have been incorporated. They do not have them in England where the government is trying to help the poor man. We should put a stop to them in Canada and then we shall not be bothered any more with them in this parliament.
Motion negatived.



ATLANTIC LOAN AND FINANCE COMPANY

[Stage Direction]
Mr. PAUL MARTIN (Essex East) moved the second reading of Bill No. 86, to incorporate Atlantic Loan and Finance Corporation.
Hon. CHARLES A. DUNNING (Minister of Finance): Mr. Speaker, the remarks I made on the previous bill have not the same application to this one, which seeks to join two companies now holding provincial charters in Nova Scotia and doing business in that province. Section 5(b) of the bill indicates that the rates of interest to be charged are lower than those authorized in the general legislation adopted by parliament in the session of 1934. Pending the revision of the existing legislation I would not have the same objection to this bill as I have to the former one. The terms of this bill are much more moderate, though not as moderate in my opinion as they should be under the terms of general legislation. At any rate the same objection does not apply to .this bill, though it does apply to the next one on the order paper.
Richard Bedford Bennett: Wherein does this differ from the other?


Mr. DUNNING:: Section 5(b) (i) provides that the rate of interest on loans less than $350 shall be two per cent per month. For loans of S350 and upwards the Money Lenders Act will apply and the charge will be limited to twelve per cent per annum. The provisions of this bill are much to be preferred to the provisions in the other bills for the reasons above indicated. The rate of two per cent per month is less than that being charged now by all operating companies for loans less than $350.
While I do not advocate the bill, I am indicating that because it falls within the scope of existing legislation I have not the same objection to it as I had to the former bill.
United Credit Association


Richard Bedford Bennett: So does the other one. Whether we like it or not, the statute passed in 1934 brought the others under control. The interest rate was controlled.


Charles Avery Dunning: These people are voluntarily asking for less than the law provides.
Motion negatived.



UNITED CREDIT ASSOCIATION

[Stage Direction]
Mr. SAMUEL FACTOR (Spadina) moved the second reading of Bill No. 87, to incorporate the United Credit Association.
He said: With all that the Minister of Finance (Mr. Dunning) has said with reference to high rates of interest I thoroughly agree, and I agree with the remarks of the hon. member for Broadview (Mr. Church). But the minister's refusal to allow the incorporation of this company merely creates a monopoly for the existing companies, who will continue to charge the very rates proposed in this bill. Moreover, the legislation which is now being considered by the senate committee will apply to all companies that have received or that will hereafter receive incorporation from this parliament. In other words, if the senate and this house approve the recommendations of that committee they will apply to all companies now or hereafter to be incorporated. If this company is incorporated now and the government comes to the conclusion that the rates of interest recommended by the senate committee or by the committee of this house should apply, then they do apply to this company as well as to the five other companies. I wish to point out, however, that it is certainly not solving the problem to leave the five companies now operating to charge the very same rates of interest proposed to be charged by this company if incorporated, while refusing to allow the new concern to enter the business.
Hon. CHARLES A. DUNNING (Minister of Finance): With all that my hon. friend has said I agree. As I indicated with respect to the former bill, it is rather with a view to preventing the further extension of this evil that I take the attitude I have taken.
Mr. FACTOR:: Why not apply it to the other companies?


Charles Avery Dunning: I had hoped, as I indicated, that the study which was being made in another place would enable the matter to be dealt with at this session. It is now quite evident that this cannot be done. I admit that the action taken to-night is not constructive. especially having regard to the fact that the small loaning institution has a place and serves a purpose with respect to the needs of the industrial worker. In fact, I believe

that one of the most capable studies of that subject, made by the Russell Sage Foundation of New York, opens up a very useful field of investigation for anyone who, like myself, is appalled at the rates of interest charged. The study which is being made of this subject by the Superintendent of Insurance, a very capable actuary on whose judgment in these matters committees of the house have placed a great deal of reliance in the past, indicates not only that these rates are too high but also that the business of small loans is relatively by far more profitable net than any other type of financial business in the country. It indicates the need for a careful study by parliament of the means to be taken properly to regulate this business. I am sorry to say that it has been impossible for me during this session to give this subject the time and attention which it merits. I relied upon receiving from another place something which would be helpful, but that apparently has not occurred. We can only look forward to dealing with the situation effectively at another session, in the meantime preventing the further spread of the evil by refusing to pass bills incorporating more companies to do business along these lines. Certainly the house, having been unwilling to pass Bill No. 86, cannot consistently vote for the one now under consideration.


Alan Webster Neill: Will the rejection of this bill prevent these people from going to the provinces and getting provincial charters?


Charles Avery Dunning: I am glad my hon. friend raises the point. It is difficult for federal legislation to deal adequately with this problem. Many such companies are incorporated provincially under the aegis of provincial law, to do business within the provinces and in accordance with provincial charters. As to the constitutional aspect of the matter, that lam not competent to discuss at the moment, but I know a number of provincially incorporated companies are doing business. The reason I spoke favourably with respect to Bill No. 86 was that it had the effect of bringing two provincial companies under federal jurisdiction and therefore within the scope of legislation enacted by this parliament. However the house has seen fit to turn down even Bill No. 86, and that being the case, I do not think there is any argument in support of the bill now before us.


Thomas Langton Church: The
wording of this bill is exactly the same as that of the first two. This company proposes to operate in Winnipeg. If these people want a charter, let them go to the Manitoba legislature. The head office is to be in Winnipeg

United Credit Association
and the incorporators are David Slater, real estate agent, Gilmour F. Schoales, .insurance agent, and Patrick Herman McNulty, surgeon. Well, by the time the surgeon operates on the industrial worker the rate will be about 50 to 300 per cent, because there are a good many foreigners in parts of Winnipeg. That is the trouble. These companies operate to some degree among the foreign population and the rates that are charged should not be allowed. This bill proposes to take the company out of the federal Interest Act, out of the federal act with regard to usury, out of the federal Companies Act, and to give them a charter from this parliament for what is mostly a purely municipal business in Winnipeg. I doubt whether the company will lend money outside Winnipeg, and the rates are prohibitive. This is the first session of this parliament and we should put our foot down on this sort of thing from the start. If these people want a charter, let them go to the provincial legislature.


James Shaver Woodsworth: I suggest to the minister
the advisability, not merely of studying the Russell Sage book on this subject, but when he is preparing further legislation, of giving careful attention to the question of fostering credit unions, some of which are being successfully worked in our own country both in Quebec and in Nova Scotia. That is much more nearly in keeping with our needs here than the American experiment.


Richard Bedford Bennett: When similar measures
were before the house in 1934, I directed attention to the studies of the Russell Sage Foundation. I referred to a book that dealt with the matter at some length. I had no idea at that time of the extent to which the loan companies were serving, shall I say, a fairly useful purpose in the United States. But interest rates have so fallen since 1934 *that a rate which then looked like a reasonable maximum one, now seems almost ridiculous to contemplate. In view of what was said by the hon. gentleman who is promoting this bill, I think the government would still have time to amend the statute as we did in 1934, and to reduce the maximum rate from 2-J to li per cent per month or whatever figure the minister might consider reasonable under the circumstances.


Charles Avery Dunning: That is my difficulty,
lack of study.


Richard Bedford Bennett: Then for a year at least
this would accomplish the amount of good that control over existing companies would bring about, because we at that time passed
legislation affecting existing companies and others thereafter to be created. This bill provides for a low annual interest rate, but the implications lead to conclusions that are far from reasonable.
It occurs to me that there is much force in the arguments presented by the hon. gentleman in charge of the bill, and therefore I simply suggest that it might be desirable for the government to contemplate a short section dealing with what should be the maximum rate until such time as new legislation is enacted. Such a section would be very easy and simple to deal with. It is not true that the provinces have very much control over this matter because under item 19 of section 91 of the British North America Act exclusive jurisdiction with respect to interest rests with this parliament, and legislating on. interest rates we have been able to control to a very great extent the whole situation. That is the reason we are here in parliament.


Charles Avery Dunning: The legislation of 1934
does not control provincial companies.


Richard Bedford Bennett: No; but the general
usury act and the other acts that we have relating to interest control all interest transactions, and no province can deal with the question of interest rates as such because they are solely under our control under item 19 of section 91 of the British North America Act. Under these circumstances it occurred to me, and I would at least make the suggestion, that a short section would be all that would be required to deal with the matter while the minister is contemplating the legislation he may hereafter introduce. The difficulty at the moment is that with interest rates as low as they are it is not easy to determine what is a reasonable maximum rate. I quite realize that.


Charles Avery Dunning: I really have not sufficient information on which to base an opinion,


Richard Bedford Bennett: One might take the views of the officials of the insurance department in that regard.


Charles Avery Dunning: The rates suggested are
too high for me.


Richard Bedford Bennett: I realize the difficulty,
but on the other hand there is much force in the contention that otherwise for a year at least there is given a wider licence than heretofore prevailed for the necessitous to be dealt with, as the hon. member for Broadview (Mr. Church) has suggested, on the basis of man's necessity being man's opportunity,
Criminal Code-Fines

and the terrible necessity of some persons has sometimes offered the opportunity for exploitation and for-there is a word which is not elegant but which describes the situation -gouging to an extent which would otherwise be impossible. I think the bill must fall with the others.
Motion negatived.



CRIMINAL CODE AMENDMENT


[Stage Direction]
On the order:
Resuming the adjourned debate on the rnotion of Mr. Church for the second reading °f Bid No. 5, an act to amend the criminal code (fines and penalties).
Thomas Langton Church: I just wish to ask the Minister of Justice a question. The debate on this motion was adjourned in March so that the minister might consult the attorneys general of the provinces. As I have said, this bill is an exact copy of the law of England. I was wondering whether the minister intends to include the amendments proposed by this bill with the other amendments he has in view when his general bill amending the criminal code is brought down.


Ernest Lapointe: Mr. Speaker, I have communicated with the various attorneys general about this bill and have received their replies, and I shall be pleased to communicate them along with my own views when the bill amending the criminal code is before the house. It will be introduced this week and given a second reading, I hope, next week.
Order stands.



DEPARTMENT OF TRANSPORT

[Stage Direction]
The house resumed consideration in committee of Bill No. 80, respecting the Department of Transport-Mr. Mackenzie King- Mr. Sanderson in the chair.
On section 9-Officer to perform duties under act or contract.
Robert Emmett Finn: Mr. Chairman, when the committee rose at six o'clock I was making some references to Bill No. 80, creating a Department of Transport, as introduced by my right hon. friend the Prime Minister. I have no desire to prevent the committee or the house from going ahead with this legislation, but the Prime Minister indicated that there was another bill called the railway act, and I know of no such act that is before the house except the Railway Act of Canada, passed in

1919. As the bill now before us relates to transportation, perhaps the Minister of Railways will be able to indicate which bill the Prime Minister referred .to as the railway bill. Is it the act of 1919, which is a general act dealing with all railway matters, or is it the act dealing with the creation of the railway commission? I tried to look it up during the recess and I failed to accomplish two things, either to find the bill or to have something to eat. If the minister would indicate the particular bill the Prime Minister had in mind I should be in a better position to form a judgment.


Clarence Decatur Howe: The hon. member may discuss the matter he has in mind on the railway estimates or on the bill which went into committee this afternoon and which will come before the committee of the whole at the next sitting of the house.


Robert Emmett Finn: Which bill is that?


