CONTENTS

Oral questions.

Agricultural loans for clearing assistance. Mr. Bennett — 3591

CUPE opposition to co-ordinate municipal bargaining. Mr. D.A. Anderson — 3591

Status of Western Canada Lottery fund. Mr. Wallace — 3591

Dismissal of ICBC vice-president. Mr. McClelland — 3591

Mount Benson senior citizen housing project. Mr. Curtis — 3592

Assessment of oil shale on Queen Charlotte Islands. Mr. L.A. Williams — 3592

Cassiar Asbestos dust counts. Hon. Mr. Nimsick answers — 3592

Oil shale potential on Queen Charlotte Islands. Mr. L.A. Williams — 3592

Land Commission power to overrule development plans. Mrs. Jordan — 3593

Substandard produce imported from U.S.A. Mr. D.A. Anderson — 3593

British Columbia Railway Company Construction Loan Amendment Act, 1975 (Bill 27). Committee stage.

On section 1.

Mr. Phillips — 3594

TUESDAY, JUNE 17, 1975

The House met at 2 p.m.

Prayers.

Oral questions.

AGRICULTURAL LOANS
FOR CLEARING ASSISTANCE

MR. W.R. BENNETT (Leader of the Opposition): Mr. Speaker, seeing as how there are very few cabinet Ministers here today, I wonder if we could suspend the question period and add it on tomorrow when there may be a complement of Ministers to provide answers to questions.

DEPUTY SPEAKER: Order, please. Was the Hon. Member speaking on a point of order? This cannot be done except by a motion.

MR. BENNETT: I see they've come in, Mr. Speaker. I would like to address my question to the Minister of Agriculture. I would like to ask the Minister if his department has advised any district agricultural officers to process no further loans for clearing assistance as of June 11, 1975.

HON. D.D. STUPICH (Minister of Agriculture): Mr. Speaker, I'm not sure about the advice to the DAs, but a press release was issued last week to that effect.

MR. BENNETT: Supplementary. Rather than no loan assistance then, have farmers been advised to seek bank loans with a subsidy from the government dropping the effective interest rate to 8 per cent rather than 4 per cent?

HON. MR. STUPICH: Mr. Speaker, the press release that was issued last week and that is public knowledge was to the effect that the $4 million approved in estimates for this programme has been used up, and that beyond that farmers are advised to use the credit Act for whatever other borrowing they wish to do.

CUPE OPPOSITION TO
CO-ORDINATED MUNICIPAL BARGAINING

MR. D.A. ANDERSON (Victoria): To the Minister of Labour, Mr. Speaker. May I ask the Minister whether he has been approached by CUPE or whether to his knowledge the Minister of Municipal Affairs has been approached by CUPE to discuss the possibility of legislation to prevent the formation of a co-ordinated bargaining unit by the B.C. municipalities?

HON. W.S. KING (Minister of Labour): Mr. Speaker, the answer is no. I have received no such overture and I'm not familiar with any of my cabinet colleagues receiving that kind of overture.

MR. D.A. ANDERSON: Can I ask the Minister of Municipal Affairs, then, Mr. Speaker? I thank the Minister of Labour for his answer. May I ask whether he's been in discussions with either the Union of B.C. Municipalities or any of the CUPE people on the question of legislation to prevent the formation of a co-ordinated bargaining unit by B.C. municipalities?

HON. J.G. LORIMER (Minister of Municipal Affairs): No, there has been no such discussion, Mr. Speaker.

STATUS OF WESTERN
CANADA LOTTERY FUND

MR. G.S. WALLACE (Oak Bay): Mr. Speaker, I'd like to ask the Provincial Secretary with regard to the Western Canada Lottery if the Minister can tell the House if any money at any time has been transferred from consolidated revenue to the lottery fund, as provided for in section 6(2) of the Act.

HON. E. HALL (Provincial Secretary): I'll take that question as notice for the Member.

MR. WALLACE: Supplementary. Could I ask in more general terms, Mr. Speaker, if some financial statement as of March 31, 1975, again as provided for in the legislation, will be tabled in the House regarding the financial status of the lottery fund?

HON. MR. HALL: I'll take that question as notice.

DISMISSAL OF THE ICBC VICE-PRESIDENT

MR. R.H. McCLELLAND (Langley): Mr. Speaker, a question to the Minister of Transport and Communications regarding his statement yesterday in connection with the Insurance Corp. of British Columbia. I wonder whether the Minister could tell us the details of the dismissal — termination — of Mr. Scrivener and whether or not severance pay will be given to him and, if so, how much?

HON. R.M. STRACHAN (Minister of Transport & Communications): Yes, I will have to take that question as notice.

MR. McCLELLAND: Mr. Speaker, could I ask another supplementary while he's taking that as notice? He gave some information to the press but

[ Page 3592 ]

not to the House in his statement yesterday regarding the number of claims which were serviced in Saskatchewan by the firm with which Mr. Scrivener is connected. I wonder whether he would tell the House the number of claims that were serviced and the dollar value of those claims.

HON. MR. STRACHAN: I haven't got the figures with me, but I recollect that there were 11 claims referred to that corporation from British Columbia. There were a total of some 40-odd claims serviced by that company, others being referred either by garages or someone else in the Province of Saskatchewan. As I recollect the figure there was a total value of claims of between $3,000 and $4,000, with the total commission of less than $260. Those are general figures, not exact figures, as I recollect.

MOUNT BENSON SENIOR
CITIZEN HOUSING PROJECT

MR. H.A. CURTIS (Saanich and the Islands): To the Hon. Minister of Housing. Last week I directed a question to the Minister concerning the proposed addition, or third stage, I believe, of the Royal Canadian Legion Mount Benson senior citizens' housing project in Nanaimo. At that time there was a strong suggestion that the latest stage was perhaps in jeopardy, at least for the time being, in terms of provincial participation. I wonder if the Minister could today, having had a few days to consider the matter, indicate if in fact this project is going to be subject to delay as far as provincial participation is concerned and, secondly, if some new priorities or guidelines have been established with regard to senior citizens' projects in the province.

HON. L. NICOLSON (Minister of Housing): Mr. Speaker, the matter is under consideration.

MR. CURTIS: Can the Minister not be a little more specific than that? Is the project likely to receive provincial approval and move ahead, or is there bad news for the 145 applicants, I believe, who have already indicated a desire to locate in this new project? Incidentally, Mr. Speaker, there has been no advertising of the fact that this project is going ahead. What is the news for these senior citizens in the Nanaimo area?

AN HON. MEMBER: No news.

ASSESSMENT OF OIL SHALE
ON QUEEN CHARLOTTE ISLANDS

MR. L.A. WILLIAMS (West Vancouver–Howe Sound): Mr. Speaker, a question to the Hon. Minister of Mines and Petroleum Resources. With respect to oil shale deposits on the Queen Charlotte Islands, is the Minister's department or any agency engaged by that department conducting an assessment of the extent and economic viability of those deposits?

HON. L.T. NIMSICK (Minister of Mines and Petroleum Resources): None I know of at the present time. They may have done years ago, but I don't think there's any assessment being done at the present time.

CASSIAR ASBESTOS DUST COUNTS

HON. MR. NIMSICK: One further question. In answer to a question by the Hon. Member for Oak Bay (Mr. Wallace) in regard to Cassiar Asbestos: Cassiar has been closed down by the environmental section of the department for about one week for high asbestos dust counts. It's back working, but further checks showed that patchwork corrections are not the answer. The company has agreed to install a new ventilation system in the mill costing about $3 million, but this will not be completed until 1976. In the meantime, respirators will have to be worn.

The actual dust count for the last three months are as follows for fibres per millilitre greater than five microns in length. Crushers: March, 15.7; April, 7.6; May 6.3. The dryer: March 34.8; April, 18.9; May, 20.9. The mill: March, 20.2; April 21.1; May, 12.2. The figures indicate a general improvement but are still higher than required, and we're keeping right after them on it.

OIL SHALE POTENTIAL ON
QUEEN CHARLOTTE ISLANDS

MR. L.A. WILLIAMS: Supplemental to my question. In view of the province's urgent need for a supply of crude oil, would the Minister's department encourage groups in the private sector to make an assessment of the oil shale potential on the Queen Charlotte Islands?

HON. MR. NIMSICK: Very likely this would happen once the legislation is passed placing the oil shale under the Petroleum and Natural Gas Act. I don't know how soon that would happen, finding out exactly the potential of it, because it would be quite costly from what I hear they did in the United States.

MR. L.A. WILLIAMS: Then do I assume the Minister is saying that he would not object to people in the private sector making an assessment once the legislation which is before the House becomes law?

HON. MR. NIMSICK: No, I didn't say anything like that at all.

[ Page 3593 ]

DEPUTY SPEAKER: The Member for Oak Bay on a supplementary.

MR. WALLACE: I wanted to ask the Minister of Mines and Petroleum Resources another question regarding....

DEPUTY SPEAKER: Order, please. I would request the Hon. Member to defer to the Member for North Okanagan.

LAND COMMISSION POWER TO
OVERRULE DEVELOPMENT PLANS

MRS. P.J. JORDAN (North Okanagan): My question is to the Hon. Minister of Agriculture. Would he advise the House if the Land Commission has officially been given authority to overrule specific development plans in a municipality when those plans have been accepted by a qualified planner in the district, and the plan was based upon a community planning report by a qualified community planner, and has been accepted by the public in that area?

HON. MR. STUPICH: The question, as I heard it, was: has the Land Commission been given specific authority to overrule particular plans? I don't know how I can answer that question without knowing the details.

MRS. JORDAN: Perhaps the Minister would advise the House if he is aware that there is now an appeal from the district of Coldstream in the North Okanagan, requesting that the B.C. Land Commission withdraw its recommendation to the Lieutenant-Governor-in-council. The recommendation by the Land Commission was that a caveat would require minimum density of 20 dwelling units per acre of high-density living. This is completely contrary to the development plan of the area. Does the Land Commission have official authority to do this?

HON. MR. STUPICH: Mr. Speaker, the Land Commission has authority to make recommendations. I'm surprised at them making recommendations with respect to high-density living since their work is really with respect to the agricultural land reserve, and that does not seem to be within the agricultural land reserve from what you say. But they have authority to make recommendations — everybody has.

MRS. JORDAN: A supplementary, Mr. Speaker. Do I take it from the Minister's statement that the Land Commission should confine itself to dealing with moving land in or out of the agricultural land reserve, and that it has no authority to recommend to the cabinet, over the municipality, the density of an area?

HON. MR. STUPICH: No.

SUBSTANDARD PRODUCE
IMPORTED FROM U.S.A.

MR. D.A. ANDERSON: To the Minister of Agriculture: is he aware of, or have any studies been done on the claim that substandard produce from the States is in British Columbia supermarkets, and that they are "using sprays and pesticides that have been outlawed in Canada", but there is nothing to prevent these vegetables and fruit coming into Canada? Has he looked into this matter which was raised approximately a week ago with Mr. Wickens of his department?

HON. MR. STUPICH: Is that a matter which the Hon. Member raised with Mr. Wickens?

MR. D.A. ANDERSON: That was my fault, Mr. Speaker, I should have given more background. It has been claimed by greenhouse growers on Vancouver Island that local supermarkets are getting American produce which is substandard and which would not be accepted by the local marketing boards. In addition, this produce has been subjected to sprays which are banned in Canada. I wonder whether the Minister has any information on this to report to the House.

HON. MR. STUPICH: I have no information on that to report to the House, Mr. Speaker.

I have said on many occasions that, as one of the ways of promoting consumer purchase of B.C. produce, that Canada's regulations with respect to protecting the health of her citizens are unequalled in the whole world, and that sprays, insecticides and hormones that may be used in other jurisdictions often are just not obtainable and may not be used in the production of food in Canada. That is just one more reason that people should be buying Canadian.

The import of food is completely controlled by the federal government. On occasion products do come into the country that are produced under conditions over which we have no control. Until we know of the use of specific chemicals, insecticides or hormones, and know that they are being used in the production of such food, and make successful representations to Ottawa — which is not always easy and is often time consuming — until we are able to get the evidence and make such successful representations to Ottawa, these foods continue to come in and work against the health of the Canadian consumers, as well as against the economic health of the Canadian producers.

[ Page 3594 ]

MR. D.A. ANDERSON: I think the Minister for that lengthy and detailed reply. Could I ask him whether or not there is any way whereby the local inspectors of the British Columbia Department of Agriculture can move into supermarkets and seize produce which is substandard or has been grown under conditions with hormones, insecticides or whatever, which are not permitted in Canada, or whether this is entirely a question to be solved at the border? Is there any way in British Columbia where such situations can be rectified by your B.C. government inspectors?

HON. MR. STUPICH: Mr. Speaker, I suppose there could be a way, but at present that sort of inspection procedure is conducted entirely by federal government inspectors. When we hear of cases, we do refer to the federal government inspectors and ask them to get involved and do the inspection, but the inspection process is federal.

Orders of the day.

HON. E.E. DAILLY (Minister of Education): Mr. Speaker, I ask leave of the House to proceed to public bills and orders.

Leave granted.

HON. MRS. DAILLY: Mr. Speaker, committee on Bill 27.

BRITISH COLUMBIA RAILWAY COMPANY

The House in committee on Bill 27; Mr. Liden in the chair.

On section 1.

MR. D.M. PHILLIPS (South Peace River): At the outset, Mr. Chairman, I would like to get a couple of things straight with regard to this bill. I would like, for the information of the House, just to state again that this bill was introduced for first reading in this Legislature on February 28, 1975, and did not come up for second reading until a week ago last Friday, some several months later. I get just a little peeved when the ex-director of the railway, the person who was fired by the Premier, starts talking about the urgency of getting this bill passed when the bill has been on the order paper for some several months, since February 28, 1975. So I don't want to hear that ex-director of the railway, the one who was fired by the Premier, talking about the urgency....

MR. CHAIRMAN: I remind the Member that you are dealing with section 1.

MR. PHILLIPS: Yes, I'm dealing with section 1.

MR. CHAIRMAN: Order! We're on Bill 27, section 1. I recognize the Member for South Peace River.

MR. PHILLIPS: Well, yes, I am speaking.

MR. CHAIRMAN: I want to bring you back to section 1.

MR. PHILLIPS: Mr. Chairman, we discussed several items under this bill yesterday and the Minister of Labour (Hon. Mr. King), the ex-director of the railway, had a far-ranging tirade against the opposition, so the other thing that I would like to remind the Chairman of is that it is clearly stated in Hansard that anything we want to discuss under the British Columbia Railway would be discussed under this bill. So I would just like to remind the Chairman that we are allowed any questions we wish to ask with regard to the British Columbia Railway under committee stage of the bill, by order from the president of the railway and the Premier, so that we understand each other, Mr. Chairman.

MR. CHAIRMAN: Will you get back to section 1?

MR. PHILLIPS: I just want to get a couple of things straight. Yes, I am getting back to section 1. We are discussing the railway and I am discussing the bill and the length of time it has been on the order paper.

MR. CHAIRMAN: Please deal with section 1.

MR. PHILLIPS: Mr. Chairman, the purpose of section 1 is to increase the borrowing of the British Columbia Railway by some $200 million. The Minister of Labour yesterday afternoon said there is a great urgency in passing this bill because the railway is not able to pay its bills, not able to advance money to the contractors who are working on the railway, and not able to pay their general accounts. Of course that brings up the question: why is the railway in such dire financial straits when shortly after the session began we discussed in this Legislature the $25 million which was being advanced to the railway? If the government knew that the railway was in such dire financial straits, why did they not advance more money at that particular time?

I discussed several times during the Minister of Finance's estimates the fact that they were not able to pay their bills on the railway. I asked him at that time if the railway was in financial problems. I got no answers.

Mr. Chairman, one of the reasons for the urgency in passing this bill, according to the Minister, is because the railway is being poorly run — as a matter

[ Page 3595 ]

of fact, it is being run into the ground. One of the reasons why this railway is being run into the ground is due to the changes that have taken place in the management of the railway since this government took over. Maybe this is the reason why we need this $200 million to put the railway back on the financial rails, as it were.

The Premier has stated emphatically that there was no political interference with regard to the management of the railway when I mentioned that five of the top management of the railway had gone in the two and a half years since the Premier took over. I am very disappointed that the Premier isn't here to answer these questions. He said we would be able to ask him any question we wanted during the debate on this bill, and here he has flown away to New York and on his way to London on another trip at the taxpayers' expense. Mr. Chairman, I would just like to ask the Minister of Labour, who is carrying this bill through the House, why the only director of the railway in this Legislature, the Minister Without Portfolio (Hon. Mr. Nunweiler), is not handling this bill. Here is a Minister who has been fired from the railway trying to see this bill through the House, when the only director of the railway — the Minister Without, the Member for Fort George....

MR. CHAIRMAN: I don't think that has anything to do with....