Clarence Decatur Howe: The bill for a railway from Rouyn to Senneterre. [DOT]


Robert Emmett Finn: I should like to say to the hon. minister that this particular piece of railway of which he speaks is very much like that oriental railway in the province of Quebec. Perhaps my hon. friend the minister would tell me how it would be possible for me, after this bill has been passed, to- discuss the questions that are involved in the bill and to bring forward any amendments I may have to suggest. That is a somersault I have never been able to make. In all kindness I would ask the minister to tell me on what other bill we oould intelligently discuss certain provisions of this Bill No. 80, which is now before the committee for consideration.


Clarence Decatur Howe: I do not think this bill provides a suitable opportunity for the discussion of the questions my hon. friend has in mind, for the reason that it does not change any existing situation at all. It simply groups in one department various powers now exercised by the Minister of Railways and the Minister of Marine. I should say that the hon. member could very well discuss the point he has in mind at the moment, on any railway legislation that may be brought down this session or on the railway estimates.


Robert Emmett Finn: This is the point that strikes me: We have two classes of railways coming under the minister under this bill. One is the Canadian National system, which is a company, and the other is the Intercolonial, which was given to the maritime provinces under section 145 of the British North America

Department of Transport
Act. I find that subsequently there was passed in this house a bill which said that the Intercolonial railway included not only the road from Halifax to Montreal but also some included lines in the province of Quebec, and were put around the necks of the people of the maritimes.


Clarence Decatur Howe: I dislike to interrupt my hon. friend, but I feel that he is out of order. May I suggest that as yet we have not passed the appropriation under the Maritime Freight Rates Act, and I should think that would be a splendid time to discuss this matter.


Robert Emmett Finn: That may provide a splendid opportunity to discuss it but my point is that under this bill my hon. friend, as Minister of Transport, takes over control of the Department of Railways and Canals, which has jurisdiction over the Canadian National Railways, through a board of directors. I want to be open and above board with hon. gentlemen in this house, with the right hon. the Prime Minister and with the Minister of Railways. I am not satisfied, in fact I am far from satisfied, with the condition of the Intercolonial railway to-day. As I said once before in this house this session-


Frederick George Sanderson: Order. I must inform the hon. member for Halifax that he is out of order.


Robert Emmett Finn: For what reason?


Frederick George Sanderson: We are now on Bill No. 80, respecting the Department of Transport. The Minister of Railways has intimated to the hon. member for Halifax that the matter the hon. gentleman wishes to discuss may be brought up when the railway estimates are under consideration or when the house considers a certain bill having to do with the proposed construction of a branch line. Therefore I must tell the hon. member for Halifax that he must confine his remarks to the bill under discussion and not go on with regard to something which is not relevant.


Robert Emmett Finn: With all due deference to your ruling, Mr. Chairman, I say that I am within the four corners of Bill No. 80. If you will look at section 2 of the bill, it will be seen that this section takes the place of the Department of Railways and Canals Act.


Frederick George Sanderson: I would point out to the hon. member for Halifax that we are on section 9 of Bill No. 80, and if he desires to make some remarks he must confine himself
to this section of the bill; otherwise he will be out of order.
Shall section 9 carry?


Some hon. MEMBERS:: Carried.


Frederick George Sanderson: Carried.


[Stage Direction]
Section agreed to.
Section 10 agreed to.
On section 11-Coming into force.
Robert Emmett Finn: I do not propose to be put off by all the "carrieds" or "Carrie Nations'-of some hon. members. I have a place in this house; I have a privilege and a right, which I propose to exercise. That is what I came here for, and when. I am not able to do that I shall go home. I understand that we are on section 10.


Frederick George Sanderson: I do not want to interrupt the hon. member for Halifax but while he is here he must comply with the rules of the house. In acting as he is the hon. gentleman is not conforming to the rules, and he is out of order.


Robert Emmett Finn: I have not started.


Frederick George Sanderson: Sections 10 and 11 have passed.


Robert Emmett Finn: I should like to ask you, Mr. Chairman, when they passed. I thought we were on section 9 when the house took recess.


Clarence Decatur Howe: I -have an amendment to section 11.


Frederick George Sanderson: The Minister of Railways moves that section 11 be amended by inserting after the word "act" in line 38 the words "in whole or in part" and by inserting after the word "date" in -the same line the words "or dates."


Robert Emmett Finn: I should like to ask the minister for an explanation as to what that means-


Clarence Decatur Howe: The purpose of this amendment is to provide that the act may be proclaimed either in whole or in part. It is felt that in the organization of the department circumstances may arise which will -make it desirable to proclaim one part of the act and not another, and this makes provision for that to be done.


Robert Emmett Finn: Then, Mr. Chairman, I think I am perfectly in order under this amendment which has been proposed by the minister. This bill deals with the Canadian National system and also with the government
Department of Transport

owned road, the Intercolonial railway. It might be the desire of the minister or of the government to deal with one part, the Canadian National, and not to deal with the other part, the Intercolonial.


[Stage Direction]
Amendment agreed to.
Robert Emmett Finn: I should like to ask how I am out of order. The Minister of Railways has submitted an amendment in which he divides this bill up; one part may become operative and the other not. I have a right to assume that it may be the part dealing with the "Intercolonial" that does not become operative; therefore, under this amendment I have a right to discuss the Intercolonial. If I am out of order I should like to know why, and under what rule.


Mr. STEVENS:: I should like to ask the minister this question. Before this legislation is proclaimed, under the present administration of the Department of Railways, which of course is still operative under the existing law, does the department recognize any difference between the Intercolonial railway and the Canadian National railway system?


Clarence Decatur Howe: There is a difference in the matter of property. The property of the Intercolonial is vested in the crown, and all transfers of property, leases, et cetera, must be signed by the Minister of Railways. Otherwise there is no difference. The operation of the Intercolonial has been turned over to the Canadian National.


Henry Herbert Stevens: Under what act?


Robert Emmett Finn: The Railway Act of 1919.


Henry Herbert Stevens: Is it under the Canadian National Railways Act that the Intercolonial railway was turned over to the Canadian National for operation?


Clarence Decatur Howe: Yes, the Canadian National Railways Act of 1919.


Robert Emmett Finn: The Railway Act of 1919 came into effect in 1922. It specifically stated that when the Grand Trunk in the United States was turned over, the Intercolonial should come under the jurisdiction of the railway commission and be subject to the same rates as applied to all other railway companies in Canada. The Railway Act of 1919 was brought into effect in 1922, and as far as I have read it-and I have read it often and critically-
I cannot find any provision in the act that the Canadian National railway management shall operate the Intercolonial. If there were any such provision, it would be absolutely in conflict with section 145 of The British North America Act, and that act cannot be repealed by implication; therefore the provisions of

that section stand. The Intercolonial is vested in the Crown and is to be operated by the Minister of Railways and Canals in the interests of and for the benefit of the maritime provinces. I think it was in 1932 or 1933 an act was passed in which it was declared that the Intercolonial railway shall extend from Halifax and Sydney to Montreal. But to-day it is cut off at Riviere du Loup going west and the rest of the road is operated under the central division or eastern lines from Montreal or Toronto.
I have no desire whatever to retard the progress of this bill, but the people of the maritime provinces have some rights, if I desired to protest for a moment I would quote the words of the late Sir Charles Tupper in his memoirs written by himself in which he said that if Nova Scotia went out of confederation we were going to deny ourselves that great destiny which was ahead of us. He pictured the flow of traffic from the orient and said that the port of Halifax would become a forest of masts. If i.t seceded, it would be -better that we were picked up and hurled behind the Rocky mountains. If we are to be picked up and hurled there I do not know who is going to catch us, but I hope before that happens I shall be under the sod and shall not have to go along.
It is in no spirit of carping criticism that I say this, but I have always felt very strongly on this subject. I have always felt that a great wrong has been done to the maritime provinces in regard to the Intercolonial, and I know of no better time than the present that the committee or this house and parliament should make up its mind whether or not we are going to be left in the middle of the lake so to speak, with no oars to row ashore, because they cut us off at Riviere du Loup and put the rest of the road in what they call the eastern lines. I want to see the Intercolonial railway operated as it was under the Prime Minister's predecessor, Sir Wilfrid Laurier, and under Hon. A. G. Blair and Hon. H. R. Emmerson, a through road from Halifax to Montreal, splendidly equipped and the pride of the people of the maritime provinces. We are not denying anything to the west, but I think there is no more opportune time than the present, when a new board is being set up and the whole management is to be changed, for us to find out exactly where we stand in reference to the Intercolonial railway. If the Minister of Railways will say to me that if a good case can be made out, as I believe it can, he will give it careful consideration, and that subject to the decision of the house a bill shall be

Bank of Canada
introduced subsequently to deal with the Intercolonial railway separately and apart from the Canadian National railways system, this legislation can go through. To save expense I believe the Intercolonial should be operated by the Canadian National management, but we should have, as we are supposed to have to-day, an Atlantic local manager. Mr. Appleton in Moncton is a vice-president and is supposed to be local Atlantic manager, but he has no more control over the Atlantic division than the Minister of Railways has to-day over the whole system. Mr. D. E. Galloway of Montreal or Toronto is in control of the eastern lines. I have had letters from home asking me how it is that we are charged with over $5,000,000 deficit, for that deficit is not on the Intercolonial railway. Part of it is on two lines of about 210 miles, in the province of Quebec, that never was a part of the Intercolonial and is not to-day except for operating purposes.
If this matter can be cleared up later I do not wish to retard this or any other legislation. I know hon. gentlemen want to get home, and so do I, but any person who comes to this parliament and whose first desire is to get home rather than stay here and attend to his duties should be left at home and should not have been sent here at all. That is what I conceive to be the duty of public representatives and that is the course which I have always tried to follow, and which I shall continue to follow until the people cease to follow me. So, if I can get some assurance from my hon. friend the Minister of Railways, I would feel better. I do not sleep very well, and if I get this assurance it may help me to sleep better to-night.
Section as amended agreed to.
Bill reported, read the third time and passed.



BANK OF CANADA


[Stage Direction]
The house resumed from Monday, June 8, consideration in committee of Bill No. 82, to amend the Bank of Canada Act-Mr. Dunning -Mr. Sanderson in the chair.
On section 6-Directors.
Hon. CHARLES A. DUNNING (Minister of Finance):	Before proceeding to the consideration of section 9 of the original act may I say that the government has given consideration to the suggestion made yesterday by the hon. member for Rosthem (Mr. Tucker) to the effect that a larger number of directors should be appointed by the government than
is provided in the draft of the bill. The government has considered the matter, and as a result I shall ask my colleague to move an amendment to section 6 of the bill which involves a redrafting of the whole section. The purpose of the amendment is simply that of changing the number of directors appointed by the government from four to six. The other provisions of the section are amended in conformity with that change. The change ensures absolute control by the government even under the contingencies imagined by the hon. member for Rosthem.
Mr. McGEER:: What is the change in the votes? Are the six directors to have two votes each?


Charles Avery Dunning: Yes, for the length of
time necessary.


William Lyon Mackenzie King: I move the
following amendment:
That the bill be amended by striking out section six thereof and substituting therefor the following:
"6. Section nine of the said act is repealed and tlie following is substituted therefor:-[DOT]
Directors
9. (1) The following persons shall be directors of the bank:
(1)	directors holding office at the date of the coming into force of this subsection, who shall continue as directors until the expiration of their several terms of office;
(ii)	six directors to be appointed by the holder of the class "B" shares of the bank, with the approval of the governor in council, to hold office as follows: two until the annual general meeting in 1940; two until the annual general meeting in 1941; and two until the annual general meeting in 1942:
(iii) one director to be elected by the holders of the class "A" shares of the bank at the annual general meeting in 1940, to hold office for a term of two years;
(iv) two directors to be elected by the holders of the class "A" shares of the bank at the annual general meeting in 1941, to hold office for terms of two years and three years respectively;
(v)	directors, each of whom shall hold office for a term of three years, to be elected by the holders of the class "A" shares of the bank, one at the annual general meeting in 1942 and one at each annual general meeting thereafter;
(vi)	directors, each of whom shall hold office for a term of three years, to be appointed by the holder of the class "B" shares of the bank, with the approval of the governor in council, two as of the day of the annual general meeting in 1940, and two as of the day of each annual general meeting thereafter.
Y acancies
(2)	In the event of a vacancy amongst the directors elected by the class "A" shareholders, the board shall appoint a qualified person to hold office until the next annual general meeting, when the shareholders shall elect a person to fill the vacancy for the remainder of the term: Provided, however, that no director in
Bank of Canada

office at the date of the coming into force of this subsection shall be so replaced if there are three or more directors elected by shareholders in office.
(3)	In the event of a vacancy amongst the directors appointed by the holder of the class "B" shares of the bank, the holder of the said shares shall, with the approval of the governor in council, appoint a qualified person to hold office for the remainder of the term.
Number of votes
(4)	In the transaction of the business of the bank, each director shall have one vote: Provided, however, that prior to the annual general meeting in 1940 each of the directors appointed by the holder of the class "B" shares of the bank shall be entitled to two votes.
Eeelection and reappointment
(5)	The directors shall on the expiration of their terms of office be eligible for reelection or reappointment."


Gerald Grattan McGeer: The amendment does not
change the general principle I was discussing at the close of the last sitting of the committee. At that time I dealt with the fundamental principle that it-he control of the bank should be directed to dominate, namely the issue of currency and credit in terms of public need.
By the amendment the government is given control over the board of directors, but unfortunately the directors do not control the bank. In proof of that fact I should1 like to draw the attention of the committee to certain provisions in the Bank of Canada Act. First I direct the attention of hon. members to section 8, which states that the governor, deputy governor and assistant deputy governor shall each be appointed as in the act provided for a term of several years. They are to be appointed by the governor in council. The actual clauses of the act which define and establish the control of the affairs of the bank are sections 13 and 14, the first of which reads as follows:
13.	(1) There shall be an executive committee of the board, consisting of the governor, the deputy governor and one director selected by the board.
Then subsection 3 provides:
The executive committee shall be competent to deal with any matter within the competence of the board but every decision of the committee shall be submitted to the board at its next meeting.
14.	No action or decision of the board of directors, or of the executive committee, shall have any effect unless the same is concurred in by the governor, or in his absence or incapacity, the deputy governor.
As a matter of fact, these sections place the actual control of the administration, of the bank's affairs in the hands of the executive committee, two of whom are appointed by governor in council, and who hold office at the will of parliament. Parliament could dismiss

them by amending the act., or by repealing the act, just as has been done in connection with the trustees of the Gainadlian National Railways.
It does not matter how many members there are on the board of directors, the board of directors have nothing whatever to say about the administration of the affairs of the bank unless what they suggest is concurred in by the governor, who along with the deputy governor, is under the control of parlia-liament because parliament may dismiss or remove them from office. They form the majority of an executive committee which today has full control over the administration of the bank's affairs. They are superior to the board of directors and, consequently, the board of directors is not a group of men the majority of whom can dominate or control the affairs of the bank. A majority of the board of directors appointed by the governments' shareholders means absolutely nothing.
During the course of my remarks yesterday the hon. member for St. Lawrence-St. George (Mr. Cahan) asked this question: What would you do with the $724,000,000 that the Bank of Canada now has the power under the act to issue; would you issue that money as a means of putting people to work? In answer to that, I should like to say that if proper control were established in the Bank of Canada it should be such control that the government, the Bank of Canada, the chartered banks and the financial institutions could get together to create the means of financing those sound public works, national, provincial and municipal, which would be the means of eliminating unemployment and putting people to work at work that is needed to be done. Of course, you would not use the legal tender currency of the Bank of Canada; you would be able to make arrangements with the chartered banks and the financial institutions by which short term treasury bills at minimum cost would be issued to carry on this work.
It may be said that it is impossible to do that, but I want to point out that that is exactly what is being done by the federal reserve board in the United States. A great deal of the money which has been used to put people in that country to work has been simply the credit of the member banks of the United States federal reserve system which has been issued for the use of the government as loans bearing interest rates as low as one-tenth of one per cent. I quite agree that the federal reserve system is far from perfection. I do not suggest for one moment that the mere fact that under the act, with the reserves of gold that the Bank of Canada

Bank oj Canada
has available, a sufficient number of Bank of Canada bills to support upwards of $7,000,000,000 of bank credit can be issued, would afford a complete panacea for all the social and economic and political ills of the Dominion of Canada. What I do say is that we have the necessary credit machinery now established and if it can be controlled so that currency and credit can be issued in terms of public need, there would be no necessity for the terrible conditions which now exist in Montreal, for the bankrupt conditions now continuing in Alberta and for the plight of our cities from one end of this dominion to the other.
The reason why the government should establish complete ownership of and control over the Bank of Canada is simply because it is not a bank of issue solely for the service of the chartered banks. It should be established as a bank of issue and as a national bank serving the public interests nationally, provincially and municipally, through which bank issues of public money and public credit for expenditure by national, provincial and municipal governments could be brought under proper and regulated control. We do not need to go to the senate or to the British parliament for an amendment to the British North America Act in order to establish a system under which coordination, regulation and control of public expenditures by all political executives throughout the Dominion of Canada could be brought within the control of the national authority.
There is one other matter which I should like to mention, a matter which has been raised time and again. If we issue through our Bank of Canada the money necessary to finance, without the appalling interest costs that public moneys now have to pay, what would happen to our international exchange? How could that be sustained? I hope I appreciate that when one advocates a substantial change in an existing system, he should have some authority which is recognized as one speaking with knowledge. In this regard, I think the statement of Mr. Beaudry Leman, who was once President of the Canadian Bankers' Association and who is the head of one of our largest French Canadian banks, the Banque Canadienne Nationale, should be accepted. This gentleman filed a report which was not in concurrence with the reports of the English members of the Macmillan commission. Mr. Leman said:
Certain features of the suggested constitution of a central bank for Canada, should one be established ultimately, appear unacceptable and do not afford sufficient safeguards in regard to currency and monetary matters: (a) In addition to minor objections to a
number of clauses, notably to clause No. 8, which fails to differentiate between the ratio of deposits to be made in the central bank in respect of notice deposits on the one hand, and of demand deposits on the other, I do take strong exception to clause No. 13, which states that:	"The bank should maintain a
proportion of 25 per cent in gold and foreign exchange against its outstanding note issue and sight liabilities." This clause makes no provision for the holding by the bank of a minimum amount of gold, or of a minimum percentage of gold against liabilities, nor does it even provide that the foreign exchange held by the bank should be convertible into gold. It will be argued that the governors and directors of the central bank would exercise their authority with prudence, skill and discretion. and that, in practice, sufficient gold would be held in reserve, and that a judicious choice would be made of the foreign exchange held by the central bank. The clause appears all the more surprising at a time when no one can have forgotten what befell the sterling, French franc and United States dollar exchange. Shall the currency of Canada he exposed to the uncertainties which might arise from possible errors of judgment on the part of the central bank? Can we be so sanguine as to hope that those who will guide the central bank and determine its policies will be men of such calibre that they will be at all times above human frailty, and will outclass in ability and foresight the bankers now at the head of the oldest and most powerful central banking institutions in the world? (b) Paragraph No. 207 of our report acknowledges that the state "must necessarily retain ultimate sovereignty in matters affecting the currency," and I find it difficult to reconcile this fundamental consideration with the power proposed to be given to the central bank under clause No. 13. Surely the parliament of Canada would not confer upon any organization, much less one privately owned, the right, implied in this clause, to strip this country bare of every ounce or dollar of gold and ship it abroad, holding in exchange, as the sole backing of the currency of Canada and as the bulk of its cash reserves, a claim on some inconvertible outside or foreign currency.
The mere suggestion that such a situation might develop would be more than enough to wreck the credit standing of this country and undermine the confidence which long years of faithful and sound banking have brought to Canadian institutions both public and private.
I read that for this reason. Here we have from the pen of one of Canada's outstanding bankers a statement condemning the methods, the practices and the securities which exist for the stabilizing of our international exchange under the present Bank of Canada Act. In Great Britain they did not rely, or they found it impossible to rely upon the Bank of England for the stabilization of the pound sterling after the collapse of 1931. When the stabilization fund was set up it was not set up in the Bank of England. The fund was administered by the Chancellor of the Exchequer and the power of the nation was given in an inflationary issue of sterling totalling $1,750,000,000. That power was given to the Chancellor of the Exchequer to
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go into the money markets of the world to maintain the value of the pound sterling as a function of the British government. In that regard the same gentleman, Mr. Leman, has this to say:
It is difficult to conceive how and to what extent, under present conditions, a monetary system can be placed beyond political influence. In Great Britain, the government, and not the Bank of England, provided the funds to establish and operate the "equalization fund" in which some seventeen hundred millions of dollars are now involved; in the United States the provisions of the statutes governing the activities of the federal reserve banks have been profoundly altered, this year, to conform with the policies and exigencies of the government of the United States; in Prance, only last year, parliament voted some ninety millions of dollars to guarantee the losses sustained by the Bank of France in pursuance of the instructions issued by the government of France to the effect that credit balances were not to be withdrawn from Great Britain; these instances of what is happening in the wealthiest and most powerful countries in the world, each provided with a central bank, should offer sufficient evidence as to what must inevitably happen in countries of lesser financial importance.
What has happened sipce Mr. Leman as a member of the Royal Commission on Banking and Currency issued this statement? Great Britain has maintained successfully the operation of the stabilization fund, which Mr. Winston Churchill, in the British House of Commons, the other day described as "the secret processes" that had' successfully taken the place of the very kind of system which has been set up in the Bank of Canada. What has happened in the United States?


Charles Avery Dunning: Mr. Churchill did not say that.


Gerald Grattan McGeer: He did not say that they were secret processes?


Charles Avery Dunning: He did not say that it was the same system.


Gerald Grattan McGeer: I am saying that.


Charles Avery Dunning: Let us understand that.


Gerald Grattan McGeer: I do not want to have any confusion between what I say and what Mr. Churchill says; I think I made that clear. He said that they were secret processes.


Charles Avery Dunning: So are our own stabilization operations.


Gerald Grattan McGeer: I understood the other
day, when the leader of the opposition asked the Minister of Finance whether the provisions and powers contained in the stabilization legislation passed a year ago had been put into operation by proclamation, that the answer was, "No; they are not in operation yet."