MR. PHILLIPS: It has a lot to do with it, Mr. Chairman. It has a lot to do with it.

MR. CHAIRMAN: It has nothing to do with section 1.

MR. PHILLIPS: Well, it has a lot to do with the railway, Mr. Chairman — a tremendous amount to do with the railway.

MR. CHAIRMAN: Order! Deal with section 1.

MR. PHILLIPS: It has to do with the competence of the directors that the Premier has appointed to the railway. I'm dealing with the railway, Mr. Chairman. There's a director of the railway, he's in this Legislature, and I'm asking the Minister....

MR. CHAIRMAN: Order! Who's piloting the bill has nothing to do with section 1.

MR. W.R. BENNETT (Leader of the Opposition): Simmer down.

MR. PHILLIPS: Mr. Chairman, let's not be....

MR. CHAIRMAN: Order! The Member for South Peace has the floor. I would ask the Leader of the Opposition to be quiet.

MR. PHILLIPS: Mr. Chairman, let's not be picayune about this. We're dealing with all aspects of the railway under section 1. I'm asking the Minister of Labour (Hon. Mr. King), that chairman who was fired from the directorship of the railway, how come he's carrying this bill through the House when we have the only director of the railway....

Interjection.

MR. PHILLIPS: He's not even a director now.

Interjection.

MR. CHAIRMAN: Order! Who's piloting the bill has nothing to do with section 1. That's obvious.

MR. PHILLIPS: Now, Mr. Chairman, the reason that....

MR. D.A. ANDERSON (Victoria): This is going to take forever, Mr. Chairman, if you adopt that attitude.

MR. CHAIRMAN: Order! You're not even speaking from your own seat. I would remind the leader of the Liberal Party that we have got to have some order in this House. If you've got anything to say, you say it from your own seat.

MR. D.A. ANDERSON: Yes, sir!

MR. PHILLIPS: Mr. Chairman, I appreciate you keeping the House in order while I have the floor. I appreciate that.

What I want to point out is that one of the reasons we're in such financial problems in the British Columbia Railway is because the management has changed, and the present management seems to have run that railroad into the ground.

Mr. Chairman, in spite of the Premier saying that there was no political interference, the reason the railway management was changed was on recommendation of one of the directors.

I have here a confidential report — evidently it's confidential because the Premier, the president of the railway, had never tabled it in this House. The report is from Swanson & Associates, consulting engineers, Railway Appliance Research Ltd., 640 Burrard Street, Vancouver 1, B.C. The report is signed by one Mr. Swanson. It is this report that recommends.... The report, by the way, is dated February 26, 1973 — about six months after the present president of the railway took over and shortly after Mr. Swanson was set up as a director of the company. Mr. R.E.

[ Page 3596 ]

Swanson, director, British Columbia Railway.

Mr. Swanson's report has a far-reaching effect on the management of the railway. I'd just like to ask the Minister of Labour if the recommendations in this report were carried forth. Was that the basis on which Mr. Broadbent was side-shuffled in the railway management? Is that the basis on which Mr. Esterbrook was fired? Of all the recommendations in this report, which of them were carried out? Did Mr. Swanson charge the British Columbia Railway any consulting fees for this report? If he did, was it paid to Swanson & Associates or was it paid to Railway Appliance Research Ltd? Or was it paid directly to Mr. Swanson? Did Mr. Swanson at any time submit a bill for preparing this report? Was there any money paid out to Mr. Swanson or to any of his associated companies for this report? Were there at any time bills submitted for this report and then withdrawn?

I'd like the Minister of Labour, first of all, to answer those questions, Mr. Chairman.

HON. W.S. KING (Minister of Labour): Mr. Chairman, dealing with the last question first: I suggest that that question has no relevance whatsoever to the bill before the House, which is a bill to provide operating revenue for the railway. The Members of the opposition know very well that in public accounts, at the year-end, they are fully entitled to question the details of operation, all of the expenditures that are made by the railway. As I mentioned yesterday, for the first time in the history of this province there is an opposition Member on the public accounts committee; he being the Member for Cariboo (Mr. Fraser). I'm sure the Social Credit Party should have some confidence in that Member, who is chairman of the public accounts committee, to ensure that the....

MR. CHAIRMAN: I would like to remind the Minister that that should be dealt with in public accounts, and is not really section 1.

HON. MR. KING: Fine, Mr. Chairman. Then I would suggest....

MR. CHAIRMAN: The question was as much out of order as the answer.

HON. MR. KING: I accept that, Mr. Chairman. That being the case, I hope you'll also keep the opposition Members to the intent of the bill in their questioning.

Now the Member raised a number of points. He said that he wanted to know what the financial needs of the railway are. Yesterday I announced quite clearly what the financial needs of the railway are. There is a need for $10 million immediately. There is a need for an additional $10 million by early in July.

That's a matter of record in Hansard. This is for operating revenue; it pertains to the construction of the northern extension also, which was undertaken by the previous administration.

The opposition has indicated they support this bill, which clearly outlines to the House the method in which financing of the railway will be undertaken. It is not a sham in any way; it is not an attempt to hide from this House or from the public of British Columbia the extent of the borrowing which the railway has to undertake. We have repudiated the former system of simply extending the share capacity in making hidden subsidies to the railway. This is evident; it's on the table. The opposition has indicated their support in second reading of this bill for the principle of extending the additional borrowing power.

I suggest, Mr. Chairman, that we get on with the needs of the railway to ensure that the workers on the railway are not in a position of having their pay cheques delayed and to allow the railway to continue with their programmes of development and service to the north central sector of this province. I don't think it's a service to anyone to unduly delay this bill on matters that have been canvassed in second reading — the facts are on the table — or on questions that are properly the business of the public accounts committee, and which can be elicited at the appropriate time when the public accounts committee sits. It's always been the practice that questions as to the operating expenditures of the railway were elicited at the end of the fiscal year under the public accounts.

MR. PHILLIPS: Mr. Chairman, as I pointed out to the Minister, I didn't want to hear him. He continues his political tirade again without the urgency of getting this bill when the bill has been sitting on the order paper since February 28. 1 hope that the next time he starts talking about the urgency of the bill you will call him to order, because the bill has been sitting. I'm a little sick and tired, Mr. Chairman, of this government creating crisis situations where they have to force legislation through this House to rectify their own errors. This is another case.

I'll state again that with regard to the relevance of my questions to the bill, we were told — I'll find it in Hansard for you if you'd like me to bring it up again, Mr. Chairman — during the Premier's estimates time and time again and the Leader of the Opposition and many Members of the opposition were told by the Premier that we would be able to discuss any questions we wanted with regard to the operation of the railway under this bill. If the Minister of Labour in the Premier's absence cannot stand the pressure of the heat, I suggest that he pass the debate on to the Minister Without (Hon. Mr. Nunweiler).

[ Page 3597 ]

MR. CHAIRMAN: Order.

MR. PHILLIPS: I'm a little sick and tired of the Minister of Labour hiding under....

MR. CHAIRMAN: Order.

MR. PHILLIPS: Yes, Mr. Chairman.

MR. CHAIRMAN: Surely even that kind of a statement has some limits. I want to keep the debate within the limits of the bill. You had the wide-ranging discussion on second reading. I'm responsible for keeping order and keeping things within order.

MR. PHILLIPS: I appreciate that, Mr. Chairman. I certainly do appreciate that. Mr. Chairman, if you would just ask the Minister of Labour to answer the questions, we would get this bill passed in a hurry; there wouldn't be any necessity of all this debate. But when we ask questions all we get from that Minister of Labour is a political tirade.

So I'd like to ask my questions again very simply. Was there any bill submitted by Swanson & Associates or by Railway...?

MR. CHAIRMAN: Order. I'd like to remind the Member of standing order 43. You're being tedious and repetitious.

SOME HON. MEMBERS: Oh, oh!

MR. CHAIRMAN: It's been said to you before that that question should be properly asked in public accounts.

MR. PHILLIPS: No, no.

MR. CHAIRMAN: That's where it should be dealt with. I bring you back to section 1 of this bill.

MR. PHILLIPS: Mr. Chairman, it has to do with the operation of the railway. If you wish to back down on the Premier's promise, I'll have to let the public know. The Premier told us specifically — I'll remind you again — that we could bring up matters....

MR. CHAIRMAN: Order! You're dealing with section 1 of this bill. You don't need to remind me of anything that somebody else said in the House.

MR. PHILLIPS: I don't need to remind you of the Premier's commitments.

MR. CHAIRMAN: It's my responsibility to keep order. You're on section 1; I would like you to stay on section 1.

MR. PHILLIPS: I would like to ask the Minister of Labour if there were any moneys paid out for this report. I also asked him if it was the result of this report that there were all of those changes in the top management of the railway. It's a very simple question; all he has to do is say yes or no. Were any bills submitted for the report? Were they paid? If so, to whom?

MR. CHAIRMAN: I remind you again that those are public accounts questions.

HON. MR. KING: Mr. Chairman, I would agree with that observation. That certainly is a public accounts question. But on the off chance that the Member is concerned with some accuracy in terms of statements that he makes and information that flows to the House, I would like to correct him on some of the statements that he has repeated.

In the first instance, I was not fired from the railway board. I withdrew at my own request, as a matter of fact, and that was announced to the House. The Members opposite may wish to draw their own conclusions and interpret that and distort it as they wish, but to accept his repeated distortions in the House is not quite acceptable to me.

The other point, Mr. Chairman, that should be brought to the Member's attention is it is true that this bill was introduced many months ago, and at that time the opposition cry was that the bill should not be brought forward for debate until the annual report of the railway was filed. So the delay in bringing the bill to the House was to some extent at the request of the opposition also. I don't think anyone can deny that more information regarding the operation of the railway has been tabled this session than was ever the case before.

Now without going into the whole debate again — and I certainly don't want to do that — I would point out that yesterday the Hon. Member for South Peace River (Mr. Phillips) drew certain conclusions regarding his interpretation of the Price Waterhouse report. He failed to mention all the conclusions that were drawn from the Price Waterhouse report, and certainly the conclusion which I read did clearly indicate that there was a need to reassess the accounting procedures on the railway.

I quote from page 2 of the Price Waterhouse report: "It was recommended that the railway should conduct a comprehensive review of the depreciation practices of the railway and develop a clear statement of depreciation objectives and policies."

On page 4 of the same report the finding was, and I quote: "The accounting systems in the BCR in the past have been directed primarily towards the traditional role of reporting financial transactions in a manner consistent with the requirements of the uniform classification of accounts and of the

[ Page 3598 ]

transport commissioners for Canada."

Now apparently the Member has interpreted that incorrectly. It points out that that was the criterion set down, but it certainly did not say that those practices were in fact followed. Indeed, in the later report, the Peat, Marwick report, the accountants of that firm, who are very, very widely known and very, very well respected, put their reputation on the line by finding and stating unequivocally that in fact the CTC standards had not been met in developing those reports and filing them with the House. So I don't think there should be any confusion there. I just wanted to make that point for clarification.

With respect to the precise expenditures of the railway, Mr. Chairman, it is obvious that that is not a matter to be debated in this bill. Certainly I do not have the entire details in my possession in terms of the day-to-day expenditures of the railway, and it is traditional that those matters be dealt with under the public accounts committee.

What I do have, Mr. Chairman, that I feel perhaps I should reveal to the House is an expression of considerable concern from the central interior about the delay in approving the moneys required for the railway's operation. There is a telegram here addressed to the Premier, dated June 16, and it says: "Dear Mr. Premier: We concerned citizens of Cariboo deplore the continuous, unproductive and asinine filibuster by the official opposition, creating a complete waste of time. Please convey to them in the House our utter disgust, Concerned citizens of Cariboo, at a meeting held in Williams Lake, June 15, 1975, Brian J. Northrup."

MR. BENNETT: Who signed it?

HON. MR. KING: Brian J. Northrup signed it.

This is the kind of concern that is being expressed, Mr. Chairman, by people on the railway property who rely on the railway for services to their community. As I mentioned yesterday, last year, during the labour tie-up of a few weeks' duration on the railway the Social Credit Members particularly expressed deep concern, and I certainly accept that it was genuine concern, about the delay in the operation of the railway. I am certain that they are similarly concerned on this occasion and will hence speed through this House the approval of the additional financing that is necessary so that we can get on with the job of running this railway.

MR. PHILLIPS: Mr. Chairman, that sort of makes me chuckle. Maybe we should wire the people in the Cariboo and tell them that they can buy steamship companies without legislation, that they can pay people on the resource review commission without legislation, and yet when they run the railroad so far into the ground that they have to wait for us to pass legislation because they can't pay their bills, this government is more incompetent than we ever even thought it was.

I want to tell you that if the Minister of Lands, Forests and Water Resources were in charge of that railway, the bills would be paid whether there was legislation or not. So I don't know why we should be so concerned.

We'll wire those concerned citizens in the Cariboo and tell them that we better put the Minister of Lands, Forests and Water Resources as a director of the railway, because he sure doesn't need legislation to spend government funds, buy acres and acres of land in the Victoria area, buy a steamship company, pay employees, go on a joy trip with it to Seattle and back and pay all the expenses, Mr. Chairman.

He brought it up, not me. He doesn't need legislation. I'm just refuting his remarks, Mr. Chairman, and I'll certainly get back to the bill.

Interjections.

MR. PHILLIPS: Mr. Chairman, there are a couple of things with regard to the operation of the railway and with regard to Mr. Swanson as director. I feel that he has a conflict of interest and I'd like the Minister's remarks on it.

The Department of Travel Industry has paid out money to the company by the name of Railway Appliance Research Ltd., incorporated March 7, 1951, with registered offices at 1800 Toronto-Dominion Tower,700 West Georgia, Vancouver 1, and the directors of this company are: Robert Eugene Swanson, president, 5212 Granville Street, Vancouver; Dorothy Edwina Swanson, secretary, 5212 Granville, Vancouver; and Ernest A. Alexander, 6150 Cypress Street, Vancouver.

Now Mr. Swanson, who is a director of the railway and the president of Railway Appliance Research Ltd., was paid out of the public purse in 1973 — and I refer you to the public accounts of British Columbia for the fiscal year ending March 31, 1973.... Railway Appliance Research Ltd. was paid $26,520.

MR. BENNETT: I wonder what that was for.

MR. PHILLIPS: Mr. Chairman, this is a company of which Mr. Swanson is the president. In the year 1974, Railway Appliance Research Ltd. was paid a sum of $18,087. Now this, Mr. Chairman, in my estimation is a complete conflict of interest. I suppose that these sums of money were paid out for refurbishing the Royal Hudson, which was paid for by the Department of Travel Industry.

We have another instance, Mr. Chairman, a company called Airchime Manufacturing Co. Ltd., which was incorporated on Nov. 25, 1954. They

[ Page 3599 ]

have their records office at 21-700 West Georgia, and their registered office at 2000-700 West Georgia, Vancouver. The directors of this firm are: George Wilber Piercy, president; Robert Eugene Swanson, vice-president; Donald Ross Challenger, secretary-treasurer. Here again, we have Mr. Swanson who is the vice-president of this company. In the year 1973, Airchime Manufacturing Co. Ltd. was paid out of the public purse $4,235; and in the year 1974, Airchime Manufacturing Co. Ltd. was paid $2,225. There was a new steam locomotive just recently refurbished, of course, for which we haven't got the figures. I have to ask: was Mr. Swanson or any of his companies involved in this?

But, Mr. Chairman, we're talking about a conflict of interest. Mr. Scrivener on the ICBC was involved in a company operating outside of the province. I think there's a conflict of interest here far more severe than that of Mr. Scrivener.

MR. BENNETT: Far more.

MR. PHILLIPS: Far more severe, Mr. Chairman. We have a director of the railway who was basically a political appointee of the railway by the present Premier. He was relieved of his duties as chief engineer in the Department of Commercial Transport. As soon as the present government took over, Mr. Chairman, he was appointed as a political director of the railway, brought in a report which I referred to a short time ago, a report which was recommendations to the Hon. David Barrett, president of the railway, Premier of British Columbia, recommendations for the complete change in the management of the railway, recommending that Mr. Norris as general manager be placed in full authority over all employees and all company officials, other than Mr. Broadbent and his immediate assistance. It recommends that Mr. Broadbent be side-shuffled.

It is the political management and political interference with the railway that has brought us to the sad and sorry state of affairs that we are at today, where the cash flow on the railway is such that we are unable to pay our bills. But, Mr. Chairman, one of the directors of the railway is involved in a complete conflict of interest. I think he should be relieved of his duties whether he is a political appointee or not. He is being paid. The companies of which he is president and vice-president are doing business with the Crown. Even though it is with the Department of Travel Industry, that train is still running on the British Columbia Railway. Maybe it was put in the Department of Travel Industry to sidestep a conflict of interest, but there is definitely a conflict of interest here.