Charles Avery Dunning: That is quite right.
[Mr. McGeer.J


Gerald Grattan McGeer: Then you are operating
under the Bank of Canada unless you are doing something yourself. Of course, I do not profess to know what secret processes are going on in Canada any more than I profess to know what secret processes are going on in England, but I know that in the United States the federal reserve bank has nothing to do with the stabilization fund. It is a function of the Treasury department conducted by the Secretary of the Treasury, Mr. Morgenthau, as a personal duty and a personal obligation. When you come to the question whether or not you can maintain the internal economy of the country oy managing your domestic currency without interfering with the value of the buying power of your unit of exchange in world markets, I think you come to the question- whether or not you can manage your domestic currency from a central bank like the Bank of Canada and your international buying power in world markets as a direct function of the government itself through the Department of Finance, with nothing more -than those connecting links that exist and must of necessity exist between the Department of Finance in all its activities and the Bank of Canada. But let me say further that when it comes to the question of maintaining the international value of the unit of exchange it is less a monetary matter than it is a trade matter. If our government, as the government of Great Britain has done, can successfully set up the means of regulating its international trade, its transactions in international credit and currency, its transactions in tourist trade, so that we can maintain a balance or something close to a balance of trade internationally, then we shall have no difficulty in maintaining the value of our Canadian dollar in those countries with which we intend to trade. But those who confuse domestic currency-that is, silver coins or copper coins or nickel coins and paper currencies such as silver certificates or bank notes or bank deposits transferable by cheque-with international currency, are developing in their minds a difficulty and a hindrance to internal prosperity and progress which really does not exist. There are two real problems; one is international exchange and the buying power of our unit of exchange abroad, and the other is putting into circulation the domestic currency and credit that will permit our people to produce and distribute wealth in their own service, and producing surpluses which they can use in exchange with people in foreign lands for the things that will make for a higher

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standard of living of our people in our own country. What I am putting forward is not new.


An hon. MEMBER:: Hear, hear.


Gerald Grattan McGeer: Well, it is not new as
far as other countries are concerned but it has yet to be adopted in Canada. The hon. member for St. Lawrence-St. George asked me what I would do if I were Prime Minister of Canada. One of the first things I would do would be to convert the Minister of Finance (Mr. Dunning) to some of the things that are now fairly current. For instance, one of the first acts would be to get a full appreciation of. what the British Macmillan report meant when it said to the British government in 1913, in section 280:
The monetary system of this country must be a managed system. It is not advisable, or indeed practicable, to regard our monetary system as an automatic system grinding out the right result by the operation of natural forces aided by a few maxims of general application and some well worn rules of thumb. The major objectives of a sound monetary policy-for example, the maintenance of the parity of the foreign exchanges without unnecessary disturbance to domestic business, the avoidance of the credit cycle, and the stability of the price level-cannot be attained except by the constant exercise of knowledge, judgment and authority, by individuals placed in a _ position of unchallengeable independence, with great resources and every technical advice at their disposition.
I think we have, in the Dominion Bureau of Statistics, an exceptionally fine group of fairly well trained men who, with the limited resources at their disposal, are able to present a remarkable but not by any means complete picture whereby it is possible for us to see where we are going in this Dominion of Canada. But when we have statements presented as we did1 in the budget that with ouir sales of gold abroad we had approximately a favourable balance of trade of 8435,000,000, one wonders why this nation should have shipped' abroad to exchange for the mom-convertible paper currency of a foreign nation or a non-convertible bank deposit the monetary gold reserves and resources of our own nation. The two do not work together. Either we shipped that gold abroad foolishly or we had to ship it abroad because we did not have available foreign paper currencies convertible into American money with which to liquidate the obligations that were currently due during the year in which the gold (payments were madle. I do not think there is anybody in this country who can say whether our adverse balance of trade was not more, and considerably more, last year than $200,000,000, and when we shipped that gold abroad we shipped it abroad as at least 12739-227
an indication of the minimum of our foreign unfavourable balance of trade.
I do not know all that must be done but I believe that we should make some attempt to set up a monetary system with wide control under which we can balance not only the national budget but provincial budgets and municipal budgets as well because I do not think it is going to accomplish very much to balance the national budget if provincial and municipal governments are going to continue to face bankruptcy. I think budgets should be balanced and I also think debts should be properly serviced. I believe that we should command the respect of the financial communities and the lenders, but I also believe that we should respect the confidence of the *taxpayer. If we can hold the confidence of lenders only by sacrificing the wealth of taxpayers through confiscatory taxation, then I am afraid the confidence of the lenders is going to be of very little value to this nation.
I believe, in addition, that we should be able to finance the construction of those things which will add to the national revenue. I believe that our great tourist resources in the maritime provinces, in Quebec, in Ontario and in the west should be developed as a means of inducing Americans to exchange for Canadian goods and services American dollars, and in addition, I believe that we should be able to finance the development of our resources and the maintenance of law and order so that those in the United States and elsewhere who can afford to live in a country in which they would prefer to bring up their families will come to Canada and settle and bring their wealth to us.
That is one way in which I believe we can meet a foreign exchange situation that will always confront the Dominion of Canada. The moment we get prosperous one of our most difficult problems in international exchange is going to be how to prevent our Canadians in such times from going south of the line in the winter time and to the attractions which the Americans present and spending more of Canadian currency in the American tourist trade than the American tourists are spending with us. I do not believe that the Americans should be exploited, but I do feel there is much we can do in the way of an intelligent administration of currency and credit to put our own people to work developing honest attractions that will bring about a movement northward in the summer time that will affect our movement southward in the winter. In that way I believe we can use the national currency and credit to increase the security of the unit of exchange abroad.

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More than that. I believe that we must rehabilitate our railroad systems. We cannot afford to allow the Canadian National and the Canadian Pacific railway systems to operate in competition with the magnificent roads that are operating now in the United States without assisting our railways to bring their road beds, their equipment and their time schedules up to the transcontinental standards now in operation south of the line. These things can all be done. We can do what New Zealand is doing. New Zealand has now gone forward, after years of bonusing and building up her foreign trade in butter, to set up an agricultural governmental institution wherein all of her agricultural products are going to be taken over at a price, and then are going to be bartered for the things which the government of New Zealand feels it can secure for the benefit of the people of that country. We cannot progress in Canada unless we are prepared to raise the standiard1 of living of the farmers of western Canada to the same level that obtains for our governmental employees and for the people in our cities and industrial communities.
Yes, these things can be done, but they require a great deal of work, a great deal of courage, and a great deal of attention, and attempts to bring them about will not be perfect at their inception. While I am quite aware that monetary reform is not the whole answer; that it is merely one step, I do suggest, however, that if a properly constituted national bank were created1 that would operate as a public utility issuing currency and credit in terms of public need, many of the political, economic and social problems which now seem to be insurmountable would, I believe, fall well within the limits of practical administration.
We should I agree, assume that because certain institutions have been sanctified in the past they should be changed only with care and caution, but I think, now that we are well advanced into the new era, what we are asking the government to do in making the Bank of Canada a national institution is only whait other nations have found by experience to be a sound and1 necessary thing to do. If I can read reports at all I think the principle of public ownership for the Bank of Canada was recommended by Mr. Leman, Sdr Thomas White and Mr. Brownlee who constituted a majority of the Canadian Macmillan Commission. That is so because the cost of public finance must be reduced through the issue of currency as a state function. That conclusion is in line with the following passage of the English Macmillan report:

The greatest difficulty, however, which we foresee is the fulfilment of the second task, namely, to remedy the shortage of definitely sound borrowers for the purpose of new enterprise. The vicious circle is complete. The decline of new enterprise has reacted adversely on profits and prices, and the low level of profits and prices stands in the way of new enterprise. It is for this reason that some of us think that in the domestic field it may be necessary to invoke governmental enterprise to break the vicious circle. In the international field measures of an analogous kind would have to take a somewhat different form. In this ease also the vicious circle is complete. The unwillingness to lend, coupled with the frequently unwise use of borrowed funds, has destroyed the credit of borrowers, which reinforces the unwillingness to lend. In many cases, no single creditor is ready to take the risk which is absolutely required in the interest of creditors as a whole, since this report was written. ,
In Great Britain they have gone into public spending; in the United States and Australia they have also gone into public spending, and as a result confidence has been restored and private enterprise is again beginning to move. If we had the courage to take over the Bank of Canada and to put the necessary medium of exchange into circulation through the proper employment of men engaged in public works, social services and public enterprises, we shall soon find that we have restored the circulation of consumers' buying power and created an effective demand which will inspire private enterprise to go to work. But until we do that we are going to slough along, picking up only the crumbs that fall from the tables of other countries where expansion and public work is going forward, and doing nothing to secure for our own people those great benefits which have come to the people of other nations through governmental action.
I do not for one moment think the tasks are simple, but I do think there is plenty of reason now for parliament to set up the machinery and to engage the best, most competent men available to carry out the work parliament wishes to see done; that is, to put the people to work creating and distributing wealth, so that the cultural heritage of mankind can be placed on a higher standard than it enjoys to-day. I think every man in this chamber is imbued with that desire just as much as I am, possibly, in some cases, even more, and that is why I say that this is the paramount political issue of to-day. It is above party politics and calls upon men of all parties, in the commons, in the senate, and in business, to unite to stabilize our finance so that our social and economic security may be restored.
Now let me say this; I know it is easy to say, "Oh, I don't know anything about finance.

It is above me. It is a highly complex problem. It is an academic issue." I think many are beginning to realize that Keynes of Cambridge has performed a great service to the academic world by writing his book A General Theory of Employment, Interest and Money.


Richard Bedford Bennett: He goes back, in terms, on all his previous opinions.


Charles Avery Dunning: And says so.


Gerald Grattan McGeer: That is what I say; we have to abandon some of the opinions of the past and adjust ourselves to the necessities of the twentieth century. I do not think we should hope to have the same economic system and the same monetary system serving the needs of the twentieth century that worked in the days of the ox cart, of hand labour and of the crinoline skirt.


Charles Avery Dunning: My hon. friend surely forgets that John Maynard Keynes, to my certain knowledge, has been writing authoritatively on these subjects each year. He did not start with the days of the ox cart; he has been gradually developing and instructing his readers, of whom I am one and my hon. friend is another, all in the twentieth century. In the book to which my hon. friend refers Keynes says he knows it is completely out of line with all that he has formerly taught us. I have no objection to a man changing his mind, but surely if we are to look for light and leadership from my hon. friend from Vancouver-Burrard to-day we do not expect that the day after to-morrow he will be telling us something definitely contrary to the opinions expressed to-day, and still expecting us to regard him as progressive and sound because he has done so. I am not criticizing Keynes, but I am saying that a teacher who changes virtually overnight in some of his cardinal teachings, I would hesitate to quote personally as an authority to-day as readily as I would before I read that book, and I say this without derogating at all from his right to change his mind. I am referring rather to his reliability as a teacher either yesterday or to-day.


Gerald Grattan McGeer: I should like to say, now that the Minister of Finance has assumed the right to criticize John Maynard Keynes, that John Maynard Keynes, as monetary adviser of the British government at Versailles, had the courage to resign because at that time he said the impositions that the allied governments were exacting from Germany contained the fruits of future disaster and the seeds of another war.


Charles Avery Dunning: And the hon. member and I agreed with him.
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Gerald Grattan McGeer: And he wrote his book The Economic Consequences of the Peace. Do not let any man of ordinary position stand up and say that Keynes is a teacher who changes his mind from day to day, because by his writings and his work John Maynard Keynes has earned the respect of the British people from one end of the empire to the other, and by his service to humanity he has earned the respect of every man who believes that government should work towards the furtherance of human happiness. I have been a student of Keynes for a great many years in a humble and possibly a loose and inadequate way, but I defy any man to say that from 1918 on John Maynard Keynes has ever changed his views as to the necessity of a managed currency. He may have said this:	"I have changed my views with
regard to some of my theories on employment and interest," but his fundamental conclusions have been growing and confirming his stand which is set out in the Macmillan report in this declaration for the establishment of a managed currency administered by men of unchallengable independence equipped with every available facility. Notwithstanding what the Minister of Finance or the right hon. leader of the opposition (Mr. Bennett) may think of John Maynard Keynes, I still hold to the view that he has made a great contribution to economic study in his book A General Theory of Employment, Interest and Money.


Charles Avery Dunning: I agree; I said so.


Gerald Grattan McGeer: This is what he says:
-professional economists ... were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation;-a discrepancy which the ordinary man has not failed to observe, with the result of his growing unwillingness to accord to economists that measure of respect which he gives to other groups of scientists whose theoretical results are confirmed by observation when they are applied to the facts.
The celebrated optimism of traditional economists ... who having left this world for the cultivation of their gardens, teach that all is for the best in the best of all possible worlds provided we will let well enough alone, is also to be traced, I think, to their having neglected to take account the dragon prosperity which can be exercised by an insufficiency of effective demand.


Frederick George Sanderson: Order. I must inform the hon. member for Vancouver-Burrard that he has spoken for forty minutes.


Gerald Grattan McGeer: Well, I can finish my remarks on the other sections of the bill, but I should like to complete them on this section.
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Charles Avery Dunning: Another hon. member has a right to the floor if he wants it.


Gerald Grattan McGeer: Very well; I can conclude on some other section.


Mr. CLARK (York-Sunbury):: In speaking on this Bank of Canada bill the hon. member for Vancouver-Burrard brought in the chartered banks to a great extent and gave some figures in respect to them that are not correct. On page 3331 of Hansard1 he is reported1 as saying:
I have checked the figures and I find that in 1934, on a capital investment of $144,000,000, the banks made an actual profit of $18,000,000 which figures out roughly to twelve per cent- not bad for a depression year.
In the first place the hon. member has not added the rest account to the capital. Instead of $144,000,000 invested it was $276,000,000, a difference of some forty-eight per cent. Then, where he said that the banks made an actual profit of $18,000,000, that is before deducting the taxes and other things which had to come out of it, so that the actual return on that capital investment, instead of being, as he states, some twelve per cent, is only some four and a half per cent.
Then he goes on to say:
... profit was paid out by the Bank of Montreal at the rate of eight per cent-The other
banks ranged from six per cent to twelve per cent, but the average stood at about twelve per cent.
How could figures from six to twelve average twelve? So the hon. member is wrong in that respect. Then he goes on to say:
-then they put aside as rest account an amount almost as great.
That is referring to the year 1934. But in fact none of the banks put any amount in the rest account at all; they have not put anything into rest or reserve for several years. In fact they have lost some of their reserves during these years of stress. Surely we are entitled to have a fair report about these banks.
Then the hon. member goes on to say:
Last year, in 1935, their profits were a little better, and the preliminary dividend paid by the Bank of Montreal in the first quarter of this year, 1936, is, I believe, four per cent.
Well, to be accurate, it was two per cent, or rather 3-75 per cent per annum on the total capital employed, rest and reserve. It might be said that the rest is not port of the capital, but it was largely provided by the shareholders as part of the capital of the banks. In many cases they issued their stock at a premium of 100 per cent and added that premium to their rest. So that sum was mostly provided by the stockholders.

It is, therefore, fair to correct the hon. member's figures in these respects; that is instead of $144,000,000 being the capital invested they had $276,000,000, a mistake on the part of the hon. member of some forty-eight per cent. When he referred to the banks having made $18,000,000 profit he figured that before taking off taxes, pension fund and other deductions, a mistake there of some thirty per cent. When he says that the dividend figures range from six to twelve per cent and calls that an average of twelve per cent he makes a mistake of some twenty-five per cent. When he says that they put aside as rest account an amount almost as great, the fact is that they did not put anything aside for rest account, so there he makes a mistake beyond measurement in percentage. When he says that the Bank of Montreal in the first quarter of 1936 paid four per cent when they paid only two per cent or rather at the rate of 3-75 per cent per annum on their actual capital he made another mistake of some fifty per cent. So in those few lines we find five mistakes, on the average fifty per cent wrong. If in respect to other things which he has stated before this committee the hon. member is as wrong as in these to which I have called attention, how much dependence can this committee place upon his statements?
We know that the chartered banks have been the bulwark of the financial system of this country, and they should be treated fairly. They are regulated by this parliament, and surely it is unfair that a wrong impression should be given about their earnings, which earnings are as small as is safe under the conditions under which they operate. I think it is only fair that these corrections should be put upon Hansard, because I have looked up the figures from the bank returns and I assure my hon. friend that they are in accordance with the facts.


James Shaver Woodsworth: The amendment
before us may be some slight improvement, but I submit that it will not enable the Bank of Canada to perform the functions which the Bank of Canada should perform. Again I believe that the government in introducing a measure of this kind is not keeping faith with the electorate who sent them to power. Reference has already been made in this parliament to the address of the present Prime Minister (Mr. Mackenzie King) on the night of the general election, October 14, 1935. On that occasion he said:
The election is an endorsation of the Liberal view that credit is a public matter not of interest to bankers only but of direct concern to every citizen.
I heartily concur in the latter part of that statement. I hoped that that might be the

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Liberal view. But under this legislation credit does not become a public matter; credit still remains under private control. We shall never have credit fully a public matter until the government of this country is prepared to take over not merely the central bank but the chartered banks as well. However I quite admit that a properly constituted and controlled central bank may have a very great effect in the control of credit. We argued for such a bank yearns ago. Two yearns ago when the Conservative government introduced the Bank of Canada Act we supported it, not because we liked the private control, which we believed the act maintained, but because we believed in the principle of a central bank and we thought the Bank of Canada Act was one step in the right direction. The Liberals at that time refused to have anything to do with the central bank as then constituted; they criticized it most severely, put themselves on record as opposed to it and pleaded for a publicly controlled bank. Yet now they introduce legislation which, as I said when the resolution was under discussion, does not implement the statements that were made on behalf of the Liberal party from one end of this country to the other. I repeat: On the eve of an election the Prime Minister said that credit is a public matter. The legislation now before us and the directorate we are setting up does not ensure that even the control of credit will be a public matter. We are setting up a private bank or, if we may so describe it, a hybrid institution, half public and half private.
The present Prime Minister went on to say:
It is a verdict against a privately owned and controlled central bank.
Undoubtedly, as it has existed so far, the bank has been privately owned and controlled, but I suggest that the bank we are to have after this measure is passed will not be publicly owned and controlled. It is not fair to permit the impression to go out that we believe the bank which we shall have as a result of this bill is going to merit that designation. or that in this legislation the government is making good its pledges to the people.
I propose to vote for the measure; what else can I do? It may be a slight improvement over what we had before. We believed that the setting up of a central bank, even as it existed previously, was an improvement on no central bank. However this measure is not what we are after. As I shall try to point out later in my observations, this bank in my judgment will not fulfil the function a central bank ought to fulfil.
The Prime Minister said:
It is a verdict in favour of a properly constituted national bank to perform the functions of rediscount and the control of currency issue considered in terms of public need.
There is nothing in this legislation, as has been pointed out by the hon. member for Van-couver-Burrard (Mr. McGeer), which would seem to suggest that the bank is to be given control in order that it may function in terms of public need. That is a point which ought to be driven home upon the people of Canada. The Prime Minister went on to say:
There can be no mistaking the demand for a restoration to the government of Canada of control over credit and currency issue.
It is for government control over credit and currency issue that a good many of us have been pleading for years. But this measure does not give it. The Minister of Finance (Mr. Dunning) cannot say that this measure gives government control over credit and currency issue. In this instance the government passes over its control to another body, on which it is merely represented. That is not government control. Only recently in railway matters we have got rid of a board of trustees in order that we may more effectively bring the railways under public control, and to do that we are now setting up a board of directors. Even under the new arrangement the railway does not come immediately and directly under departmental control. This Liberal government protested against the old arrangement in railway matters in that such an arrangement set up a body the government could not control. Now, in the present instance, in this central bank legislation, the government is setting up another body which it does not control. There is no use blinking that fact; the government does not control the Bank of Canada. It simply has certain representatives on the board.


Charles Avery Dunning: Then, who does control it?


James Shaver Woodsworth: The government does not control it; the government has certain representatives on the board, and the minister is now offering an amendment so that the government may have more control. But surely this measure does not carry out the idea the Prime Minister had in mind when he made the statements I have read.


Charles Avery Dunning: Would the hon. member answer a question?


James Shaver Woodsworth: I wish I could be allowed to go on.


Charles Avery Dunning: I wish to know who does control the bank.
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James Shaver Woodsworth: The Prime Minister said:	.
There can be no mistaking the demand for a restoration to the government of Canada of control over credit and currency issue.
This measure does not restore to the government control over credit or the issue of currency; there is no doubt about that. Even the Minister of Finance would not say that the government is issuing credit.


Charles Avery Dunning: The government is controlling it.


James Shaver Woodsworth: The Prime Minister's statement refers to issuing. We have witnessed just now a first-class example of the way in which we play around words. The right hon. gentleman refers to credit and currency issue, not control. I take it that the issue of currency ought never to be given to any other body. Some years ago we had one dollar and two dollar bills on which appeared the king's head, and we had five dollar and ten dollar bills and higher on which appeared the heads of the presidents of the various banks which issued paper money. I said that I hoped the time would come when the king's head would be placed on every piece of money issued in Canada. But we are not putting the king's head on the Bank of Canada bills; we are putting on them the head of t'he president of the Bank of Canada. The money is not issued by the government. In fact, the impression has been given that it would not be safe to entrust a government with issuing its own currency. I am not saying whether or not that is so, but I say that immediately after the election the Prime Minister said:
There can be no mistaking the demand for a restoration to the government of Canada of control over credit and currency issue.


William Lyon Mackenzie King: What is the meaning and significance of the word "restoration"?


James Shaver Woodsworth: I will leave the Prime Minister to answer that question. He is an adept at giving definitions. Perhaps he would answer it to-night. He proceeds:
As the campaign proceeded, the issue of control, by the people, of all functions of government, through their representatives in arliament, and not by any other power, ecame increasingly clear.
One of the functions of government is that of issuing money. According to the Prime Minister that function was to be in the hands of parliament. It is not placed in the hands of parliament by this legislation. I would have been content if we had set up a board directly under control of parliament, but we have not done that. The Prime Minister concludes:

The electorate has declared that a responsible ministry, not organized finance and international money power, is to control in all matters of state.
Well, he may reply that under this measure there is control by the responsible ministry, but he shares that control with the financial powers. As I study this legislation-and I have been trying to read something of the history of central banks-I believe that a central bank can perform its functions only as it is independent of business pressure. Wre know how the present board' of directors of the Bank of Canada was selected. The chamber of commerce put up a slate. It is quite true there was a wide distribution of the shares, but as everybody knows shareholders cannot be got together easily, and for that reason the chamber of commerce put over a slate on which business men predominated. It may be said that we have a farmer on the board; yes, but he does not act as a farmers' representative. As my colleague points out, many of the directors were strictly financial people directly concerned in other financial matters.
If I understand aright, one of the main functions of a central bank is to maintain general price levels. It can do that more or less by restricting or expanding credit. The central bank is required to do the very thing that is unpopular at a given time. It must expand when there is a tendency to contract, and it must contract when there is overexpansion. Do we think it is possible for men trained in business, and having outside business interests, to perform that function? I believe that is one of the weaknesses of the old board. We did not get an independent board, but rather a board of business men who looked at the matter from a financial standpoint.
We now have provision for some government appointees. I cannot say who will be appointed, but if I were a betting man I would be willing to wager quite a sum that we would have the same class of people put on the board to represent the government. That has been the history in the past, whether Conservatives or Liberals were in power. We shall have financial men put on that, board. Of course, there will be one or two others to give colour to the idea that it represents all classes, but it will be a board essentially dominated by the present financial interests. Just recently we had the nationalization of the central bank of Denmark. The legislation by which that bank was nationalized provided that no directors might be directors or managers of any private undertaking. Just let me put this to the Prime

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Minister: If he wants his board, poorly instituted as it is, to be thoroughly free from business influences, will he place on this board no one who is connected with private undertakings? Dare he do that?