I think that if we are going to get this railway back on the tracks, as it were, we had better get political appointments out of there, get it back into good management, or we will be subsidizing this railway — and not to the tune of $200 million. We will have just seen the tip of the iceberg.

The losses that were made in the railway last year far exceed almost half of the total losses of the past 17 or 18 years, even under the new bookkeeping system. Last year the railway lost $32-odd million, the greatest loss certainly in the history of the railway and, as I say, more than half of the total loss over the previous 15 years. By statements that have been made in this House, we know this year that the railway is going to be in another loss position. We know that the opening of the car plant which was supposed to have cost $5 million eventually cost $8 million.

Interjection.

MR. PHILLIPS: Up to $9 million now? It is going to be in a loss position this year. We know that the cars are not rolling out of that assembly plant as was set up on the schedule. So, Mr. Chairman, we do need a new look at this railway.

Interjection.

MR. PHILLIPS: Yes, we need to have a judicial inquiry into the whole operation of the railway. It is all right for the Premier to make an hour-and-a-half speech about a scandal on the railway. The scandal on the railway is the way this government has run that railway from a good operation completely into the ground. That is the scandal on the B.C. Railway. That is the scandal. The reason we have this problem today is strictly because of the incompetence of the directors of the railway and because of political interference by that government — no other cause whatsoever.

When we have conflicts of interest such as I have tabled here in the House, and when we have a man who, when he was the chief engineer for the Department of Commercial Transport, writing complete, glowing reports about the safety standards on the railway, writing glowing reports about the operation of the railway.... Then, as soon as he becomes a political appointee on the railway, he does a complete 180-degree turn and condemns everything that he praised before. This is a man who is pulling the strings on the British Columbia Railway at the present time. This is the reason why there is so much urgency.

I would like the Minister of Labour to explain to me how this can be justified. If he feels there is no conflict of interest, I would like him to advise me why he feels there is no conflict of interest.

Were Mr. Swanson's companies involved in the restoration of the engine that just came out of Coquitlam when he had charge of the controls last week, he and the Premier...and so gloriously rode

[ Page 3600 ]

down the rails? Were any of Mr. Swanson's companies involved in the restoration of the particular engine and, if so, to what extent?

There are funny things going on on the railroad, Mr. Chairman, and we would like some answers. I would like the Minister of Labour to justify that position now or stand up and tell this House if Mr. Swanson is going to be relieved of his duties.

HON. MR. KING: Mr. Chairman, it is quite obvious that there are some political things going on on the railway. The Member stands up and quotes from a confidential, internal report of the railway. One can only speculate as to how that confidential, internal report came into the hands of the Member for South Peace River. So I suppose we are to accept that perhaps there are some political games going on in certain areas of the railway. As I understood it, they were the Member's own words.

[Mr. G.H. Anderson in the chair.]

MR. H.A. CURTIS (Saanich and the Islands): Open government.

HON. MR. KING: I think every business in the province certainly makes assessments of management needs on occasion. I don't think there is anything untoward about that unless one is completely paranoiac.

The political interference pertains to that question as far as I am concerned. Mr. Swanson was formerly chief engineer for the Department of Transport and Communications. He was appointed and aspired to that position under the previous administration. How the Member can now conclude that appointing a man who was previously in a very confidential position and a very high position in this province, appointed by the previous administration and thereby knowledgeable with respect to the engineering needs and background of the railway.... How he can conclude that that is a political appointment really boggles the mind.

Now if it were Einar Gunderson I could accept their concern. But they choose to forget that reports by independent firms have demonstrated clearly that there was interference by the previous board members. Mr. Gunderson in particular was mentioned in the Minty report as failing to provide adequate information on which the auditors could base their investigations and reports. If the Member for South Peace River (Mr. Phillips) were sincerely concerned about possible conflict of interests, one would think that he might have spent some time addressing himself to that question. He has chosen to completely ignore that all down through this debate.

Swanson's position, or any other position, will come out in terms of the spending of the railway when the public accounts committee sits to hear how the budget of the railway has been expended.

AN HON. MEMBER: But that's a year later.

HON. MR. KING: Certainly it's a year later. That's always been the procedure with respect to the budgetary items of the railway — the budgetary spending.

As far as the Member's definition of what happened with Mr. Swanson, he indicates that Mr. Swanson did some work for the Department of Travel Industry in terms of preparing the Royal Hudson and the museum train for operation. I'm aware of that. I know that he certainly did, and he did an excellent job. He has a good relationship with CP Rail. Both the locomotives involved were former CP Rail engines and many of the parts necessary to get those locomotives back into operation were found in either the CPR scrap heaps or actually manufactured in some of the machine shops. So I know that Mr. Swanson did a good job with the cooperation of CP Rail in locating or making the parts to make both those steam engines operational.

I'd be surprised if any Member of this House attacked the policy of reactivating those steam engines because they certainly bring back a good deal of the history of this province, and have introduced to many of the young people, who never had occasion to see a steam engine, what the pioneering life in this nation was all about. I would think that rather than attacking the considerably determined and positive efforts of one Bob Swanson to assist in that programme, the Members might be applauding his action.

If it comes to any allegation that the Member wants to make about a conflict of interest as to payments a director received from the railway for work performed for the railway, then, certainly, he should raise that in a question to either the president of the railway, to the executive vice-president or before the public accounts committee. I would think that would be a very serious allegation to make, and there should be some basis of evidence for that kind of allegation because it is a serious statement to make.

I don't think it is appropriate that those questions of how the expenditures are made be raised in the debate on this particular bill. We have had wide-ranging debate on second reading of the bill — we're now in committee stage. I repeat: the opposition has indicated quite clearly that they intend to support this bill. Further delay, as they well know, seriously impinges upon the railway's ability to do the job for the people of the province.

MR. PHILLIPS: Mr. Chairman, I'm really astounded and flabbergasted that the Minister of

[ Page 3601 ]

Labour is condoning this definite conflict of interest. Whether the account was paid for by the Department of Travel Industry, or whether it was paid for by any other part of the government, the Royal Hudson is an integral part of the railway. I'm not attacking the Royal Hudson as such, but we have a definite conflict of interest because, as I say, maybe this was put through the Department of Travel Industry. Who pays for the Royal Hudson? Who pays for the operating? Do they pay the British Columbia Railway for the operation of this train?

AN HON. MEMBER: It's charged to the BCR.

MR. PHILLIPS: Does the Department of Travel Industry pay the British Columbia Railway to operate this train for them? Who receives the revenue? Mr. Chairman, these are all questions that should be asked with regard to the operation of the British Columbia Railway. We need some answers. As I say, despite the very fact that the refurbishing of the Royal Hudson was paid for by the Department of Travel Industry, it still runs on the rails of the British Columbia Railway system. Regardless of what government department, it still has to do with the railway. Certainly it is the railway that has to do with the operation of this. If the Minister of Labour just wants to gloss over that and say that there was no conflict of interest, then we know what to expect from this government in the future. I think he is basically condoning this conflict of interest.

The president of the railway had no qualms about filing other confidential reports. Why did he not table the report from Mr. Swanson? Was it selective tabling on his part? Did he not want us to see this report? Was there something derogatory in this report?

I would say that if Mr. Swanson, a director of the railway, drew up this report regarding the management of the railway, saying that there needed to be changes in the management of the railway, the report should have been tabled in the Legislature so all of us could have a look at it.

Was this report not tabled, Mr. Chairman, because it was a paid-for report? The Minister hasn't answered that question. Was this report paid for? Were Swanson & Associates or Railway Appliance Research Ltd. paid for this report? Was Mr. Swanson paid for this report, over and above his regular director's fees? That's a question that the Minister hasn't answered yet, and I would like the answer to that. Is that the reason that this report wasn't tabled? What is so confidential about this report? Why wasn't it tabled when the rest of the reports were tabled when the Minister of Finance and president of the railway took an hour and a half in this Legislature to unveil a supposed scandal on the British Columbia Railway? He certainly dug up everything else he could that was damning to the railway. He tried his best to bring up anything that was damning to the railway.

Mr. Chairman, I just have to ask why this report was not tabled. It is a complete revision of the management of the railway, along with written recommendations as to who shall be in what position. Is this a political document?

MR. CHAIRMAN: Could we come back to section 1, Mr. Member?

MR. PHILLIPS: Mr. Chairman, I feel it is the management of the railway that has brought us to this financial crisis that we have on the railway at the present time. This report from Mr. Swanson....

MR. CHAIRMAN: That matter is for discussion under second reading, not in Committee of the Whole.

MR. PHILLIPS: Well, Mr. Chairman, the point is on third reading to get answers to questions that you don't seem to get in second reading. It is amazing to me that the report would be signed by R.E. Swanson, director of the British Columbia Railway...

MR. CHAIRMAN: The matter is not relevant to section 1, Mr. Member.

MR. PHILLIPS: ...and yet would be on Swanson &Associates, consulting engineers, stationery.

MR. CHAIRMAN: Would the Member please return to section 1?

MR. J.R. CHABOT (Columbia River): On a point of order, the Premier was pretty emphatic on Monday, March 17, when we were discussing B.C. Rail, when he said:

Mr. Chairman, I pointed out that there was a bill on the order paper. I will be giving a full report when the bill is called, and I anticipate a full debate on all aspects of the railway including the boxcars, ties, the freight cars, engines, engine drivers, the stations, the huts, and the whole operation of the railroad under that bill.

Mr. Chairman, I want to suggest that that is exactly what the Member for South Peace River (Mr. Phillips) is attempting to do — discuss what the Premier suggested on March 17 would be available to do when the bill is called.

MR. CHAIRMAN: In view of the length of time the Hon. Member has in this House, he knows that discussion should properly have taken place on second reading.

MR. CHABOT: Mr. Chairman, it is quite obvious

[ Page 3602 ]

that you haven't been in the House very long because if you look back and think of second reading for one moment, you will clearly understand that there is no opportunity of questioning Ministers of the Crown under the second reading of a bill. It is a question of giving your impression of the bill and its ramifications. However, the Premier has said that we would have a full discussion on March 17 — "We'll discuss the stations, we'll discuss the huts, we'll discuss the engine drivers, we'll discuss the engines, we'll discuss absolutely everything relative to the BCR. There will be a full and open debate." And that is exactly what we are attempting to do here.

MR. CHAIRMAN: That's what we had under second reading of the bill, Mr. Member.

MR. CHABOT: Well, under the committee stage of a bill, Mr. Chairman, this is the only opportunity. Are you, the Chairman of the House, attempting to deny the Members of this assembly the opportunity of questioning Ministers on their administrative responsibilities, be it as a cabinet Minister or be it as a director or ex-director of a railroad?

MR. CHAIRMAN: I am simply applying rules of committee and keeping the discussion relevant to the section of the bill. Would the Hon. Member for South Peace River please continue?

MR. PHILLIPS: Well, Mr. Chairman, I would just like to ask, once again, and the Minister can ask — he was a director of the railway at that time.... Here is supposedly a confidential report by Mr. Swanson, who is a director of the railway, and yet the report is filed on Railway Appliance Research Ltd. stationery. Now I want to know if this so-called confidential report was paid for by the government? Were there any directors' meetings where this report was discussed? Who was present at the directors' meetings? Was there an agreement to pay Mr. Swanson? How much did he want for this report?

Mr. Chairman, this is a highly significant report because it is the report that has to do with the complete restructuring and reorganization of the railway, and it was done shortly after Mr. Swanson was appointed as a director of the railway. It was done even before the report of Mr. Sawyer.

This is dated February 26, 1973, and Mr. Swanson is recommending far-reaching changes in the management of the railway. Why was it necessary to have another report done by Mr. Sawyer?

This was received in the Clerk's office on September 18, 1973. It was dated July 17, 1973. It is a report on the status and management, controls and organization of the British Columbia Railway. If Mr. Swanson was paid for one report, or one of Mr. Swanson's companies was paid for doing a report on the management of the railway, a report which this Legislature has never had the opportunity of seeing, why was immediately after that another report commissioned by the Premier by Mr. Sawyer? Mr. Sawyer says:

"This letter transmits my report on the status and management controls and organization of the British Columbia Railway, a summary of which starts on page 10."

He goes on to say:

"Because of the detailed assignments to Price Waterhouse and Swan Wooster, engineers, I have, as planned, focused my attention on an overview of the management status and considered the organizational activities of the operation. I found them to be consistent in concept with most other companies in North America, with the exception of data processing. I have consequently recommended little or no change in the structure to this section. This view has been confirmed by my experienced advisers. In presenting this report, I have concentrated on the future potential and the steps through necessary and proper evolvement of the company.

"One such step concerns the organization, the concept of which I have described in some detail by functions, not departments. The recommended next step is to have the board review these concepts and confirm acceptance, after which a task group can be directed to describe and develop the structure in detail."

Well, Mr. Chairman, there seems to me to be a.... This is evidently a political report. This is the report that was tabled in the Clerk's office, a complete report in detail on the management and organization of the railway. I'd like to know — maybe the Minister of Labour would explain — why the Swanson report, which was done by one of his companies and yet signed by him as a director of the railway — I can't quite understand that — was never tabled in the Legislature. Maybe the Minister of Labour would like to answer that question.

MR. CHAIRMAN: Shall section 1 pass?

MR. PHILLIPS: Well, Mr. Chairman, I think that the Minister of Labour has developed amnesia. Or is he not going to answer the questions? Has he forgot, or does he just not know? Yesterday afternoon in this Legislature the Minister of Labour proved that he didn't know anything about the financial reports or anything to do with depreciation, because he was all confused when we were talking about the statement of detailed accounts, which by the way....

MR. CHAIRMAN: Could we come back to section 1, Mr. Member?

[ Page 3603 ]

MR. PHILLIPS: Well, we're talking about the British Columbia Railway and that is section 1. If you don't feel that the operation of the railway has anything to do with the borrowing of an additional $200 million, why, Mr. Chairman, we've then reached a new low in this debate.

The detailed accounts of the railway were not filed in accordance with the legislation on the books. The statement of railway expenditures did not comply with legislation under the Public Bodies Financial Information Act, which says they must be filed within six months after the financial statement. These detailed expenses were in direct contravention of legislation; yet because it's the British Columbia Railway, the Minister did not answer that question yesterday afternoon. Was it due to the fact that there might have been some payments made to some other of the company directors that these detailed accounts were not filed? How does the railway justify not filing these detailed accounts?

Once again, Mr. Chairman, I'd like to ask the Minister, the man who is responsible for seeing this bill through the Legislature, why the Swanson report was not tabled in this Legislature? How much was paid for the report? Was it paid to a director, was it paid directly to Mr. Swanson, or was it paid to one of Mr. Swanson's companies?

HON. MR. KING: The Member has asked for information regarding certain works done by Mr. Swanson, a member of the board. Now obviously there are just a tremendous number of expenditures which the railway will make in its day-to-day operations out of operating revenue. To accept the Member's demand that all of those expenditures be accounted for in debating a bill which relates to the narrow question of whether to approve further financing authority to the railway is stretching one's credibility beyond all limits.

Obviously the railway must account for each and every expenditure it makes. The appropriate time to do that is in the public accounts committee where the entire railway management plus their financial people will be on hand to presumably provide the vouchers and to justify the expenditures that have been made. But I think it's nonsense to suggest that every expenditure or any particular expenditure which has been made should be debated here.

Now it's true that in large measure the whole area was covered in debate on second reading. Simply it went much beyond the principle of the bill. But I have no intention of attempting to identify and explain every expenditure that will be made in the fiscal year for the railway. I've pointed out repeatedly that we have a realistic public accounts system with a Member of the opposition as chairman of that public accounts committee.

MR. G.B. GARDOM (Vancouver–Point Grey): Baloney!

HON. MR. KING: The Members did ask for some delay pending the filing of the annual report on the railway. That report was delayed in some part, as I understand it, due to other matters that were under investigation on the railway and which were subsequently tabled with the House.

So everything is clearly on the table, and the Member will have an adequate opportunity to pose the kind of questions he's putting here today. This is not the appropriate time, in the committee stage, of considering the advisability of increasing the borrowing power of the railway from some $440 million to $650 million.

Now the Members of the opposition again have indicated their support in second reading and supported this bill. I suggest that to continue to delay it on questions that can certainly be provided on a more appropriate occasion, either in question period to the president of the railway or to public accounts, is irresponsible and certainly an unjustified delay in approving the continued operation of a very, very essential service in this province.

MR. PHILLIPS: Mr. Chairman, I suggest that the statement the Minister of Labour just made is completely irresponsible and shows his complete ignorance of the legislation which says that any public company must file a complete detail of its accounts within six months after the financial statement. The Minister doesn't seem to understand that. I'm not asking for debate. It's contravention of legislation.

AN HON. MEMBER: What's that got to do with the bill?

MR. PHILLIPS: It's got a lot to do with the bill, because we're talking about the operation of the railway. And here's an ex-director of the railway...