William Lyon Mackenzie King: May I say at
once to my hon. friend I do not believe that every man who has to do with private business is dishonest and dishonourable. I believe that most men who are in business and who are successful owe a great deal of their success to their probity and integrity. I resent altogether the idea that because a man is in private interests, he is not to be trusted.


James Shaver Woodsworth: Will the Prime Minister just hold himself for a minute?


William Lyon Mackenzie King: No; it is my hon. friend who should hold himself.


James Shaver Woodsworth: I shall not permit the Prime Minister to try to put words into my mouth or to put ideas into my speech which never were contemplated. The Prime Minister stated that he resents my statement; he speaks on behalf of the financial people. Well, he can resent my statement all he likes, but that is not what I am talking about.


William Lyon Mackenzie King: I am not speaking on behalf of the financial people. My hon. friend directed a remark to me to the effect that I would not dare to have a board upon which there was no one connected with private business.


James Shaver Woodsworth: Quite so.


William Lyon Mackenzie King: I said that I resented the idea that one dealing with private interests was necessarily dishonest.


James Shaver Woodsworth: That is not my implication, and it never was. I do not for one minute hold that all men in private enterprise are crooks or anything of the kind. I can well agree with the Prime Minister that a great many of them are actuated by very high motives. I am not suggesting anything else and the Prime Minister is not going to divert me from my argument. I do say, and I have felt for a long time, that directors of chartered 'banks ought not to be interested in other private concerns. That is my opinion with regard to that phase of the question. I .taught school out in the west forty years ago and I can remember the instance of a man who had timberland and who was delivering wood to the school, who was not eligible as a trustee. The idea was not that all men who teamed wood were cranks
or crooks; the idea was that if a man was to be independent as a trustee he ought not to be mixed up with many other things. That idea is carried out in a great many departments of public life. I should like to see the time come when a man could not be a director of a chartered bank when he was director of a number of other private concerns. That is all. I am not attacking the probity of these men, but at the same time I do not think they are angels. I do not think they are exempt from the weakness of other human beings.
I come now to the directorate of this central bank. This directorate ought to be able on occasion, and especially at a time of crisis, to go directly counter to prevailing financial opinion. A board of directors selected from those who are interested in financial undertakings is not likely to do that. That is all I am trying to say and the Prime Minister need not try to divert me. I said with regard to the bank of Denmark, that in that legislation the directors of the new bank were not to be directors or managers of any private undertaking. I said to the Prime Minister-and I say it again-.that I could not imagine his putting such legislation upon the statute books of Canada.
I believe that the issuance of currency and the control of credit should be a state function. I agree largely with the hon. member for Vancouver-Burrard (Mr. McGeer), although I do not know that I can follow him in all details. When he was speaking yesterday the hon. member for St. Lawrence-St. George (Mr. Cahan) asked him whether he thought he could create something of value out of nothing. That was another of those little remarks which are thrown in and which may so easily mislead the public. I should like to quote from an address made by the hon. member before the Canadian Club in Toronto on November 13, 1933, when he was Secretary of State. This is contained in a pamphlet entitled The Depression, Its Monetary Problems. I should like to answer the hon. member for St. Lawrence-St. George with his own words. He said:
The prevalent conception that bank deposits may only be created by actual deposits of specie, or its equivalent in dominion notes or foreign exchange, is quite erroneous.
I think that is what the hon. member for Vancouver-Burrard was trying to say. The hon. member for St. Lawrence-St. George gave certain figures as of that date three years ago, and went on to say:
The credit extended by the Canadian banks is secured in less than one-fourth part by the capital and surplus of the banks, but largely
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by the good faith, property, administrative efficiency and business capacity of the customers to whom such loans are made.


Charles Avery Dunning: That is right.


James Shaver Woodsworth: The Minister of Finance says that that is right, and I believe that he is in sympathy with a good deal of it. The former Secretary of State continued:
The aggregate of these loans, by which the bulk of all deposits are created, largely represents advances of credit made by the banks to their customers.
That is the very thing which many of us seem to find it so difficult to get into our heads. Every loan creates a deposit. Again and again it has been said on the floor of this chamber that the banks are simply lending out savings deposits. The word "savings" is not always used, but the idea is that the loans are deposits-real money-placed at the disposal of the banks by their customers. The hon. gentleman continued:
In more modern times the invention and adoption of the cheque system has effected a radical revolution in monetary policy. The cheque has now largely usurped the function of metallic coins and government notes as currency.
After reviewing some monetary history, he went on to say:
The result is that, in modern practice, seventy to eighty per cent of the aggregate of all deposits, shown in the Canadian bank returns, represent in reality the amount of loans made by the banks and then outstanding.
In order that there might be no mistake about his meaning, he said later on:
The cheque system, which has been developed, enables the banks to create-
"Create" was the word he used.
-money without the issue of their printed notes.
Last night the hon. member suggested that only the creator could create something out of nothing, but in that case he used the very word "create." He continued:
But the cheque system, which now prevails, enables the banks, as I have stated, to create credit money at will for many hundreds of millions of dollars in excess of their note issues. $1,428,000,000 of such credit money was issued and outstanding on September 30 last. In comparison with this bank credit money, the amount of all other money in circulation is quite insignificant.
One more paragraph of the same kind:
The fact remains, however, that the banks now have an almost complete monopoly of the credit facilities of the country. They may restrict or extend credit at will within the limitations which I have mentioned; and the question has arisen whether the control of credit should continue to be exercised in the sole discretion of the directors and officials of the banks.

Without going into the theory of the matter, I think I will just leave that statement of the former Secretary of State to speak for itself. In brief, what is the situation that we have before us? In the Bank of Canada, it has been pretty clearly recognized, there is no need of capital, and yet this government is proceeding to extend the capital of the bank. Under the present arrangements a few shareholders

that is, few in comparison with all the citizens of Canada-are given certain guaranteed profits. I do not know why it is that a few people should have 4J per cent while, if I want to put my savings into one of the chartered banks to-day, I can receive only 14 per cent. A comparatively few favoured people who are in that happy position can have guaranteed profits. Further, the business interests are able, as I have said, to elect a slate of directors, and they will have a very considerable influence, I fancy, on the new board, though I agree to a considerable extent with the hon. member (Mr. McGeer) that the directors may not be as important as the executive committee. In any case, the business interests, it seems to me, will be dominant in the new set-up, and this strikes me as a surrender of the sovereignty of government in that field. The hon. member for Vancouver-Burrard was speaking of what had been accomplished in various countries by utilizing money to supply the needs of the people. I should like to read one or two paragraphs from an interesting article that appeared in the May-June number of International Affairs, which most hon. members know is the organ of the Royal Institute of International Affairs. The article is by the Right Hon. Lord Passfield, on Soviet Communism, Its Present Position and Prospects. Dealing with currency matters, he says, at page 403:
To the bolsheviks, currency, whether in the form of money or of bank credit, is merely an inanimate slave of the community, or shall we say a tool, like the immense park of hundreds of thousands of tractors, available for use here or there on the quarter of a million collective or state farms. The tool dictates nothing. It is merely an expedient for giving freedom of choice to all the several consumers and producers, as an alternative to supplying them all with definite rations, whether they like them or not. Hence currency is created, just as are postage stamps, to whatever extent is found to be required for the purpose of the people, quite without influence on the projected aggregate total of commodities and services, or of the amount of trade. As prices are, for the most part, fixed by the various organs of government, and fixed not on cost alone but on a whole range of considerations of public benefit, an increase or a decrease of currency has no effect on these prices. If the currency seems, at any moment, to be inconveniently deficient, more is provided by a stroke of the

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pen. If there seems to be more in circulation than is comfortable, the issue of further paper roubles or bank credit is' suspended, or, by means of propaganda for an internal loan, essentially a voluntary determent of the expenditure of wages or other incomes, a large block of currency is withdrawn from circulation. The monetary quantity of currency in circulation has absolutely no influence on the aggregate volume of employment or of consumption, or on the quantity or kind of production that is planned and undertaken. Moreover, by the simple expedient of prohibiting any import or export of Soviet currency, which accordingly never passes the frontier in either direction, and by making all foreign trade, including the import or export of gold and silver, a government monopoly, all the complications of international rates of exchange are avoided.
A little later on he says:
Low prices of manufactures abroad exert no influence on prices in the U.S.S.R., they are only an advantage to the soviet commissar for foreign trade, and not a disadvantage to the soviet producer, whose earnings remain unchanged whatever may be the commodities that it suits the soviet union to purchase abroad or to export in order to pay for its purchases. What future bolshevik students will say, when one day they turn over the hundreds of thousands of books and pamphlets about currency that cumber the British Museum, I simply cannot imagine.
I give that simply because of the remarkable development which has taken place in Russia. Soviet Russia after the war was a poverty stricken country. After the revolution they had practically no equipment for producing at least any of their heavier commodities. Everything had been disorganized by war and revolution. They obtained practically no outside credit, or very little. They were able to get a little, and for that they had to pay dearly by the export of commodities at a very low rate. But by some means or another-I do not profess to know how it was done-in the last ten years they have built up a wonderfully productive machine. I am not going to read any further from this article but I would commend it to the members of the committee. That Lord Passfield is a very careful investigator is well recognized by all students of economics. Well, what Russia did, they did with very little outside credit; and they are proceeding in an increasing degree to supply the material needs of their very large population.
Now, I ask, why it is that- we cannot utilize our currency and credit in some such manner as they have done in Russia in supplying the needs of the people? Again and again through these years we have considered in this house the matter of currency and credit and we still hold to the old theory. I cannot say tint I follow the theories of my friends to tie left. I for one do not believe
that we shall get out of the woods simply by printing more money. That is not what I am after; I do not think that is what is involved in monetary reform. But I say that our present system is piling up debt upon debt which we cannot pay. Our present system is failing to function in the interests of the masses of the people, and under those circumstances it seems to me that this parliament ought to listen to the plea which has been made by the hon. member for Van-couver-Burrard and not pass through these " particular pieces of legislation without considering the more fundamental problems involved. With regard to the bill that is before us, I am not allowed to move an amendment; I do not see how I can under the ruling given the other day. I have either to reject the bill or to vote for it. I suppose the only thing I can do under these circumstances is to vote for it, but I am absolutely dissatisfied with what the government has done in bringing in a measure of this kind. I do not think it is going to secure for the people of Canada what might be secured by a properly constituted and controlled central bank.


Mr. TURGEON:: The hon. member says
that he will vote for this amending legislation because it is at least an improvement on the present act. Will he tell the committee in what respects he considers it an improvement on the present act?