Interjections.

MR. PHILLIPS: ...who doesn't even know anything about the operation of the railway, trying to pilot this bill through the House, not being able to answer questions. And the Premier runs away on a joyride at the taxpayers' expense to London just because he....

MR. CHAIRMAN: Could we return to section 1, Mr. Member, please? Could we return to section 1?

MR. PHILLIPS: He took off on an expense-paid tourist trip to England because he didn't want....

[ Page 3604 ]

MR. CHAIRMAN: Order, please! That has nothing to do with this section of the bill, and it's tedious and repetitious.

MR. PHILLIPS: I want to tell you.... Tedious and repetitious! That Minister of Labour stood up and made the same speech five times since the House started this afternoon. The same speech! You talk about being tedious and repetitious! All I want is some answers to some questions.

MR. CHAIRMAN: It seems to be habit-forming. Could we return to section 1, please?

MR. PHILLIPS: Mr. Chairman, I've asked the questions. You know, we could pass this legislation so smoothly and so easily if we'd get from that Minister of Labour a few answers. We'd like to get this legislation passed. I'm going to have to tell those people that we can't pass this legislation until we get the answers, and the Minister is filibustering. The Minister is filibustering the debate and the bill.

But this report is a very vindictive report, and Mr. Swanson has every right to be vindictive because he was relieved of his duties with the government in 1971 as chief engineer with the Department of Commercial Transport. He was relieved of his duties, presumably for a reason; so he has a reason to be vindictive. So he comes out and this is his first vindictive report, his first vindictive report against the railway.

Are we going to have a break? You're going to take over? Well, maybe we'll get more answers out of the Minister of Education (Hon. Mrs. Dailly) than we're certainly getting out of the Minister of Labour.

Mr. Chairman, we do want some answers because we are concerned about the future operation of the British Columbia Railway. And as I've stated in this House, the top people in that railway have either been fired or side-stepped or let go. None of the team that built that railway into the smoothly functioning operation it was are still there.

MR. BENNETT: The men who came up through the ranks.

MR. PHILLIPS: Men who came up through the ranks, men who knew the railway, men who had organized it, men who were the mucilage that held that railway together. Johnny Trask.

As a matter of fact, the Premier said himself that he tried to keep Mr. Trask on that railway — said that he wanted him to stay there because he was a man who had come up through the ranks, and who had built the railway into what it was today. So what happened to him? Why wouldn't he stay? Political interference by the political directors who had been appointed by this government? This is why we have to have answers before we allow the railway to continue its downhill slide.

This fall it was $25 million; now it is $200 million. What will it be next year if this railway continues to go down the rails on the same basis because of the political interference? Is there nobody in either the directors, in the management of the political directors of this railway who can take this railway and put it back on the rails?

Mr. Chairman, I will ask again, and maybe the Minister of Education (Hon. Mrs. Dailly) will answer. If I remember correctly, I think the Minister of Education was at one of the board of directors meetings when this report might have been discussed. Maybe the Minister could tell me: was this report paid for? Was it discussed in that board of directors meeting she was at? Was it paid for? Was there a bill submitted? Did Mr. Swanson ask to be paid for it? Did he submit a bill? Was it one of his companies? Maybe the Minister would explain it to me.

MR. CHAIRMAN: Mr. Member, I repeat: that is a matter for the public accounts committee. Will you return to section 1?

MR. PHILLIPS: No, it is a matter for the railway, Mr. Chairman. If you think we can just gloss over....

MR. CHAIRMAN: The Chair has ruled it is a matter for the public accounts committee.

AN HON. MEMBER: Oh, no, no. That's not true.

MR. CHAIRMAN: Please return to section 1.

MR. PHILLIPS: Would you like me to challenge your ruling? I won't challenge your ruling.

MR. CHAIRMAN: The Member always has that opportunity.

MR. PHILLIPS: Oh, no, I won't challenge your ruling.

MR. CHAIRMAN: Any Member.

MR. PHILLIPS: I'll just say that it really has, and the House Leader knows that.

But, Mr. Chairman, I would like to have permission of the House to file this report.

MR. CHAIRMAN: Is that a motion?

MR. PHILLIPS: I am asking you to ask the House for permission to file this report.

MR. CHAIRMAN: You are asking for leave?

[ Page 3605 ]

MR. PHILLIPS: Yes. May I have leave to file this report.

Mr. CHAIRMAN: Technically, it should be asked for in the House right after the committee rises.

MR. PHILLIPS: All right. I thought we had had permission to file in committee.

Anyway, maybe the Minister of Education is going to give me some answers. I see her making notes; maybe she is going to tell me whether this report was paid for. Was there any bill submitted that was withdrawn? Was it a paid report?

MR. GARDOM: I would just like to bring back to the attention of the House, and the lady Minister, something which was being discussed and upon which the Premier and president of the railway failed to furnish complete or adequate information. I am referring to the incorrect material concerning the railroad which was filed in the B.C. Hydro prospectus which has been, to a great extent, a subject matter of this debate.

The Premier indicated to the House that there was a discussion between the Deputy Minister of Finance and the legal firm of Messrs. Sullivan & Cromwell in New York as to the advisability, in the viewpoint of the Deputy Minister of Finance, of filing explanatory notes with the B.C. Railway statement in this prospectus, which has proven to be an incorrect statement, and which was, to the knowledge of the government and to the knowledge of the railway, an incorrect statement when this prospectus was filed with the SEC.

It was the position of the Premier that the legal firm in New York informed the Deputy Minister of Finance that there was not a necessity for such notes. But I would draw to the attention of the House Leader that in the prospectus it states that these New York firms may rely, as to all matters of Canadian and provincial law, on Messrs. Macdonald, referring to the Attorney-General, and Mitchell, referring to the senior counsel for B.C. Hydro, and Clark, Wilson & Co., a firm in Vancouver.

I would ask the House Leader if there is any information available as to whether Mr. Macdonald, the Attorney-General, or Mr. Mitchell, chief counsel for B.C. Hydro, or the legal firm of Clark, Wilson & Co. have volunteered an opinion as to the need for the filing of explanatory statements with this somewhat fallacious report in order to have it effectively comply with Canadian and provincial laws? That is the first question to the Hon. House Leader.

The second one. I drew to the attention of the Premier that, under the Railway Act of this province, it is prescribed as a duty that the board of directors of the company have to keep adequate and complete records of all meetings of the shareholders. I asked the Premier if he would file with the House minutes of those meetings of the directors for the past five years. That was the request I put to him.

His answer was neither in the negative nor in the affirmative, just to the effect that we shall see. I would respectfully request that the time to have these minutes filed obviously would be during debate of this bill, which would give an opportunity to put adequate light upon the matter.

Thirdly, under section 279 of the Railway Act, there is a responsibility upon this company to annually prepare returns, but it is also very interesting to note that those returns are to be attested by statutory declaration of the secretary of the railway, or some other chief officer of the company, and also by the statutory declaration of the president or in the event of his absence, the vice-president or manager of the company. I would ask whether or not such statutory declarations were entered into by the present president or by the former president of the railway, and whether or not the Hon. House Leader (Hon. Mrs. Dailly), who is having the carriage of this part of the debate, is prepared to file those statutory declarations in this House. Three questions.

MR. GARDOM: Is the Hon. Lady prepared to answer?

HON. MRS. DAILLY: The Minister is back. He missed the first two questions, but I believe he was here for the third one.

MR. GARDOM: Would you like me to reiterate?

HON. MRS. DAILLY: If you're not satisfied, you can reiterate them. The answer to the first question is: not to my knowledge. On the second one, I don't think there was a specific question asked. The third one the Hon. Minister of Labour will be prepared to make a comment on.

HON. MR. KING: I know the BCR is subject to the Railway Act, but it's a highly legalistic question as to whether there are certain exemptions under the charter and so on — I certainly don't know. As far as I know it certainly is subject to most of the provisions of the Railway Act anyway.

MR. GARDOM: Well, that was not my question. I would respectfully assure the Hon. Minister that it is subject to the Railway Act and it is subject to this section. There is nothing precluding the responsibility of the secretary of the company and also the president or the vice president or the manager of the company, two people attesting under statutory declaration the annually prepared return. That is mandatory under

[ Page 3606 ]

the statute; there is a responsibility under the statute to have that happen. I would ask if it has occasioned, or if it has not occasioned, why not? If it has happened, is the Hon. Minister prepared to file that material in the House?

HON. MR. KING: Mr. Chairman, I'm certainly not prepared to file documents in the House. I would suggest again that if the Members want additional information, then they should make requests either on the order paper in written form to the president of the railway or the executive vice-president of the railway. It's very obvious that some of the material filed with this House in previous years was inaccurate. That's the whole purpose of tabling the Peat, Marwick report as well as the Minty report with this House. Because it clearly indicates that reports filed with the House, although they were certified to be in compliance with the proper accounting procedures and in compliance with the CTC regulations for railway audits, did not in fact so comply.

We have been busy ensuring that the accounting procedures and the cost control methods on the railway were improved and upgraded to reflect an accurate and true picture of the operating costs of the railway. This whole area really pertains to the cost that had been hidden because the accounting procedures which were purportedly correct were not in compliance with the accepted national standards. That's what the whole debate revolves around. That's been debated and that's been canvassed very widely and very adequately in second reading of the bill. But in terms of requests for further information — statutory declarations — I would suggest that the Members make that request in the form of a written request on the order paper or that they certainly make it in a verbal way to the president or the executive vice-president of the railway.

MR. GARDOM: I would have hoped that the Hon. Minister could have conveyed the request for me. If he wishes to have it prepared more formally, that could be attended to. But he is fully aware of the fact that there is considerable responsibility in supporting this financial statement by a statutory declaration — a considerable responsibility. I just want to know if that practice has been carried out, because the mechanics for that practice and, as far as I can see, the law requiring that is clearly set forth in our statutes. I wish to know if our statutes have been followed by this administration or by the prior one, for that matter. There is a responsibility to follow this thing, and if it's not being followed the people of this province should know why not.

Dealing with one other topic which the House Leader (Hon. Mrs. Dailly) referred to, she said that she wasn't aware of the Attorney-General, the chief counsel for B.C. Hydro, or Clark, Wilson & Co., a Vancouver firm, giving any opinion as to provincial or Canadian requirements for the appending of explanatory notes to this prospectus of B.C. Hydro that was filed with SEC dealing with the incorrect B.C. Rail statement.

I'm asking the Hon. Minister: will he determine himself from these three concerns — the Attorney-General's offices, those of Mr. William Mitchell in Vancouver with B.C. Hydro, and Messrs. Clark, Wilson & Co., a firm of solicitors in Vancouver — if they have given such an opinion? Because it would appear to be paramount, according to accepted accounting principles in this province and in this country, that there should have been explanatory notes filed with this prospectus. And they were not filed. I personally find it very difficult to accept as an adequate reason just an opinion over the telephone from a firm of New York lawyers.

HON. MR. KING: I just point out to the Hon. Second Member for Vancouver–Point Grey that the requirements of Macdonald, Mitchell and Clark were strictly with respect to the Canadian accounting of the railway. There is no requirement for foreign borrowing in the U.S., other than the prospectus requirements presented to the law firm handling the financial transaction being met. It has been clearly established already that the Deputy Minister of Finance indicated to that firm that there was an investigation underway which might relate to, and in some way alter, the outline contained in the prospectus.

Now despite that admonition from the Deputy Finance Minister, the legal firm handling the financial transaction indicated that they were quite prepared to accept the prospectus, even in light of the caveat placed upon it by the Deputy Minister of Finance.

I think it should be clearly understood that the requirements for foreign borrowing do not relate to the question the Member asked with respect to the legal firm's requirements in the Canadian context.

MR. GARDOM: I don't wish to grab this bone too long, but, Mr. Minister, it does say the New York firms may rely, as to all matters of Canadian provincial law, upon the Canadian legal advisers, the people whom I have named.

My question to you is: the statement is clearly incorrect; did those Canadian legal advisers give an opinion to the Deputy Minister of Finance as he received from New York, or did they not? Did they consider it? That was the question. Can you answer that?

MR. PHILLIPS: Mr. Chairman, I'm absolutely flabbergasted that the Minister of Labour has not said something more on the fact that we have a conflict of interest of one of the directors on the railway — a

[ Page 3607 ]

definite conflict of interest where a director of the railway is doing business with the government. Whether it be the Department of Travel Industry or any other department, it is still the British Columbia Railway and the Royal Hudson, where thousands and thousands of dollars were paid to this director, while he was a director of the railway, for doing business with the Department of Travel Industry or any other government department. It is still definitely on the railway. The Minister of Labour gets up and condones the action, and says that we should be thankful that the Hudson was restored. It doesn't seem to matter to that Minister how we achieve our ends. Whether we break the laws or whether we break the regulations, it's no matter what we do as long as the end is obtained.

Now there is a definite conflict of interest, more of a conflict of interest here, definitely more of a conflict of interest here than a director of the Insurance Corp. of British Columbia having shares in a company way off in Saskatchewan. Definitely clear-cut and more a conflict of interest here than there is in that. What did the Minister of Transport and Communications (Hon. Mr. Strachan) do? He acted swiftly and surely. That's the way this Minister should do to see that there is no more conflict of interest. Or, because it is the railway, are we overlooking any conflict of interest?

I'm absolutely astounded. The Minister gets up and talks about the need to rush this legislation through. I'll tell you why he wants to rush it through. He wants to rush it through so maybe we can hide some other things because we are certainly not getting any answers here this afternoon.

AN HON. MEMBER: Closure!

MR. PHILLIPS: A definite conflict of interests. The Minister says that we should be happy that the Royal Hudson is steaming and showing the children. Well, I'll tell you, the Royal Hudson could steam and huff and puff and show the children without having a conflict of interest. Does this mean that any of the Ministers of the government, because they want to attain an end, can have a conflict of interest? Are we setting a new standard in British Columbia, a new low of conflict of interest?

If that Minister had the same concern for the public interest that the Minister of Transport and Communications (Hon. Mr. Strachan) had, he'd move. He'd get on the phone and he'd wire this to the president of the railway and he'd ask him for instructions. He'd tell him to come home instead of running off when the pressure's on. Why isn't the president of the railway here? Why didn't he bring this legislation in before he went? It's been on the books since February 28. Why did he bring it in second reading where we didn't have an opportunity to ask him questions? We couldn't get at him directly and he flies off to London.

MR. CHAIRMAN: That's been well canvassed.

MR. PHILLIPS: It will be well canvassed again, Mr. Chairman, and the fact that the Minister of Labour's been threatening us has been well canvassed.

I just want to read the first paragraph of this report of Mr. Swanson:

"In accordance with your instructions at the board meeting of the British Columbia Railway, I am submitting herewith an organizational chart setting forth a shuffling of personnel in the area of management in the British Columbia Railway so as to bring about a more satisfactory relationship between management and the working forces."

What did Mr. Sawyer say? He said there was a good relationship between the management, and this report was done after Mr. Swanson's. Did Mr. Swanson have something to vindicate the railway for after all his glowing reports of how well it was, and how the management and personnel were working together, how safe the railway was, and all of those glowing reports that we read a year or two previous to this?

Again, how much was Mr. Swanson paid for this report? How come the report is on Railway Appliance Research Ltd. stationery and signed by Mr. Swanson as a director of the British Columbia Railway? I would think that if a director of a company were submitting a confidential report — highly confidential report because the Premier and the president of the railway chose not to file this report when he was trying to file every other report that was supposedly damning to the railway.... Why didn't the Minister file this report? If I were a director of the railway, I would probably use the railway stationery to file a report, but Mr. Swanson doesn't use the railway stationery to file the report. He uses the stationery of his own private company, Swanson & Associates, consulting engineers, Railway Appliance Research Ltd. Is this why this report was not tabled? Is it due to the fact that Mr. Swanson charged the railway for this so-called confidential report that the report wasn't tabled? If he did charge, how much did he charge? If he submitted a bill and it was later withdrawn, how much was that bill for? Why was it withdrawn?

I would think that if I were working as a director of a railway and asked by the Premier to do a report, as a director of the railway it would be in my line of duty. Would I get extra for doing this? Would I do it during board meetings, or would I get one of my companies to do it, as seems to be the case here? I would suggest that Mr. Swanson should have filed this letter as the president of Railway Appliance Research

[ Page 3608 ]

Ltd., instead of a director of the British Columbia Railway, because it's on their stationery. Now was some of that money that was charged for this report hidden in some of these expenditures which I've outlined here, and charged to the Department of Travel Industry?

Now, Mr. Chairman, I want some answers from that Minister of Labour! He was a director at that time. He was a director of the railway at that time. We want some answers. Maybe the Minister would tell me. I'll ask him once more: did Mr. Swanson charge for this report and, if so, how much, and to what company was the amount paid?

HON. MR. KING: Mr. Chairman, I indicated to the Member that I'm not in possession of those facts and that the appropriate time to elicit those facts is in the public accounts committee hearing on the operation of the railway.

I must repeat, Mr. Chairman, that it's indeed fascinating. This Member is prepared apparently to build any kind of straw man to divert attention from the really serious indictment that has been developed by the firm of Peat, Marwick and Associates and by the comptroller-general for the Government of British Columbia in reports that they filed, which have been tabled in this House, and which show a scandalous performance by the previous administration, by certain board members, and which found, in reporting on the audit procedures of the previous government, that indeed the practices were deficient. They were unduly restricted in setting the terms of their audit by one Einar Gunderson, a former board member, a political appointment by the previous administration.

The report of the chartered accountants association of the Province of British Columbia, which held a hearing on the conduct of the firm of Buttar & Chiene, which had been the auditors under the previous administration for many years:

"The panel having found unanimously that the said member, Douglas McKenzie Walker, violated rule 21 of the code of ethics and rules of professional conduct as alleged in paragraphs 1 and 2 of the statement of complaint by reporting on and associating himself for and on behalf of the firm of Buttar & Chiene with the financial statements and auditors report thereon for the British Columbia Railway Co. for the year ended December 31, 1972, when he had failed to obtain sufficient information to warrant the expression of the unqualified opinion expressed thereon and therein, and that the said member has been incompetent in professional matters within the meaning of bylaw 67A(3) in force at all material times, and also of bylaw 68A(3) in force at the present time, as alleged in paragraph 3 of the statement of complaint."

That is a judgment by the professional peers of the auditors appointed under the previous administration. If I am to accept the concern of the Member for South Peace River (Mr. Phillips), then I could well question as to whether or not this professional incompetency which has been adjudged by his professional peers in the province was prompted by political interference. I could pose that question with some justification in light of the fact that the comptroller-general indicated that improper restrictions had been placed on the auditors by one of the former board members — a political appointment and former Social Credit cabinet Minister, one Einar Gunderson.

MR. CHABOT: How about Roland?

HON. MR. KING: It's really significant....

Interjections.

HON. MR. KING: It's really significant, Mr. Chairman, that the Members over there become so strident in building strawmen and speculating on the characters and on the professional conduct of certain people without a shred of evidence that I can determine, but completely choose to ignore the hard data filed with this House which reveals a shocking and unacceptable performance by the management of the railway, by the board of directors and by the former administration. All of these factors resulted in the hiding and the submerging of millions of dollars of losses which have not been properly portrayed to this House.

So it becomes apparent that the opposition sham — trying to build strawmen to divert attention from what the real facts are in this case, from their sorry and shoddy record of hiding the true picture of financing on the railway from this House, which had been called upon to finance it through what the former Premier used to like to refer to as a system of "contingent liabilities" and "the expansion of share capital" and so on, which was nothing more than nonsense.... It was an outright subsidy.

As far as the man Swanson was concerned, he was a high official under the former administration's reign. Certainly he's never been associated in any way politically with this government. He was appointed to the board of directors in view of his experience with the Transport department of the provincial government and his knowledge of the railway. If the Member is suggesting that he has evidence that that director was paid money by the railway to do work....

MR. PHILLIPS: Tell us that he wasn't.

[ Page 3609 ]

HON. MR. KING: The point is, Mr. Chairman....

MR. PHILLIPS: The point is that you are responsible.

HON. MR. KING: The point is, Mr. Chairman, that the Member is using that allegation. If that's all it is, a suggestion, then that is an absolutely shocking statement.

MR. PHILLIPS: Answer the question.

HON. MR. KING: If the Member would make that kind of suggestion on conflict of interest about perhaps something that goes beyond simply being conflict of interest, without a shred of any supporting evidence in this House, then I suggest that politics has arrived at a new low in this province.

Interjections.

HON. MR. KING: That's toying with a man's integrity, with his character and with his reputation. I don't think any Member of this House should do that unless he has some support for the kind of concern he's expressing.

I have pointed out that that does not in any way relate to this bill as to whether to provide additional funding for the railway.

MR. PHILLIPS: After you've gone on for half an hour.

HON. MR. KING: The Members of the opposition receive the answer. They choose not to accept it because they're not interested in getting on with the business of the railway. Rather they hope to divert attention from the scathing indictment inherent in the Peat, Marwick report and in the comptroller-general's report. They want to divert the complete attention of the public from those damning facts and build strawmen. If you're concerned about any expenditures within the fiscal year by the railway management or by the board in terms of its conduct, the time to elicit that information is at the public accounts committee, where those officers of the railway and those directors will be available to give the kind of precise information you're seeking.

Interjections.

HON. MR. KING: This is not a bill to provide an accounting of the daily operational policy and the daily operational decisions of the railway. That is obviously ridiculous. This is a bill to determine whether or not that railway should receive additional borrowing power in order to enable the railway to continue the expansion programme that was started by the previous administration to meet operational costs, to fund the car shop at Squamish, and things of that nature. These relate very dramatically to the economy of this province, to the stability of this province, and to the welfare of its people. I am, quite frankly, shocked that the Members are going to the extremes they are — playing frivolous little games in an attempt to simply delay passage of this bill when it is so important and so crucial to the interests of the whole northern part of the Province of British Columbia.

MR. CHAIRMAN: The Hon. Member for South Peace River.

MR. PHILLIPS: Mr. Chairman, don't sound so disgusted — you're supposed to be impartial.

MR. CHAIRMAN: Just tired.

MR. CHABOT: Go to bed then.

MR. PHILLIPS: If I belonged to your government, I would be tired too. I would be tired of all of that political tirade we just heard from the Minister of Labour who stands up and talks about cooking the books, deliberately hiding and talks about scandal.

HON. MR. KING: Who is supported by reports? What have you got?

MR. PHILLIPS: Talk about scandal — I want to tell you, here is a report from Price Waterhouse. There is not one word about cooking the books or deliberately hiding. The railway made a decision to change the practice of depreciation, yet the Minister tries to bring it up as a big scandal. Oh, he tried. And the Premier stood here on the podium — you would think he was giving the Sermon on the Mount — for an hour and a half. He tried to raise a scandal up out of the depths of the good management of the railway. He fell flat on his face, and it's coming back to kick him. That's why he ran off to London. That is why he took off for London — because he couldn't stand the pressure.

I want to tell you, Mr. Chairman, we are talking about the railway. Well, that Minister of Labour, the ex-director, no wonder he was let go, he doesn't know anything about the operation of the railway. But, oh, when he was appointed I remember the Premier in this Legislature saying that finally we've got somebody on that railway who knows something about the railway, and how he was going to be one of the greatest directors there ever was. He stood in this House and he praised the Minister of Labour, the first man to ever run the railway who knows anything about the operation of the railway. Two years later,

[ Page 3610 ]

what happens? The Premier cuts his legs right out from under him and says: "Get out of here!"

MR. BENNETT: Today we know why.

MR. PHILLIPS: Yes, we know why.

The Minister of Labour pleads ignorance, Mr. Chairman. But what does Mr. Swanson say? He says: "Dear Mr. Premier, in accordance with your instructions at the last board of directors meeting of the British Columbia Railway...." Was not the Minister of Labour there as a director of the railway? Do you mean to tell me that as a political director of the railway the Minister of Labour didn't know there was a report going on with regard to the all-important management of the railway? Oh, how naive does the Minister think we are?

You know, Mr. Chairman, it is amusing to me. Yesterday afternoon the Minister of Labour was like a steam engine that had just been really shovelled full of coal — he was huffing and puffing and blowing steam all over the Legislature. Today he is like a steam engine that is coming in on the last mile of the track and into the station.

MR. BENNETT: Out of coal.

MR. PHILLIPS: Out of coal, out of steam and there is no pressure up. That is the same way with that whole government, Mr. Chairman.

MR. CHABOT: No water in its boiler.

MR. PHILLIPS: That whole government is losing its steam because they have gone off and they have burned up all their coal. Now they are not only running out of coal, but they are running out of money. That is the reason that not only the railroad is short of money today, but that whole government is broke, broke because of the wild, careless spending practices of that government. We'll tell the people up in Cariboo.

I ask you once again, Mr. Minister. You were a director of the British Columbia Railway — and don't try and hide under public accounts. The chairman of the public accounts committee will set you straight in just a moment. You were a director of the British Columbia Railway, and you knew that this report was asked for. I have asked you time and time again: how come this report was tabled on the stationery of a private company and signed by a director of the railway? Why was it not on company stationery?

If you don't think that they were paid, all you have to do is say yes or not. You know that there was discussion in a board of directors meeting of that railway with regard to payment of this account. You know full well, and you are pleading ignorance. All you have to do is answer a simple yes or no.

MR. CHAIRMAN: Would the Member please address the Chair?

MR. PHILLIPS: Was he or was he not paid for this report? You know the discussion that went on in the board of directors meeting.

MR. CHAIRMAN: Order, please. Would the Member please address the Chair? It is normal procedure.

MR. PHILLIPS: Oh, I'm sorry, Mr. Chairman. I did neglect you for a moment. I am terribly sorry.

Mr. Chairman, through you to the Minister of Labour: the Minister of Labour knows full well that this controversial report was discussed in a board of directors meeting which he was at. He knows that the payment of this report was discussed in the board of directors meeting. All he has to do is stand on the floor of this Legislature and give us an answer. And he can't hide behind that charade of trying to get the legislation rushed through the House so we can cover all this over in a sheet of motherhood so that we pay the bill, a bill that has been on the order paper in this Legislature since February 28, 1975 — three and a half months.

MR. BENNETT: They should have called it.

MR. PHILLIPS: I know why they didn't call it. The Premier and president of that railroad, the man responsible for the operation of the railway, didn't want to stay in this Legislature while this debate was taking place, so he takes off on a world tour at the taxpayers' expense. Talk about not having enough money to pay the railway personnel! Maybe you should divert some of the money that the Premier of this province is using to tour the world at the taxpayers' expense. Maybe you should have used some of the money that the Minister of Lands, Forests and Water Resources (Hon. Mr. R.A. Williams) used to buy — illegally used to buy — the Princess Marguerite and acres in the harbour here in Victoria, to pay the railway people.

MR. CHAIRMAN: Hon. Member, I'm trying to connect this with....

MR. PHILLIPS: Oh, no. We're not buying that, Mr. Minister of Labour. We want some answers and we want them this afternoon. Was there this Swanson report, yes or no? Was it paid for?

HON. MR. KING: Mr. Chairman, it would be very difficult to rush everything through the Legislature in any undue haste with that kind of strident Member in attendance. I'm sure that nothing would be rushed through. I'm certainly aware that when I....

[ Page 3611 ]

Interjections.

HON. MR. KING: Can the Member be silent long enough to hear my answer, Mr. Chairman?

I'm quite aware that many reports on the railway were requested after the new government took over. I indicated the other day that there was a report regarding the engineering standards on the railway. There was a report requested regarding the safety factors on the railway with respect to signal operations, with respect to the uniform code of operating rules. There was also a report regarding the internal management — the management organization on the railway. I think that this is pretty normal. I think it would be a rather irresponsible administration, in taking over a corporation of that size, which did not undertake investigations to ascertain the adequacy and the efficiency of the structures.

I can further inform the Member that in many respects some of these investigations were undertaken after receiving expressions of concern by people on the property. Certainly that was true with respect to the safety factor. I had received constant submissions and letters from the workers on the railway expressing their concern over the adequacy of safety provisions and, indeed, the report that was subsequently commissioned by the chief rules instructor for the CNR and the CPR made recommendations to improve the degree of safety in operation.

Now what is so significant about making that kind of assessment of the management organization on the railway? The Member would have the House believe that there's something untoward and something ominous about that kind of request. I fail to see it. He can shout as loud as he wants, and he can be as strident as he wishes, but it seems to me that that was the responsible thing for the new administration to do.

As far as I know, there was no payment made to any member of the board of directors, I've indicated to the Member, Mr. Chairman, that....

Interjection.

HON. MR. KING: Mr. Chairman, one question at a time.

MR. CHAIRMAN: Order, please.

HON. MR. KING: I've indicated to the Member that as far as I know there was no such payment. But we're debating a bill that doesn't relate to the day-to-day operational matters on the railway. If you want the kind of precise information, then you would have to go to the president of the railway or the vice president or through the public accounts committee.

Interjection.

HON. MR. KING: Well, you know, that's kind of an irresponsible performance the Member put on. I remember shortly after the election in 1972 the former Leader of the Opposition, W.A.C. Bennett, who had been premier for 20 years, went on an extended vacation and left South Okanagan without representation.

Interjections.

MR. CHAIRMAN: Order, please!

HON. MR. KING: Mr. Chairman, I don't think we should get into those kind of inane accusations...

MR. R.H. McCLELLAND (Langley): Let's not get into that.

HON. MR. KING: ...but if the Members want to indulge in it, fine. But it's true that the Premier is on....

Interjection.

HON. MR. KING: Oh, what a tiresome Member that man is, Mr. Chairman! What an utterly tiresome Member! You know, sometimes I feel like taking him out and spanking him because he's such a little nuisance at times. He gets up and gives long, wordy, windy speeches asking for all kind of information and then sits there and shouts like a banshee. I don't know what kind of manners he learned at home, but perhaps he should be introduced to some in this House.

Now the Premier is on government business on behalf of the people of this province, and I accept that the opposition Members dispute the right of this party to represent the people of this province, but we were elected in democratic fashion. The Premier is away on business out of the country. The former Premier took similar trips. The former Premier even....

MR. PHILLIPS: Not when the session was on!

MR. CHAIRMAN: Order, please!

HON. MR. KING: Mr. Chairman, the former Premier took a holiday while the session was on — when he was Leader of the Opposition.

Interjections.

HON. MR. KING: In any event, Mr. Chairman, what kind of an asinine debate to get into. We're dealing here with something that's very important.

[ Page 3612 ]

I can only repeat again that the opposition has voted for this bill in second reading. They've said: "Yes, we support the principle." They canvassed every conceivable fact that was raised in the reports that were tabled in the House, and although they disputed some of those facts and chose to ignore others, they voted in support of second reading of this bill. They supported in principle the intent of this bill.

The bill is a one-liner: "Section 21 of the British Columbia Railway Company Construction Loan Act is amended by striking out $440 million and substituting $650 million." That's the extent of the bill, Mr. Chairman. It doesn't pertain to the operational practices of the railway.

The bill could have been presented earlier but it was delayed, partially as a result of a request from the opposition, until the financial report of the railway had been brought down. True, that was delayed because other investigations were underway. The House can't deny, Mr. Chairman, that although some of these things were late, a more accurate and a more total picture of the entire economic health of the railway has been made available to Members.

In light of that, Mr. Chairman, I think it is simply regrettable that Members continue to delay passage of this bill when it means so much to the economic health of the citizens that some of those Members even presume to represent. I suggest there are ample devices for eliciting the precise information they are asking for. They know how to accomplish that, and I ask them to do the responsible thing and support third reading of this bill.

MR. D.A. ANDERSON: The Minister quite properly said a moment ago that the operational practices are not here for detailed examination except as they refer, of course, to the need for more money. But the operational costs are here for examination, because it is not a bill — as was pointed out yesterday by the Member for West Vancouver–Howe Sound (Mr. L.A. Williams) — only for new construction. It is a bill to cover operating losses, and this aspect, which was outlined at some length by the Member yesterday, has simply not been answered by the Minister, as far as I know, today and certainly not yesterday evening.

The Minister did indicate that $10 million will be needed on July 2, $10 million needed on July 15, and $15 million on August 15, which is a total of $35 million in a six-week period. Presumably these are to meet debts which have been incurred and come due on those dates in that period.

Perhaps I could request that the Minister go back and break out this $210 million for us in terms of how much is needed for operating deficits, whether it be legitimately for higher wage costs, legitimately for higher fuel costs, legitimately for any other higher interest rates or higher costs of that nature — as to how much will be needed for the actual operation of the railway.

The vice-president of the railway has pointed out that funds are needed to pay existing commitments, but he has also pointed out that loadings are down. This is due not only to price action, but to a general economic slowdown. I would like to know whether or not we see at the present time, given that this is June of 1975, increasing operating deficits as a result of continuing freight car loading levels being down.

We really haven't had any report from the Minister on this distinction between the money that is needed for actual operation to meet deficits that are going to occur, and the money that is needed for construction of extensions, however wrongly or rightly they were analyzed when the decisions were made to go ahead.

So can I ask the Minister at this time in committee, Mr. Chairman, how much of the $210 million will be required between now and the end of the year for operating deficits? I assume $35 million of this comes off the top to pay for past debts for operations, but maybe I am wrong. Maybe he can comment on that. How much, however, will be needed for operational deficits, and how much of the whole $210 million can be considered as a chunk of money to be used for construction and extending the railroad and turning it into something bigger than it presently is?