Mr. WOODS WORTH:: I suppose the government is getting a little more control; it is a little bit nearer a government bank. Of course, to be perfectly frank, so long as there are in the seats of government people who believe in the present financial system and take their policies, as in my judgment they do, from the financiers, I do not know that it makes very much difference whether we have a government bank or not.


James Gray Turgeon: But the improvement
is in the degree of government control.


James Shaver Woodsworth: Yes.


Miss MACPHAIL:: I am going to make one of my two minute speeches. I dislike this particular method of increasing government control. To me the issuing of fifty-one per cent of new stock, and an increase in the board, an additional four members to be appointed by the government, or, according to the amendment, six, smacks of big, and possibly what we have come to call, slick business methods. I do not think it is anything like as straightforward as buying out the original shares would have been, and when I remember
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the speed with which the Minister of National Defence (Mr. Mackenzie) rose in his place in committee to try to head off the then member for Macleod in his attempt to move in committee for a government owned bank, it is really funny. I remember the zeal of the Liberals in castigating the hon. member for Winnipeg North Centre (Mr. Woodsworth) and others who voted with him in supporting the central bank bill as brought down by the Conservative government then in power. Why, [DOT] this country simply rang with the condemnation of the Cooperative Commonwealth Federation members for not voting for public ownership like the righteous Liberal party did. As a matter of fact, at that time, while I understood the motives of the hon. member for Winnipeg North Centre and those associated with him, I did not support the central bank bill, not because I did not think it better than what we had, but because it was not all we wanted to have and I felt that the only way I could protest against the bill as it was was to vote against it. But what I felt about that bill was exactly what my colleagues in the southeast comer felt at that time.
What I would like to ask the Minister of National Defence is: Where is now all his zeal for a publicly owned bank? I remember how hard he worked at that time, and it does seems strange that he should have so completely changed his mind.
I think it would have been better to buy out all the original shares but, to express myself exactly, we never needed to sell shares of the central bank. Did anyone ever hear of anybody drilling for a well with the hope of striking a spring and then pouring down into the well five million gallons of water that it might mix with the spring water before it was drawn up again, or did anyone ever hear of anybody opening up a coal mine and then taking down five million tons of coal to bring it back up again? The business of the central bank was to create currency and credit, and for the life of me I have never been able to see why we have to go to the trouble of getting money to start with. But then, of course, I am not supposed to understand finance; it is so evidently a very deep subject.
I do not wonder that the Liberal government feel a bit jittery on this question, since this bill falls so far short of the promises they so definitely made during the campaign; then, too, the private members behind the government are not feeling comfortable about the matter as is evident to anybody who has had experience in parliament or has ever seen one before. I think the Finance minister, and the Prime Minister as well, must know by now that their followers are not content with
[Miss Macphail.l
this bill, and for the very good reason that the bill is not what the party definitely promised. So I feel that I am standing for the principle by which I stood before when I say that I shall vote against this bill, not because it is not slightly better, but because I dislike the way in which it is being made better, and because I feel that it falls short of the promises which were made by the Liberal government during the campaign and that it is a betrayal of the confidence of the electorate.


Gerald Grattan McGeer: Mr. Chairman, if I might repeat the remarks which I had to make on Keynes' book I should like to quote a paragraph which should commend itself to every student of this problem. He continues his reference to academical schools of economy by saying:
Our criticism of the accepted classical theory of economics has consisted not so much in finding logical flaws in its analysis as in pointing out that its tacit assumptions are seldom or never satisfied, with the result that it cannot solve the economic problems of the actual world.
That is exactly our problem to-day. In other words, while we are going ahead with an assumed increase in the government's control over the Bank of Canada, we are doing this by changing a board of directors that really does not exercise actual control over the administration of the bank's affairs. In other words, we are continuing the Bank of Canada as it was set up by the leader of the opposition and by the government that he led in the last House of Commons. There is no fundamental change in the Bank of Canada, or in the methods under which it is going to operate, or in the control that is actually exercised by the executive committee with wdiich his legislation vested the absolute control of the bank.


Richard Bedford Bennett: The governor in council comes in at that point.


Gerald Grattan McGeer: I do not think the governor in council can dismiss the governor or the deputy governor-


Richard Bedford Bennett: No, no.


Gerald Grattan McGeer: The governor in council
can appoint them, but under the act they are appointed to hold office for seven years


Richard Bedford Bennett: I am talking about the veto power.


Gerald Grattan McGeer: The only veto power that comes in is an extension of the veto power in the governor in council over the acts of the governor of the bank. If the governor of the bank refuses to agree in the decision of the executive committee-

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Charles Avery Dunning: Or the board.


Gerald Grattan McGeer: -or the board, then he must report that to the governor in council, but the only power the governor in council then has is to affirm or deny the action of the governor of the hank. The governor in council cannot, under any section of the act that I know of, say to the governor of the bank, you must do this, and make the governor of the bank carry it out. It is not within the power of the governor in council to say to the governor of the bank: Here is the policy of parliament to which we wish you to conform, and you must carry this out. But they can, under the present act, after calling parliament together and saying that the governor will not carry out the wishes of parliament, ask parliament to dismiss the governor and then they can put in a new governor who will carry out their policy. The board of directors of the bank have nothing more to say in the administration of the bank's affairs than the shareholders who own the stock of a company have in the administration of its affairs, and that is absolutely nothing. The board of directors is purely a group of men who sit in at the board and confirm very largely what the executive committee has done, because they are never in a position to do otherwise.
Now with reference to the suggestion as to what should be done, I think possibly we may find some instance in which Keynes may have changed his conclusions. I do not think however that he has ever changed any conclusions that he has held upon fundamental principles of monetary policy. He says:
The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.
He goes on to the question of creating an effective demand so that the available supply may be absorbed, and then he deals with the rate of interest and says that the rate of interest is bound to come down. He says:
The justification for a moderately high rate of interest has been found hitherto in the necessity of providing a sufficient inducement to save. But we have shown that the extent of effective saving is necessarily determined by the scale of investment and that the scale of investment is promoted by a low rate of interest.
There can be no doubt that this criterion will lead to a much lower rates of interest than has ruled hitherto; and, so far as one can guess at the schedules of the marginal efficiency of capital corresponding to increasing amounts of capital, the rate of interest is likely to fall steadily.


Richard Bedford Bennett: It will be observed that
he uses the word "guess."


Gerald Grattan McGeer: No one can tell for certain what is going to happen in the future. He goes on to say:
But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital.
And certainly the actions of Russia, Japan, the Roosevelt administration and Great Britain, prove that that is true. He goes on to say:
An intrinsic reason for such scarcity, in the sense of a genuine sacrifice which could only be called forth by the offer of a reward in the shape of interest, would not exist, in the long run-
-If, as he says in another section in the book, a central bank is created.


Charles Avery Dunning: I think my hon. friend should quote that exactly.


Gerald Grattan McGeer: I shall be very glad to do so:
There can be no doubt that this criterion will lead to a much lower rate of interest than has ruled hitherto and, so far as one can guess at the schedules of the marginal efficiency of capital corresponding to increasing amounts of capital, the rate of interest is likely to fall steadily, if it should be practicable to maintain conditions of more or less continuous full employment-
How does he say you are going to maintain conditions of more or less continuous full employment? He deals with that in a very trite, Keynes' way of argument:
Unemployment develops, that is to say, because people want the moon; men cannot be employed when the object of desire (i.e. money) is something which cannot be produced and the demand for which cannot be readily choked off. There is no remedy but to persuade the public-
-that money can be created simply through a central bank.
I may be wrong; I may be presuming a great deal to offer a suggestion as to what this book really contains, because I think it is a book written not for men like myself or for the public but very largely for classical economists who have academic training. But he has pointed out certain things to the classical economists with academic training, whom we have long followed in their teachings. I think Ricardo and Pigou of recent times probably have had more influence upon the political economy of Great Britain than political leaders have exercised. We have accepted the teachings of Ricardo. In this book Keynes comes forward' to change the academic and classical economist into one who forces himself to make his theories find the sanction of actual experience, to make his theories stand
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up under the test of practical political experience. In other words Keynes has taken what we call unorthodox economy and put it into this book in a classical version.


Richard Bedford Bennett: He says that the book is largely written for economists.


Gerald Grattan McGeer: I think so. I have read it and studied it, and I am trying to give what I think is a layman's interpretation of its practical value and application. I do not know that one needs to stress the point that the Macmillan commission agreed upon unanimously, namely that the creation of currency and credit, the issue of currency and credit, the regulation of prices, the stabilization of production and all those factors that must be taken into consideration as well as money, must come under the control of men of unchallengeable independence. I agree that it is easy to say that our bank directors should be men of business experience; that is true. But they should be men of unchallengeable independence, having no other interest than the well-being of the community at large.


Richard Bedford Bennett: Would the hon. gentleman answer a question? How does he reconcile that with government control?


Gerald Grattan McGeer: The government control I should like to see established is something like the government control that we exercise over the supreme court. We would not think of allowing the members of our county courts, our provincial supreme courts or the Supreme Court of Canada to have any other interest during their active service than the well-being of the public and the nation.


Richard Bedford Bennett: But they frequently decide against the government.


Gerald Grattan McGeer: There is no question as to that, but it is only in the determination of issues in accordance with the laws which are established. It cannot be helped that the government and the supreme court may conflict, as has occurred recently in the United States, but there is no reason why the course followed by the government of Canada could not have been followed by the government of the United States, so that the questions would have been sent to the Supreme Court of the United States for determination before being acted upon by the government.


Richard Bedford Bennett: Their constitution forbids that.


Gerald Grattan McGeer: But they could change their constitution in that regard, and in the light of the experience of the past year possibly the necessity of working out some arrangement by which the supreme court and the

government of the United States can work in harmony will be recognized and such an arrangement will be developed. In any event we have not that situation, in the Dominion of Canada. I think it is extremely rare that there has been any suggestion that the interpretations of our laws were violations of the general spirit of democratic government as we have it in this house. I do not think we have ever had any criticisms as to that. I quite appreciate that the board of directors of the Bank of Canada have no easy task, but what I say is that there is no reason for believing that such a board of a publicly owned bank and the government cannot work together in circulating and in regulating the circulation of the medium of exchange which constitutes the economic blood stream of our whole social order. Just because these problems are difficult is no reason for not undertaking them, and when there is opportunity for us to take another step forward, if it is necessary to change stagnation in business into activity, unemployment into employment and to advance the standard of living and the spread of culture, it is well worth the risk.
I may be criticized for expressing my views so keenly, but in connection with this great subject I feel that every man in public life should be at least willing to study this question, to formulate some definite ideas and to bring them into the council chamber of the nation for discussion. It is not necessary that they be adopted; even if they only promote intelligent discussion and intelligent pursuit of information that will lead to some effective solution of the great problems which governments have before them, it will be worth while. This, I think, is the greatest political issue and the greatest economic problem before us for solution, and until we solve it we cannot find the way to that social and economic security which we are all anxious to see everyone enjoy. The right hon. Prime Minister has said:
... once a nation parts with the control of its currency and credit, it matters not who makes the nation's laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile. Those are strong words; they constitute a strong argument, and they are words of which this house ought to take full acount before it is too late.
Again, during the same debate, the right hon. gentleman said:
The hon. member for Vancouver Centre has referred already to what I said when speaking in this house on February 27, 1933, in outlining the position of the Liberal party on the central bank. I should like to read again the words