Having given me that information, perhaps the Minister would request from his assistants what the operating deficit would have been had freight car loadings and economic activity been unchanged between 1974 and 1973. In other words, how much of the extra deficit could be broken out in terms of the declining economic activity of the railroad and how much of the deficit was this business of fuel, interest rates, wages — in other words, costs? How much was a loss on the revenue side? How much was an increase in the cost side? That again is a breakdown that is needed on the operational aspect of this particular loan.

In summary then, first, break the $210 million figure in terms of the operating deficit to meet the actual operations of the railroad and the construction part of it. Second, take the operating chunk and break that down in terms of how much is a result of extra costs and how much is the result of a loss of revenue.

HON. MR. KING: Mr. Chairman, I think the Member can appreciate that in terms of budgeting for the year's operation it is a projection of anticipated cost. Naturally the operational costs are going to relate in large part to what happens to the economy. I'm informed there is an indication that there is an upturn in housing south of the border, which, of course, we are heavily dependent on in terms of our

[ Page 3613 ]

forest products export. Some 80 per cent, I believe, of B.C.'s wood products are exported to the U.S. market. So if we see an upsurge in terms of the domestic home-building market in the U.S., then of course that could change the operating cost picture dramatically in terms of the revenue loads that are shipped and so on. Of course, as the volume increases, additional operating costs are experienced too. But by and large the profitability has had a pretty bad year in terms of a depressed market, in terms of inflated interest costs and so on. That's general all over the North America continent.

A good part of the funds are related to the northern extension. It has been indicated to the House that those costs are going to be a good deal beyond what was anticipated because of inadequate engineering studies and surveys in the first instance. What they may be is another question. The Member is aware that there is litigation underway with respect to some of those contracts on the northern extension. Perhaps that could be a factor in the outcome there, We can't really speculate on that.

The car plant at Squamish again, is getting underway. We anticipate there will be quite a work force there. So it is difficult in any precise way to break down what the expenditures will be. I just gave an outline yesterday of the financial needs by date deadlines. I'm afraid that's all I can possibly do at the moment.

MR. D.A. ANDERSON: Mr. Chairman, I have no wish to suggest the debate be adjourned, but when you vote $210 million and we can only get a breakout of $35 million, which is meant, as I understand it, to meet obligations which come due on certain dates — July 2, July 15 and August 15.... We have no breakdown other than that. When we have no breakdown as to whether or not that $10 million on July 2 is for new construction or for operation, no idea whether the $10 million on July 15 is for new construction or for operation of the actual line, no idea whether the $15 million is for new construction or the actual operation, I would suggest that the Minister adjourn the debate and come back with at least rough figures.

I fully appreciate that there are many imponderables: the U.S. market, the price of lumber, whether the car factory at Squamish works out, whether there are wage settlements, whether the price of oil goes up. I know full well that there are lots of imponderables, but that's why I asked the question of the Minister. He is meant to answer; he is meant to know a little more about this than I do. I am quite willing to have him give me figures which perhaps I in my financial innocence would be unable to concoct on my own. That's the purpose of asking the question: to try and find out something.

There must be some sort of breakdown somewhere in BCR indicating how much of the $210 million left over will be put to new construction. There must be some breakdown somewhere in BCR as to how much of the $210 million is going to get lost — totally lost — in meeting operating costs. There must be some indication in BCR as to what revenue losses can be expected. These things just have to be; otherwise the railroad is being run in a way which would indicate we should not vote a penny to it. We should cut our losses and close it down and turn it over to some other outfit — CN or CP. I don't recommend it, certainly not. But certainly in this House we must be given some indication of how much of the $210 million is going to go to construction and how much is going to go to meet operating deficits.

I have looked at the information put forward, in particular the information in the Swan Wooster report. It appears that we are going to be met with another bill of this nature next year. We're going to have to put up the borrowing of BCR next year, from what I can gather. But naturally, if I get a better indication from the Minister as to what will be needed for operating losses, I will be better able to judge whether or not this amount of money perhaps should go up another $100 million. Who knows? Maybe it's necessary to raise it, because it certainly will not meet cost obligations of the BCR as I understand them from what has been tabled by the Minister with respect to operations and with respect to new construction.

Mr. Chairman, I have taken another two or three minutes of time debating and the Minister has had an advertising conversation with some of the experts of the railway. Perhaps at this stage he'll be able to answer the questions I asked a few minutes ago.

HON. MR. KING: Mr. Chairman, the point in this House is not just to answer questions but it's whether or not the Members across the way accept the answers.

Now we have a board of directors on the railway and they have, indeed, approved the budget for 1975. Normally, the House then at the end of the fiscal year of the railway queries the policies and the expenditures of the railway, which are set by the board of directors. That's their purpose and their function.

I could give some indications about the ballpark figures that we see in terms of the northern extension, but I have some trepidation about making that kind of guesstimate in terms of construction costs. I indicated to the Member earlier that there is litigation underway with respect to whether or not the railway properly indicated to the contractors the amount of work involved in placing their tenders. We have an indication that the initial engineering surveys were based on improper and inadequate engineering studies. I don't know whether there's a relationship

[ Page 3614 ]

here, but there could well be, and I would be very hesitant to start estimating the possible additional annual costs involved there, when that could relate in some way to a relationship between the contractor and the railway. I think the Member understands what I mean. It's pretty difficult to give those ballpark figures, but the railway through public accounts will certainly be called upon next year to justify the expenditures and the policies that they've made. At that time, the House will be in a position to determine and to judge whether or not additional and higher funding and borrowing power should be invested in the railway.

MR. D.A. ANDERSON: I can appreciate that this will be before the public accounts committee next year, and I can appreciate that at that stage we will have a retroactive look at the losses, as undoubtedly there will be losses on the railway system. But we're asked in this bill not to do anything retroactively; we're asked to increase the borrowing to take care of future requirements. It's not, I think, wrong to request some statement from the government, however tentative, on future costing. Clearly you haven't got enough in this increased borrowing to cover the extra cost of extension. It's clear that you're going to have to ask for more money in the future. That's fair enough, as you're only asking for one year's supply for the construction, but there must be some indication of the break of this $210 million between operating revenue to meet operating deficits and revenue needed for construction purposes.

There's just no way that the Minister doesn't have a reasonable idea on this. He can hedge it around as much as he likes depending upon the result of lawsuits, but please, Mr. Minister, it's not good enough to ask for $210 million for two very different purposes and to give us no indication of how much goes in each direction.

HON. MR. KING: Mr. Chairman, I can only repeat that that's a normal function of the board of directors. I don't think it was ever anticipated that the House would play that role.

MR. D.A. ANDERSON: I get more and more confused, since the Minister fails to answer each question in turn. It's not a question of the House playing the role of the board of directors; it's a question of the House getting information upon which they can determine whether the credit of the people of British Columbia should be extended for straight office rating deficits or, indeed, extension of this railway. There are a whole pile of imponderables. I recognize the Minister's problem to give definitive figures, and let me have it clearly on the record that I'm sure any reasonable Member of the House recognizes precisely the same thing. There's no way you can give us definitive figures when there are so many uncertainties in the future. But there must be some indication from the railway as to how much they're going to need of this to meet operating deficits.

We appreciate the annual reports that come out, but when you come for money to this House you should be giving us some indication of the future. The annual report is fine. To look on the operations in detail, as the Minister has rightly pointed out, is what we should be doing in public accounts with the people from BCR other than the directors. But when you come to the House and ask for money in anticipation, you're going to have to give some indication as to where it's going, because you've asked for money in one bill for two totally separate things. You've lumped them together, and you've not even given us the most remote ballpark figure as to the breakdown. I would venture to guess that the breakdown may be somewhat more than $50 million to meet operating losses, and I would like to know whether that guess of $50 million, approximating $1 million a week of losses on BCR, is accurate. Perhaps the Minister could comment, if that is the only way we can get any discussion going on how much of this $210 million is for losses.

HON. MR. KING: Mr. Chairman, that is the kind of thing on which I am not prepared to speculate. What the cost and losses are can only be revealed after the fact. That is the normal custom of the House in terms of revealing what the performance was in public accounts. I think it is a matter of record that under the previous administration, in arranging financing for the railway, no itemized budget was ever presented to the House in terms of what they proposed the expenditures would be on. I fail to see where it would benefit the Member in any great degree, in terms of his determining whether or not to support the bill, if I told him that 60 per cent of the money was going to be used for operational costs and the remaining 40 per cent for construction. I don't know how that would help him — or vice versa, for that matter. I am simply using those figures as an example. I can only say that, really, the appropriate time to deal with that, to query and criticize both the board and the railway management, is in light of the accountings of the costs and expenditures of the railway when those figures are in and firm, and the House can have access to a proper and detailed accounting.

MR. D.A. ANDERSON: Mr. Chairman....

MR. CHAIRMAN: Hon. Member, you have canvassed this twice. Are we going to have the same?

[ Page 3615 ]

MR. D.A. ANDERSON: Mr. Chairman, you are too generous. I thought I'd canvassed it three or four times.

I would like the Minister to just think once more. I am not asking for detailed accounting. Obviously, that can only come later. But I do feel that the Members of the Legislature who are asked to vote funds should know what the funds are voted for — a very fundamental principle, the most fundamental principle. All we know is that it is for the railway: we don't know what is there for construction; we don't know what is there for operating losses. There is a very big difference between money used to construct something and money used simply to meet deficits. It is a very big difference, Mr. Chairman, between the railway a year from now being $210 million worth of line, locomotive and track, more wealthy, and the railway simply being exactly as it is but $210 million gone into deficits. That is a big difference.

I know the Minister has consistently refused to give any information, but I would just like to express, for the final time, my objection to the government coming in and asking us for millions upon millions of dollars, asking us to have the credit of the people of British Columbia mortgaged for hundreds of millions of dollars without even letting us know whether it is for something that is going to be left behind a year from now or whether it is something that is going to disappear a year from now.

HON. MR. KING: Mr. Chairman, I can tell the Member that the factors that will be taken care of in this funding will be cash loss from operations, construction, the capital and sinking fund, long-term debt paid and railcar manufacturing. These whole areas are the matters which require additional funding. I think that is all I can do is indicate to the Member what the direction of the funding will be and what it will be taken up for.

MR. D.A. ANDERSON: It looks like $40 million for next year's interest statement. Forty million! There will be $19.5 million plus a minimum of 10 per cent on $210 million.

HON. MR. KING: Yes, yes.

MR. CHAIRMAN: Order, please.

HON. MR. KING: That is quite possible.

MR. D.A. ANDERSON: Forty million bucks!

MR. PHILLIPS: Mr. Chairman, just a moment ago the Minister of Labour was talking about Mr. Swanson and how he had condemned the British Columbia Railway and the safety standards. He said that he had received numerous letters about safety standards from the employees. How fast things change.

In 1971 the chief engineer of the railway put out a report stating that the year 1971 was a very good year for the Pacific Great Eastern Railway:

"...with the completion of new trackage to Fort Nelson and work proceeding on the new Dease extension. Record traffic movement due to increases of copper concentrate, lumber, wood chips, manufactured products, petroleum products, and piggyback services pushed their gross tonnage to a new high. During the year, industrial expansion has continued at a fast-growing pace, the railway giving service where needed."

It goes on to state with regard to accidents:

"During the year, the Pacific Great Eastern Railway had three fatal accidents which were investigated by this department in cooperation with the Pacific Great Eastern Railway's department of safety and security. These investigations indicated that individual carelessness and disregard of good safety practices were prime factors in these fatalities. The Pacific Great Eastern Railway's department of safety and security have safety training procedures for all employees and are constantly finding ways and means to improve operational and employee safety."

Now that is from a report of 1971, from the Department of Commercial Transport — the railways, aerial tramways, pipelines and industrial transportation department. It goes on to talk in glowing terms about the railway, Mr. Chairman. And the conclusion, on page Z-25, is:

"It can be reported that the Pacific Great Eastern Railway is being properly maintained and properly operated, commensurate with serving the public in a safe and proper manner. It can also be reported that the extensions of this railway are being located and constructed in a proper and efficient manner.

"(Signed) Robert E. Swanson."

How fast things change. Here's a man who, while he was employed with the Department of Commercial Transport, wrote glowing reports about the railway, about the engineering standards on the railway, about the location of the extension, about the safety standards, but as soon as he's a director, as soon as he's relieved of his job and becomes a politically oriented director on the railway the man changes his tune entirely, Mr. Chairman.

We're talking about cost overruns on the Dease Lake extension. I'll tell you why there are going to be cost overruns on the Dease Lake extension. Mr. Chairman, it's because Mr. Swanson has recommended changes in the standard of that extension from that of a primarily resource railroad

[ Page 3616 ]

to that of a mainline railroad. Mr. Chairman, that's like going out in the bush to build a logging road and building a four-lane highway immediately instead of building a logging road and as people move in upgrading the road, which is normal practice. It's been normal practice on the railway. That's why, Mr. Chairman, we need $200 million of the taxpayers' money — to make that railway into a mainline railway. You would think, from the standard that they're building that railway to, that it would have to carry passenger trains at 100 miles an hour. That's not necessary for a resource railroad, Mr. Chairman.

Maybe it's not necessary to borrow all this money. But we don't know. We've never been given any prospectus as to what the money's going to be used for. We've never been given any prospectus in this Legislature, any indication of where this money's going to be spent. If you look at last year's financial statement, Mr. Chairman, you will realize that the cash flow of the British Columbia Railway decreased by some $46 million under that government — $46 million they lost in cash flow alone, whereas in the previous year they had an increase of over $7 million in cash flow. Why, Mr. Chairman? All because of the poor management of the railway brought about by Mr. Swanson' infamous report on the management of the railway.

What else does Mr. Swanson recommend? We seem to get new information all the time, Mr. Chairman. The government says we never do our research. Well, we've done our research and now they want us to pass the bills through quickly before we can bring out the research that we've done.

[Mr. Dent in the chair.]

Mr. Chairman, what does Mr. Swanson recommend? Chetwynd subdivision: Prince George to Chetwynd, 200 miles, to be widened on cuts and fills to provide proper width to mainline standards. There's no passenger service on that particular line, Mr. Chairman. You'd think we were running a 100-mile-an-hour passenger train over that line. It's going to be widened to mainline standards. Fort St. John subdivision: Chetwynd to Fort St. John, 78 miles, subgrade to be widened to mainline standards, Mr. Chairman.

That's the reason for the cost of these extensions and the necessity for borrowing an additional $200 million. That railway is operating perfectly the way it is, without that much problem with regard to safety. And the resources of that area, Mr. Chairman, are being brought out without any problems. But Mr. Swanson wants to have it up to gold-plated standards. That's why the increased costs. That's why we have to borrow $200 million. That's what's happening to the railway. Not only is the management, Mr. Chairman, on the railway gone to pot; not only is the morale in the railway.... You talk to somebody in the railway now and they say: "Oh, sshh! I can't say anything, Mr. Chairman — we've got to wait until the Legislature's prorogued."

The supervisors and the management on that railway have got the fear of God instilled into them by that government. You can't even talk to them about the operation of the railway at the present time. Somebody's given them the fear of God. They're afraid of their jobs. They'll hardly talk to you. They say wait until the Legislature prorogues. That was never prevalent before. There was good morale on that railway in 1972 — good morale, Mr. Chairman, and you know it. It was a well-functioning operation. Johnny Trask was the mucilage that held that railway together and held up the morale of that railway, a man who had come up through the lines. That's why the Premier wanted to keep him. But there's too much political interference in the railway, Mr. Chairman. That's why Mr. Trask left.

Mainline standards. Takla subdivision: O'Dell to Fort St. James, 72 miles, subgrades in both cuts and fills to be widened to mainline standards.

That's why we need to borrow an additional $200 million — to make up the $60 million cash flow that this railway lost last year in one year alone. Not only did the railway lose $32 million last year, but they suffered a deficit in cash flow of $47-odd million. That's really the nuts and bolts.

So I don't think the railway only lost $32 million last year. If they suffered a cash flow loss of $47 million, basically that's what the railway lost.

"Takla subdivision — Fort St. James to the end of Steele — $142 million. New track, good construction to proper mainline standards maintained with respect to subgrade and the type of construction."

He goes on. This is a letter from Mr. Swanson which was sent to the Premier of British Columbia on November 5, 1973. He says: "It can be expected that substantial sums will be required to be expended starting immediately and continuing over the next four years. The programme of betterments will be required to be appropriate with traffic increases over the entire system." But, Mr. Chairman, there will be no traffic increases on the Dease Lake extension because the resource policies of this province have killed any load factor on that railway — absolutely killed any load factor.

That's why we need this $200 million; that's why it's going to cost the taxpayers of this province not only $200 million but hundreds of millions of dollars in the future — because they're building a mainline, gold-plated extension to Dease Lake, and the load factor on that will be absolutely nil because of the killing resource policies of that government. That's what has happened to the railway. That's why we're being asked to rush through this bill to borrow an additional $200 million on the railway. That's why

[ Page 3617 ]

the Premier flew the coop and went on a tourist visit to London to watch the changing of the guard at taxpayers' expense. That's why he wouldn't stay here as president of the railway....

MR. CHAIRMAN: Order, please. The Hon. Member is tending to be tediously repetitious in regard to this matter.

MR. PHILLIPS: Which matter?

MR. CHAIRMAN: In regard to the absence of the Premier. I would ask the Hon. Member to raise some new matter of something new and fresh. Would the Hon. Member do this, please?

MR. PHILLIPS: I am concerned, Mr. Chairman, as you are, that the Premier isn't here.

MR. CHAIRMAN: Order, please. I think it's been repeated at least 30 times this afternoon. I would ask the Hon. Member to try to bring up some new matter relevant to this section.

MR. PHILLIPS: Mr. Chairman, my question to the Minister of Labour is: why is it necessary to have all of these extensions brought up to mainline standards when it has been the practice of the railway to build a line to resource railroad standards and, as the traffic increases, gradually increase the weight of the steel, gradually improve the grades, gradually improve the trestles, gradually improve the bridges? Are we going to be in a big rush, Mr. Chairman? Are there going to be so much resources coming out of that Dease Lake extension that we have to have a 90-mile-an-hour track? The government has killed the resources in that area.

MR. CHAIRMAN: Order, please. The matter of the resources available for transportation on the railway has also been repeated a number of times. I would ask the Hon. Member to try to think of something new.

MR. PHILLIPS: Yes, but it has a tremendous impact on this bill which we are discussing.

I'd like to quote from an article in the Vancouver Province, Tuesday, June 10, 1975. Headline — "Government Cutting Throat On Own Railway." What did we have the other day tabled in the Legislature? A report on a copper smelter. What does the report say? The report says we should subsidize a copper smelter in British Columbia. I remember shortly after the Premier took power in this province, he said: "We will subsidize nobody." He condemned the legislation that was on the books, the offer to assist in bringing a copper smelter to British Columbia. Now the report says: "We should subsidize private industry to put in a copper smelter."

MR. CHAIRMAN: Order, please. The Hon. Member....

MR. PHILLIPS: That's a complete reversal, Mr. Chairman.

MR. CHAIRMAN: Order, please! The Hon. Member is straying away from the....

MR. PHILLIPS: I realize that. I just did want to make that point with you.

Interjection.

MR. PHILLIPS: Mr. Chairman, we're talking about $200 million of the taxpayers' money. But it's not only the $200 million and all the conflicts of interest that we have here and the back-up and go-ahead policies of the director of the railway. What I'm afraid of is that we're just seeing a small bill this year — $200 million. If this extension to Dease Lake is built to mainline standards and there is no load factor on the railway, then we're going to be facing a bill next year of possibly $500 million and on and on.

What we need, Mr. Chairman, is a public inquiry into the operation of this railway to get it back on the tracks, because it's going to cost, under that government and the poor management of that government, the taxpayers of British Columbia billions of dollars, not millions of dollars.

MR. CHAIRMAN: The matter of asking for a public inquiry is not relevant to this section. I would ask the Hon. Member, if he wishes such inquiry, it should be done by a motion on the order paper.

MR. PHILLIPS: Mr. Chairman, maybe the Minister of Labour will stand and tell me how come Mr. Swanson had glowing reports about the engineering and safety standards on the railway while he was the engineer for the Department of Commercial Transport, then as soon as he gets a political appointment as a director of the railway, he changes his tune and condemns the engineering and safety standards on the railway.

I have a report here from Swann Wooster on the engineering standards of the railway. They don't condemn the fact that we are building a resource railroad on our lines and upgrading them as we go along. As a matter of fact, this report is a very good report on the engineering standards of the railway.

I would like the Minister of Labour to answer these questions: how come there is a change? How are you justifying the upgrading to the mainline when it has been the policy...? When the railway was first built into the Peace River area in 1958, when the first

[ Page 3618 ]

train rolled in there, it was on a resource railroad line. There was low-poundage steel on there for years and years. The trains rolled out of the Peace River area bringing to market the resources of that area — grain and lumber and, until this government came to office, copper from the mines north of Fort Nelson. There was no problem.

As we built further extensions, we upgraded the steel. We upgraded the lines as revenues started to flow in, but now the policy of this government is to build gold-plated mainline standard immediately, before there is any traffic whatsoever on the railway. I would like to ask the Minister of Labour, as a fired director of the railway, how he can justify this.

HON. MR. KING: Mr. Chairman, the Member will recall that the Premier reported, when he spoke on the railway some time last week, that there had been 270 derailments of various magnitudes on the Fort Nelson to Fort St. John extension — 270 derailments, and I would suggest that certainly anyone who is concerned for railway safety would have to be extremely concerned over that high an incidence of derailments, to say nothing of the tremendous cost involved.

MR. PHILLIPS: In what period of time were those 270 derailments?

HON. MR. KING: That was in the year ending 1972. No, I beg your pardon — there were 143 in the year ending 1972 and 57 in the year ending 1974. That is an extremely high incidence of derailments and attendant costs due to wrecked equipment in the period between when the rail line was completed and went into operation and the current period of time.

Now when those facts were revealed, the Leader of the Opposition (Mr. Bennett) made a statement — I think it was reported on June 10 in Hansard. He attempted to justify that by quoting from an engineering expansion report submitted by the Department of Commercial Transport. Guess who the engineer was? Mr. Swanson — the very individual that the Member is now condemning. You can't have it both ways: you can't use Mr. Swanson to justify and support the arguments and the position of the Leader of thy Opposition when he tries to justify the sorry performance and the sorry safety record of that extension line, and then, when it suits your purposes, Mr. Member for South Peace River, seek to discredit and completely destroy the same individual.

Now the Leader of the Opposition, I think, quoted from previous year's reports, but, of course, they were in no way relevant to the expansion line. That wasn't completed until 1971. So the very significant incidence of derailments demonstrates clearly...

MR. PHILLIPS: You're all mixed up.

HON. MR. KING: ...the need for upgrading of the railway engineering on that portion of the line. Any line that has experienced that kind of record of derailments, obviously, must be upgraded.

The Member for South Peace River perhaps doesn't understand railroad requirements too well, because to suggest that simply requiring the upgrading of the tracks to mainline standards in no way indicates that it would be of a standard similar to the trans-continental mainlines which are appropriate for carrying passengers. That refers to the class of railway, not to mainline or siding requirements.

We are simply saying here that because of the obvious engineering deficiencies, because of the high incidence of derailments and the consequences to the safety of the crew, the high loss in insurance claims and damaged equipment that flows from that, it was self-evident that there had to be upgrading on that portion of trackage. The Leader of the Opposition, I think, would support that contention.

MR. BENNETT: Mr. Chairman, I would like to deal with the point the Minister has brought up consistently today, and that is the urgency of the financial requirements of the B.C. Railway. He would indicate to this House that this urgency has just developed.

He indicates, because of this bill which sat on the order paper since February 28 and was only just brought in for debate by the Premier while he had one foot on the airplane to fly away, that we are irresponsible in wishing to have full discussion into the expansion, development and the operational costs of the railway. It is no ordinary bill. It is a bill that asks for money in advance for operations. For the first time ever under any method of accounting, the BCR had expenses greater than revenue in 1974. Now that is something that no other railway in Canada has had, with the exception of the CNR in one year. There were expenses in excess of revenue, and they want us to vote money as part of a bill, in advance, for the first time, without debate, for the operation of the railway.

I want to say that the Minister has the means, has had the means, to finance this railway. Earlier this year, January 13, the Premier brought in an order-in-council for $15 million. What does he say?

"Whereas the Minister of Finance has reported that as a result of certain employees on the British Columbia Railway having withheld their services..."

Here he is blaming the employees of the railway for losses on the railway and extra costs in an order-in-council.

"...over an extended period of time, and the consequent curtailment of operating revenues, it is in the public interest to grant the sum of $15 million to the company."

[ Page 3619 ]

Then again on April 3 he brings in an order-in-council for $20 million for a different reason:

"Whereas the Minister of Finance has reported that the British Columbia Railway Co. has reached the aggregate of the sums which may be borrowed..."

Now that was in April that the Premier right in this order-in-council said that he had "reached the aggregate of the sums" that could be borrowed:

"...and the authority for further borrowing is pending and that it is in the public interest to grant the sum of $20 million to the company.... "

It was April 3 that the Premier and executive council in an order-in-council said that they were to their limits of borrowing then. He said that there was legislation pending. Now the Premier had the authority to bring that legislation before this Legislature, but he didn't do it. What makes it so urgent now, though, that we pass it is that the Minister doesn't want to have debate. He hasn't got the answers and he doesn't want to have debate. If they can't do it by restriction, then they will try and close debate off by saying that the opposition is operating irresponsibly and closing out money for the BCR. That is not true, because the Premier in the order-in-council says that you are to your limit April 3. April 3 — and you never brought that legislation forward! That's shocking. That's shocking.

But let me go on because I believe you have been operating this railway's finances illegally for some time. In a prospectus in New York as part of the statement for B.C. Hydro, you state:

"The province owns all the issued capital stock of the railway, representing an investment of $185.6 million at December 31, 1974. The British Columbia Railway Construction Loan Act authorizes aggregate net borrowings by the railway and by the province for railway purposes of $440 million."

That is the limit which is proposed to be increased to $650 million.

"At December 31, 1975, securities outstanding with the provincial guarantee, before deducting sinking fund investments of $53.5 million, totalled $442 million."

Does that indicate that at that particular time you were $2 million over your limit? And since that time you have brought in these grant loans of $35 million. This is borrowing that is illegal, then. Don't say it isn't borrowing, because statements by the Premier in this House time after time have said: "These are a debt of the railway that must be repaid." On February 20, 1975, the Premier said: "Mr. Speaker, it is a loan which is repayable with no interest to the Crown."

If it is a loan from the government, it is a debt of the railway. Did the government lend money illegally? Did the railway borrow money illegally? If it borrowed money illegally then, can it not borrow money illegally now? Isn't the argument of the Minister just a sham because he has no answers on conflict of interest, he has no answers on operational budget, he has no answers on the specification changes leading to the large capital costs? The Premier says it was a loan.

On February 20, the Premier said:

"I will inform the House of the details of all of the accounts of the B.C. Rail under a new accounting service as soon as the annual report is available. The information asked for yesterday will be tabled as soon as I receive it from the railway."

In answer to the Member for West Vancouver–Howe Sound (Mr. L.A. Williams), he says: "...and point out that the $35 million was a repayable grant and presumably will be paid back out of this money." If it is repayable, it is a loan. If it is a debt to the province, it is a loan. If it is a loan, by the government's own statements and own order-in-council it is illegal.

Yet the Minister, in order to curtail debate and provide answers, tells this House right now that the opposition in this House are holding up the operation of the railroad, when since April 3, by their own order-in-council, they were at their limit and never did anything about introducing the bill to this House to provide the money.

You want to know why they wanted to hold it back? So they could make a political presentation with the restated depreciation. A Premier who would play political games like that, withhold introduction of this bill and debate, has caused this crisis situation. And his Minister attempts to call the opposition in the Legislature irresponsible. He says: "Oh, it's the last minute. It's the 11th hour. Don't debate. No debate; do as we tell you. Do as we suggest or you'll be irresponsible."

You know, next year I suppose they'll bring the budget in in November at the end of the year, and say: "Don't debate the budget; we need the money to pay the bills for the year that's gone by." That's the type of logic that the Minister of Labour is advancing to this House. We have two financial statements. We have a financial statement that's part of a prospectus in New York, which indicates the railway may be operating illegally in borrowing money and capital for both operating and expansion which is beyond the limit as stated in the bill, the limit the government wishes this House to change with urgency; yet by their own admission, their own statements, they've been operating illegally for some time.

[Mr. G.H. Anderson in the chair.]

[ Page 3620 ]

I can't believe it, because on April 3, here's all the urgency the Premier had, and I'll repeat it again:

"Whereas the Minister of Finance has reported that the British Columbia Railway Co. has reached the aggregate of the sums which may be borrowed and the authority for further borrowing is pending, and that it is in the public interest to grant the sum of $20 million to the company..."

That's what he called it, a grant.

Later on, the Premier has indicated that it is not a grant, that it is a loan and must be repaid. A grant-loan, a groan. But really, Mr. Chairman, what we have in this is the government operating illegally, playing games with semantics of the words "grant" and "loan," but indicating that it is a loan. If it's a loan, it's illegal. If it's ever repaid back, it would mean that it was a loan and that it has been illegal for the railway to operate. In fact, indications in this financial statement filed as part of a prospectus in New York would indicate they are $2 million beyond the limit at that particular time.

This is very serious. The Minister says it's serious. It certainly is serious, because we now have financial accounting and financial statements that don't add up, that don't stack up. We have excuses offered that, when you read the history and the statements of the Premier and president of the railway, are not valid. If the Minister ever thought there was some reason why this House desired information, these very conflicting statements indicate why we need an accounting, why we need an independent judicial inquiry. Two financial statements, conflicting statements, perhaps authorized loans, perhaps illegal operating money, and today the Premier's in New York trying to explain it.

Interjections.

MR. BENNETT: But here we have a problem, because last year in 1974, for the first time, operating revenues were $48 million, expenses $62 million — operating loss $13 million. By any accounting system, the first time ever. By any accounting system, the first time ever.

Fantastic cash losses, and the government wants us to be part of a large bill that would normally be for capital construction. Any of the financing done before, whether it was to buy shares or whether it was grants, went for capital construction. In this case, they want part of the money to be for operating losses, not only for last year but for operating losses that will be happening this year as the railway management runs it deeper in debt.

The revenue, instead of increasing, stayed static: $48 million in 1973, $48 million in 1974. Up until that, every year we had increases. Even during the 1961 recession year we had an increase, Mr. Chairman. We had increases in operating revenue, but not now. Why? Because resource development in this province and expansion has declined because of the policies of the government over and beyond how the normal world market has been affected. And that affects the very future of this railway.

With no answers to this House they want us to authorize this money for expenditure and expansion, when the very statistics that made up the feasibility study and its potential loading factor may be affected because of the government action, which is stated to be a necessary part of any expansion. Right in the reports to the government it said the expansion of the railway required loadings and an economic policy of the government that went hand in hand with guaranteed future loadings. This government hasn't allowed that economic future for resource industries to be possible, and, of course, the figures are out the window.

Mr. Chairman, we don't even know whether this railway can meet the figures that were suggested or even half of those figures. The Minister hasn't provided questions that were asked the Premier the other day. What is the potential car-loading? What companies and what mineral deposits are being brought on stream to provide the loading factor for the extension of this railway? These are all a series of questions that we should have answered to do with the extension of the railway. If the mines aren't being developed, if there is no load, would the Minister tell me what the railway is going to haul out of the northwestern part of B.C.?

MR. CHAIRMAN: The Hon. Member for Cariboo on section 1, hopefully.

MR. BENNETT: Helpfully.

MR. FRASER: Helpfully. First of all, I think that debate should be adjourned. I haven't had anything to do with the committee debate till now. I think it's an absolute disgrace that there are none of the railroad officials in this House for this debate. They're so alarmed and concerned about the operating revenues and the money needed, I'd like to ask them.... They don't show it here. The president of the railroad is off to New York and London. The Minister of Economic Development (Hon. Mr. Lauk), who is the executive vice-president, is in Sweden — I don't know what for; I don't think he knows either. The Minister Without (Hon. Mr. Nunweiler) who is very rarely ever in the House.... He was here earlier this afternoon.

MR. CHAIRMAN: Could you relate your remarks to section 1, please?

MR. FRASER: I'm relating to who is running this

[ Page 3621 ]

railroad. Nobody cares about it to be around. Here who do we have carrying the bill? The Minister of Labour, who just got fired as executive vice-president. I think it's an insult to the whole Legislature.

Public accounts was batted around in relation to the BCR here yesterday when I was away. I want to clear up some matters here. The Minister referred to it in the committee debate today. First of all, the public accounts committee didn't call the British Columbia Railway to the public accounts until we had a financial statement. There's no point in calling any Crown corporation to the public accounts till we can get a current as possible financial statement. The financial affairs of this railroad for 1974, Mr. Chairman, were tabled in this House on June 6, 1975 — five months late. That's why they weren't called before then.

On June 11th I wrote a letter to the executive vice-president of the railroad and invited him and his staff to appear before the public accounts committee.

AN HON. MEMBER: What did he say?

MR. FRASER: I asked him on June 11th to appear with his staff on the morning of June 17 at 8:30 in the morning. While I was away yesterday, I phoned from Horsefly. I know you don't know where that is.