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quoted by the hon. member for Vancouver Centre. Referring to the control of credit and stating the position of the party with respect to the control of credit, I said:
"The Liberal party believes that credit is a public matter, not of interest to bankers only but of direct concern to the average citizen. It stands for the immediate establishment of a properly constituted national central bank, to perform the functions of rediscount and the control of currency issue, considered in terms of public need. A central bank is necessary to determine the supply of currency in relation to the domestic, social and industrial require* ments of the Canadian pepole; and also to deal with the problems of international commerce and exchange."
I desire to direct special attention to the words: "a properly constituted national central bank." Also:
To perform the functions of rediscount, and the control of currency issue, considered in terms of public need.
Note that the Prime Minister said, "in terms of public need," not private gain.
The acknowledgment of the Prime Minister that the sovereignty of parliament and democracy is dependent upon the recognition that the issue of currency and credit is the most conspicuous and sacred responsibility of government constitutes a clear repudiation of the views of orthodox finance and classical economy which have prevailed in British countries during the last one hundred years.
The statement of the leader of the Liberal party should be recognized as the outstanding economic pronouncement made during the depression. I have formed this conclusion because I think that in the brief statement which I have quoted he was able clearly to define the primary cause of the economic disturbance and to indicate in specific terms the basis upon which may be developed a practical and enduring remedy.
Now, the fact that I have spoken strongly upon this issue does not mean that I am a rebel, or that I am inconsistent with the ideals or the practical workings of the Liberal party. I have formed my own ideas on this great public issue. I advocated them before the banking and commerce committee and was given a delightful welcome by the Liberal members of that committee when I came from Vancouver to appear before it. When I accepted a Liberal nomination I did so reserving to myself the right to stand upon the floor of this house and adtvooarte monetary reform as a non-partisan issue in which all should join and cooperate to find a solution of our financial and economic problems. I am not downhearted because the government in this first session have not gone as far as I would like to see them go. But I would have been false to my constituents if I had not stood up in my place here and done exactly what I promised to do if I was elected. I say this
to the government: You have started on the problem of setting up for the Canadian people a properly constituted bank. This is only the first session. With what is going to happen in the United States in the next few years, with what has happened in Great Britain, in South Africa, in New Zealand and in Australia, this government can and, I am confident, will go forward', in its own perhaps cautious way, less active than I think it ought to be, but nevertheless it will fulfil the promise and the philosophy which is expressed in the quotation from the Prime Minister's statement I have read and upon which the Liberal party went to the electors. I hope we shall be able in the next election to go to the country with the same statement, not as a promise then but as a pledge fulfilled.


Mr. CAHAN:: Mr. Chairman, I would prefer to ask the indulgence of the committee, that I might move the adjournment of this debate, rather than enter upon the discussion of such an important matter with only fifteen minutes available.


Charles Avery Dunning: Could we carry this section and my hon. friend speak on a later section? I do not think my hon. friend could possibly be more out of order than the discussion has been at times this evening. If he made his speech on the section relating to the governor's veto or anything else I think there would be no objection in view of the latitude that has been permitted. I should like to have this amended section carried if I could, and I shall leave any opportunity to my hon. friend that he desires.


Richard Bedford Bennett: There was a point made by the hon. member for Vancouver-Burrard (Mr. McGeer) with respect to the executive committee that I think the minister should not overlook. There is no doubt that the policy of the bank is determined by the activities of the executive committee. Not the day to day operation, but the carrying into effect of the policy of the bank is more or less entirely under the direction of the executive committee which consists of the permanent officials plus one director. If the government believe, as I think they should not, that they can accomplish more with this bank under government control than otherwise-and I use the words "government control" in the sense in which I propose to make some observations later about it from our experience-then it is clear that that one director should be of a class "B" designation. That is perfectly obvious. If he happened to be a class "A" director, representing private interests-I use the term in a broad sense-as distinguished from the "B" class representing the public or government interest, it is perfectly obvious
Bank oj Canada

that if the plan which the government has outlined is to be carried out, that director should be a representative of that class, although the government have anticipated that point to some extent by providing that if the governor vetoes action that may be taken by the executive committee he reports the matter to the governor in council. But he may not veto the action; he may approve it, and that creates an entirely different situation. I mention this; it is not a matter of importance to me, but it is a suggestion which occurs to me and which is accentuated by what was said by the hon. member for Van-couver-Burrard in dealing with the question of the executive committee and its relation to the bank. In reality, as far as the bank is concerned, at the moment or in the future, its operations are determined by three men, namely the governor, the deputy governor and a director, who constitute the executive committee. The governor is the chairman of the board; it is quite clear that under this statute he becomes the permanent chairman of the board, and the reason given is that very reason. When that is done you have a situation that, I think, is not quite consistent with the declared purpose of the government. If it is intended to carry into effect the logical result of the policy indicated, this director should be designated as being a class "B" director.


Charles Avery Dunning: Well, I do not quite
agree with the definition of the function of the executive committee as stated by the leader of the opposition (Mr. Bennett) and some others. I might point out, with regard to the suggestion he now makes, that the modus operandi is covered by the amending bill now under discussion for the reason that the third member of the executive committee is elected by the board. Being elected by the board he would in the nature of things be a representative of and satisfactory to the majority of that board, who will be government appointees.


Richard Bedford Bennett: That does not follow.


Charles Avery Dunning: But I should point out that under the executive committee arrangement at present existing the Deputy Minister of Finance is also present, although without a vote, thus ensuring that the Minister of Finance is made familiar with any vital matters which may be under consideration by the executive committee. My difference of view from that of the leader of the opposition rather rests upon this point. I do not take it that the power given the executive committee, of conducting the bank's business

between the meetings of the board of directors involves that between the meetings of the board the executive committee can go contrary to the declared policy of the board. Such a position is unthinkable. If it arose it would speedily bring about a conflict between the different sections of the board, and the line of division would not necessarily follow the line of appointment. A difference of view might quite honestly arise between one government appointed director and another, because I am not supposing for a moment that the government can or should get men on this board merely as rubber stamps for the Minister of Finance. Indeed, the Minister of Finance or the government cannot possibly at all times give detailed consideration to the managing of those great functions which are demanded of those who would be intimately concerned with the bank as directors. If it were possible there would be no need at all for the board. Why not say that the governor in council shall do this, that and the other thing? What is the reason for the delegation of governmental functions? Why, one of the great difficulties with which governments are faced to-day is the multiplicity of matters with which governments as such must deal.


Gerald Grattan McGeer: How many times did the board-


Charles Avery Dunning: I should like to complete this point. I was referring to the growing multiplicity of matters with which the governor in council must deal as taxing the physical and nervous capacity of every man who serves in government.


Richard Bedford Bennett: For five years I heard that as a joke.


Charles Avery Dunning: Some might regard it as a joke.


Richard Bedford Bennett: For five years the hon. member's party did.	[DOT]


Charles Avery Dunning: No man who has endeavoured to carry out those responsibilities in recent times can possibly regard them as a joke-


Richard Bedford Bennett: That is what the hon. member's party did for five years.


Charles Avery Dunning: I do not believe the Liberal party did anything of the sort.


Richard Bedford Bennett: Well, it did, and worse than that.


William Lyon Mackenzie King: May I ask the leader of the opposition whether, when he was holding the office I now hold, I did not

Bank oj Canada
extend towards him every sort of consideration any opponent could possibly give to another?


Richard Bedford Bennett: I answer unhesitatingly, and I carry public opinion with me, when I say, No! No!! No!!!


Ernest Lapointe: My gosh!


Richard Bedford Bennett: It was the talk of the country, from one end to the other. You gave all the embarrassment possible, and personal attacks on top of that.


Charles Avery Dunning: Unfortunately I was not here. I am trying to discuss what to me is a question of fact.


William Lyon Mackenzie King: Hansard will show the facts.


Charles Avery Dunning: Yes; Hansard will show them.


William Lyon Mackenzie King: And the public has a memory.


Richard Bedford Bennett: "Dictator" and every
other name under heaven was used.


William Lyon Mackenzie King: My right hon. friend thanked me in this house repeatedly.


Richard Bedford Bennett: Look at the records and you will find that it was very seldom any thanks were given, and those occasions were eo seldom that they called forth thanks because they were in such contrast with the usual conduct.


Charles Avery Dunning: I wish to thank the hon. member for Vancouver-Burrard for having graciously allowed me to continue my remarks.


Richard Bedford Bennett: It is something to laugh at.


William Lyon Mackenzie King: My right hon-friend even expressed his thanks over the radio.


Richard Bedford Bennett: His thanks over the radio had nothing to do with that. All you have to do is to look at the record in Hansard. Look at the attacks, the type of them, the frequency of them, and the personal attacks on top of them.


Gerald Grattan McGeer: We are surely discussing the bill.


Richard Bedford Bennett: And now the minister talks about the governor in council, and the strain upon the members of the government, when it has been in office for only a few months, as against those who for five years endeavoured to conduct the business of this country.


Charles Avery Dunning: I made no reference to this government.


Richard Bedford Bennett: It was to this government.


Charles Avery Dunning: I spoke about the governor in council.


Richard Bedford Bennett: The minister is talking about his own experience.


Charles Avery Dunning: May I be allowed to speak? I might as well embark a little myself. The right hon. gentleman attracts the lightning to himself by the manner in which he is now treating me. I made no reference to him at all. The reference I made was to the functions of government as at present constituted, and the ever-increasing weight of responsibility which rests upon the governor general in council-meaning the government of the day-and a responsibility which I do not hesitate for a moment to say is fully up to the physical and nervous capacity of any man occupying a position in any government, under these conditions. The constant multiplication of functions is due to a change which has come about in the conception of governmental functions. They have been constantly widening for the last twenty years, and indeed I am one who thinks one of the problems we shall have to face in the not distant future is the problem of adjustment, and an adjustment which wil1 in some manner be consistent with out system of responsible government. It will have to be an adjustment of the load in a way which will ensure that members of governments will at least have time to think about the things they are supposed to deal with. I am thinking of any government under present conditions.
Here we undertake as a state responsibility a larger measure of concern with and control over the vital functions of currency and credit. Is it possible to put that function directly into the hands of members of the government, and expect them to discharge it, along with their other functions? Any thinking man must recognize that men must be set apart to execute these functions for the state. That is what we are trying to do in the present bill. We are trying to ensure that those men shall be men who have the confidence of the government of the day. We do not mean that they will be rubber stamps to express in every thought and action the views of the government. In the nature of things if they are the kind of men who must run to the Minister of Finance or the Prime Minister to ask what shall be done in connection with every day to day function of banking, the government might just as well try to discharge the function through its own corporate entity. We must have men in whom the government has confidence, from the point of view of knowledge held by the government respecting the general views of the individual with respect to policy. There must be knowledge on the part of the govern-
Questions

ment that the individual holds views with respect to the matter he is to administer which are in harmony with the views of the government, and that his conduct will at all times be assured on major matters. That is the attitude I take of the executive functions. But I also hold the opinion, in contradiction of those expressed in other quarters, that the executive committee of the bank cannot continue to carry out between sessions of the board of governors or board of directors policies contrary to the expressed views of that board of directors. If that were attempted, I believe an utterly impossible situation would be created.


Frederick George Sanderson: Shall the section carry?


Gerald Grattan McGeer: May I ask one question?


Richard Bedford Bennett: It is eleven o'clock.


Gerald Grattan McGeer: In the Canadian Macmillan report one of the primary functions of the central bank is that the government-


Richard Bedford Bennett: It is eleven o'clock.


Frederick George Sanderson: Yes; it is eleven o'clock.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Wednesday, June 10, 1936