MR. CHAIRMAN: Oh, yes, I do.

MR. FRASER: It is in the riding of Cariboo. I phoned to find out if we had heard from the BCR. Yes, we had. They couldn't attend the public accounts committee. I believe it was said here yesterday that I cancelled the meeting. That's absolutely correct. I certainly did after I found out they said they couldn't attend the public accounts committee. Do you think we want to meet with a bunch of section hands from the railroad? We want to meet with the senior management of the railroad. We're reasonable people. So naturally I had to cancel the meeting because they said they couldn't attend. Let's get the record straight here. The Minister of Labour is playing political games about the cancellation of that meeting.

Mr. Chairman, I was further advised that they had to have 10 days notice — I am referring to the railroad — to attend. I want to make it clear that I would like to say on behalf of the public accounts committee that we would like to have 10 days notice of all the business we have to attend to — sitting in this Legislature from 10 in the morning till 11 at night because this government mucked up the session back about two months ago. What kind of ridiculous nonsense are we talking about here?

AN HON. MEMBER: A do-nothing chairman.

MR. FRASER: Do-nothing chairman? What are you going to do without a financial statement? There was no financial statement till June 6.

Interjections.

MR. FRASER: We're dealing with raising the borrowing power for the BCR from $440 million to $650 million. I don't think that that should be brushed aside by pressure put on by the Johnnys-come-lately from that side that should have had this stuff in front of us three months ago. I don't accept that at all that we have to rush through the debate when we have this vital link of the province in a financial mess and a management mess. Naturally we want to have questions. Who do you think we're asking the questions for — ourselves? Certainly not. We're asking them for the people that live along that line, and our concern about the mess that exists in that operation of that railroad right today, right here.

With reference to the people from Cariboo, I've never heard of that fellow in my life before. I was all through the Cariboo from Friday night to Monday night and they are worried, all right. But the Minister tried again to twist as he does that they are concerned. You bet they are concerned about the future.

That railroad is running — it'x running cars. I saw four freight trains in 24 hours with 100-odd cars on them last Friday, last weekend. That wire was set up by the Minister of Labour, and I'll bet you it was paid for by him too, so he could twist it around and blame the opposition. What a bunch of bunk!

MR. CHAIRMAN: On a point of order, the Hon. House Leader.

HON. MRS. DAILLY: I would ask the Hon. Member to withdraw his statement that that was a set-up by the Hon. Minister of Labour.

MR. CHAIRMAN: It does attribute a motive that shouldn't be attributed to another Member, Mr. Member.

MR. FRASER: Okay, I'll withdraw that, but....

HON. MRS. DAILLY: It's not the way we operate.

MR. FRASER: They are definitely concerned up there about the future of the railroad. But I want to make it clear that there is nothing to be concerned with right tonight because the railroad is running.

AN HON. MEMBER: What about the past?

MR. FRASER: Well, where they were concerned

[ Page 3622 ]

was when that Minister over there, who is carrying this bill, wasn't a bit concerned when it wasn't operating from November 26 to January 7, 1975. That's when they were concerned. You'd better believe it. You could not have cared less. They would like to know when you are going to pay them for the three weeks of lost accounts up there. There are firms going bankrupt up there today because of the mismanagement in the railroad at that period.

I would also like to ask this Minister where all the revenue they're getting is going if it is so urgent that they get $15 million or $30 million, or whatever he told us, right away. That railroad is operating night and day, running a hundred loaded freight cars a trip. Are they not collecting their freight accounts either? There's a cash flow there.

Don't stand in this House and tell me they can't pay the salaries. If they can't pay the salaries and the operating expenses, they are not collecting their freight accounts, and then they are negligent at that level. That's why. They are getting revenue night and day, seven days a week. I ask you: what are they doing with it? Don't get all excited about needing cash to meet payrolls, that is not a fact.

Mr. Chairman, Bill 27 was put in this House on February 28. It is not our fault we are standing here on June 18 debating the bill in committee. I know what the fault is; we all know what the fault is. They were getting all the financial statements they could to suit their political purposes and, of course, we had no financial statement to talk about. That's why we are here today. There is no reason at all for rushing things regarding this. This is a lot of money, Mr. Chairman, $650 million — a net increase of $210 million. I would assume that this looks after the repayment of the grant loan, or whatever they want to call it, so we are dealing with a net amount of money of $175 million.

The British Columbia Railroad might not think this is a lot of money, but I can assure you that everybody along that line thinks it is a lot of money, and they want to know where it is going. So do I.

Mr. Chairman, to the Minister of Labour: before the committee votes this supply, you should have listed down here approximations of where the $175 million is going. I think this House deserves that. Never mind this House: the people of British Columbia deserve it. How much is capital? How much is operating? We are halfway through the year of the operation of that railroad now, thanks to your mismanagement of the books, so you must know some factual figures now. Guess the other half — that's all we ask. It's a budget of $175 million net that's what is left to spend, and we are certainly entitled to that.

I am absolutely amazed, Mr. Chairman, that the people who are so concerned about this railroad aren't even in British Columbia today when it is so serious an affair, the operation and the financial operation of the railroad.

I would like to ask the Minister if he will give a rough breakdown of the $175 million in view of the fact that half the operating year of that railroad is gone. It operates on the calendar year, not like the government operates on a fiscal year ending in March. I think those figures are available, and I think we should know them before we vote.

I was in the Cariboo this weekend — and that is where this railroad gets most of their freight, by the way — and they too want to know where this money is going to go once it is voted.

Mr. Chairman, there are a lot of questions from the people who use this railroad. It is their lifeline, and they want to know. Where else can their elected representatives find out, rather than right here?

AN HON. MEMBER: Public accounts.

MR. FRASER: Yes, and if we get in public accounts, we can't get financial statements. Then when we call them to public accounts, they say that they can't make it. So try that one on for size.

Interjection.

MR. FRASER: Well, that's what I was told yesterday. I was out in the far west, in Horsefly.... The Minister of Highways (Hon. Mr. Lea) is smiling. I know what he is saying — I hope he got stuck in the mud. Well, I just about did. (Laughter.) But I had to get back here to talk about the BCR.

HON. G.R. LEA (Minister of Highways): They don't care about the roads.

MR. FRASER: Oh, yes, they care all right.

I believe the Second Member for Victoria (Mr. D.A. Anderson) was up here asking a few questions. He doesn't even know where the railroad runs, let alone what goes on about it.

In reply to the Minister of Labour, the Second Member for Victoria said that the United States' economy is on the upgrade and therefore business on the railroad will increase. What a bunch of balderdash, Mr. Chairman. I will straighten out the Minister of Labour on that comment. I'll straighten that out right here and now. Don't expect any increased revenue from the BCR during 1975 — and that is what this bill is talking about, the operating year 1975 — in view of the economy of the United States advancing. It won't advance very much.

But apart from that, even if it advanced tonight, that railroad won't have any cars. They never have any cars for lumber products when the market is excellent down in the United States. They have lots

[ Page 3623 ]

of empty cars today when there is no lumber market, but if it increases and demand is put on them, they won't be able to supply the cars. The forest industry, the people of the interior, lose millions of dollars because they can't deliver the cars and get the product to market.

Mr. Minister of Labour, don't get carried away by any observation like that. That is not going to bail out the BCR because it is a record loud and clear: every time there has been a strong lumber market, there haven't been any cars to haul the lumber to market. I have no reason to believe that that isn't going to happen again in view of the $9 million that has been spent on the car plant that has produced one car. One car!

MR. CHABOT: One car 16 months later.

MR. FRASER: Yes, 16 months later, when you probably need another 2,000 cars if there is an upswing in the market for pulp, lumber, plywood and so on that come out of there. I might say, Mr. Chairman, that there is a lot of it. Ten years ago, before this railroad got going, 75 per cent of the wood products in this province came from the lower mainland. Now 55 per cent of them come from the interior because of the expansion that has been done by that railroad. Don't you ever forget about it. When that railroad is in trouble, the whole interior of this province is in trouble, and in turn, the whole Province of British Columbia because it affects everyone in this province.

Now I would like to hear from the Minister about what they are actually going to do with this $175 million. Don't get up and say that you can find out from the public accounts committee. I want to remind you, Mr. Minister, that I am the chairman of that committee, and I doubt whether we will find out anything about the BCR in 1975 through the public accounts. Why should I think we will in 1976? I want to know now why you can't deliver a rough budget of the $175 million.

HON. MR. KING: Mr. Chairman, what the Member lacks in light, he more than makes up for in the heat and stridence of his voice. But we have produced nine cars out of the new Squamish railcar plant. They are in production and their capacity will undoubtedly improve as time goes on. I would think the Members would be pleased to hear that we at last have a capacity and a capability of producing our own railcars right here in British Columbia, employing British Columbians rather than being totally reliant upon the foreign railroads and upon the national carriers.

It is a strange thing to hear the chairman of the public accounts committee say that he has no confidence in public accounts as a vehicle for eliciting information. We heard the Member for South Peace River (Mr. Phillips) build a straw man to try to divert attention from the shocking reports that have come in on the previous accounting practices of that railway. The Leader of the Opposition (Mr. Bennett) waxes strident and emotional with the same objective.

MR. CHABOT: Are you going to frame that word "strident"?

HON. MR. KING: So they introduce a scapegoat, one Mr. R.E. Swanson, a member of the board of directors. They suggest that this man is involved in a conflict of interest. "A conflict of interest," the Member for South Peace River says. And he wants to know, he demands information: did this man, while he was on the board of directors, receive payment from the BCR for services rendered? I indicated earlier that I was of the view that no, that was not the case.

Interjection.

HON. MR. KING: Yes, that was with respect to a report. I understand that that is not the case.

But I find, by having a check made of the public accounts for previous years, that some revealing information is available. The same Mr. R. Swanson, whom the Member now accuses of being in a conflict-of-interest position as a director on the board, was once the chief engineer for the Department of Transport in this province, under the previous administration. As such, he was the chief regulatory officer over the engineering standards on that railway. Perusal of the public accounts for the year 1965 indicates that Railway Appliance Research Ltd. received $10,000 payment from the British Columbia Railway.

SOME HON. MEMBER: Oh, oh!

HON. MR. KING: Here was the man charged with regulating the affairs and ensuring that the standards of the railway conformed to safe standards, and he was on the payroll of the same Crown corporation he was authorized to regulate and inspect.

In the year 1969 he received $869. In the year 1970 he received $11,592. In 1971 he received $979. Now if this is concern about a conflict of interest, that is where the concern should reside.

MR. McCLELLAND: Was he fired?

HON. MR. KING: I don't know what the previous administration did with him. I don't know. He certainly held that position.

[ Page 3624 ]

Interjections.

HON. MR. KING: Oh, listen, Mr. Chairman, they don't like the heat. When they're caught with egg on their face, they start their shouting and hollering again. They're not prepared to sit in silence and listen to the facts.

Now these public accounts are available to anyone to check. I would say that that was definitely a conflict of interest, where the man responsible for regulating the safety standards of that railway was on the payroll of the same railway he was inspecting — and presumably regulating. That went on from 1965 to 1971, for six years under that administration.

I never heard the Member for South Peace River (Mr. Phillips) getting up and screaming about a conflict of interest at that time. I never heard one word of concern expressed by any Socred. Not a word. So it's quite evident, Mr. Chairman, that the Members of the opposition are simply interested in setting up any strawman, any ruse possible to take the focus of attention off the improper accounting procedures and the improper financial control mechanisms that were in existence on that railway and which have been revealed by the Price Waterhouse report, by the Peat, Marwick report and also by the internal report of Mr. Minty.

That's the issue, and the Members can distort the facts all they wish. These are the facts of the case and if the Members wish to continue the debate, why, they're under no limitation. I'm certainly imposing no restraint on them in terms of carrying on the debate for the next week if they so wish. Of course not. But the people of British Columbia will make their own judgment in that regard.

MR. H.A. CURTIS (Saanich and the Islands): Mr. Chairman, very briefly, fundamental before this committee, fundamental to the committee discussion which has gone on for some time, is the increase in borrowing power for the British Columbia Railway Co. Other Members have gone into more detail than I am prepared to or need to at this point.

But I think there is a document which might well be of some assistance to the committee in determining whether we have had all the information necessary; whether past and present accounting practices have been correct or incorrect; whether the state of the railway's financial health is as the Premier and Minister of Finance would have us believe; or whether it is as we on this side of the House suspect, and the evidence is mounting to support the opposition point of view.

I recall from participation in public issues in the past that when the province or some other corporation or public body goes to the market to borrow, in that period between the issuance of a prospectus — preliminary prospectus and then the prospectus, between the period that those two documents are released — and the loan is finally and fully concluded, completed and the money delivered to the borrower, there is what is known in the trade as a comfort letter or sometimes a cold comfort letter.

Now I would suspect that in the most recent issue — that is for B.C. Hydro and Power — which refers as it must in its prospectus to the British Columbia Railway Co. there would have to be in existence such a comfort letter. A copy of this must be available in the offices of the Department of Finance here. As I understand it, as I recall, this letter is signed by the auditors for the borrower. It's a very significant updating of the financial situation for the borrower. The auditors prepare the letter and forward it to the underwriters. Now whether it's to the principal management organization or to the total management group I'm not entirely certain.

But I think it would be very helpful if over the dinner break the Minister of Labour (Hon. Mr. King), who is, unfortunately for him, piloting this bill through committee stage, would ask the Department of Finance to locate a cold comfort letter. Indeed he may have it in the House now. I'm referring to one which would have been issued in May. It could clear away many of the doubts which have been raised — or confirm them. If the Minister would be prepared to file that with the committee or with the House, perhaps it would answer a number of questions which have been asked on more than one occasion in the last few days.

HON. MR. KING: Mr. Chairman, it's my understanding that the letter the Member refers to would be governed by the rules and the regulations of the Securities & Exchange Commission, and therefore they must be contained in the prospectus. I understand that that is, in fact, the case, that the information the Member is soliciting is contained in the prospectus that was filed with the firm of Kuhn, Loeb, the First Boston Corp.

MR. PHILLIPS: Mr. Chairman, getting back to Mr. Swanson: if Mr. Swanson did business with the government at that time, it was wrong and it's wrong now. I'd like to know why the opposition of the day didn't bring this to the attention of the government. I want to tell you, Mr. Chairman, that as soon as it came to the attention of the then Minister of Commercial Transport, his extensions on his retirement were no longer extended. They were terminated immediately. Had the opposition of the day been on their toes and brought it to the attention of the Minister....

AN HON. MEMBER: Then you'd never get the details.

[ Page 3625 ]

MR. BENNETT: No research.

MR. PHILLIPS: No research — his work with the government would have been terminated. Now it has been brought to the attention of the government. Not only that, but we have here that he's a director of the British Columbia Railway. His directing is in charge of these at the present time. I say that if it was wrong then, it is wrong today. As soon as it came to the attention of the government of the day, his services with the government were terminated. The same thing should happen today. I'd like to know what checks the government did on this man before they put him in as a director. Did they know that he had a conflict of interest? Did they know that he had companies which would be providing services?

Interjection.

MR. PHILLIPS: That's right. He's running the railway. He's the one that recommended all the changes in management. He's the one that has recommended the engineering changes. He's the one that recommended the changes in accounting systems. But I'll tell you, Mr. Chairman, while this man is a director of the British Columbia Railway, payments direct to him, not to any company, Mr. Chairman, but payments direct to Robert E. Swanson while he is a director of the railway, not through any company that he's a vice-president of — a payment in the British Columbia Railway accounts to Mr. Swanson of $766.80. He's paying himself, and I'd like to know what that's for.

Now that is not his director's salary, which is in the sum of $3,000 in this same statement of accounts. It's completely different. This is under salaries, wages and travelling expenses: $3,000. But in schedule of payments to corporations and individuals for supplies and services rendered, here is a director....

MR. BENNETT: Over and above the $3,000 he already got.

MR. PHILLIPS: Over and above the $3,000 that he was paid as director of the company here is the British Columbia Railway paying the director for payments of supplies and services rendered while he is a director of the British Columbia Railway in the amount of $766.80. Was that for that confidential report? What was it for?

Now, Mr. Chairman, there's a principle involved here. I say that if Mr. Swanson had a conflict of interest while he was working for the previous administration, it was wrong. As soon as that information came to the attention of the then Minister of Commercial Transport, the extensions on his retirement, which were on a three-month basis, were no longer extended. It was wrong then and it's wrong now, but we're bringing it to the attention of the government and we demand that they act forthwith and immediately. I want to know what this $766 direct payment to Mr. Swanson, while he is a director of the British Columbia Railway...I want to know what it's for.

HON. MR. KING: Mr. Chairman, I agree with the Hon. Member. I think that they certainly have a right to know what this payment is for. At the moment, I do not know. I wasn't aware that any payment for any services....

Interjection.

HON. MR. KING: Well, now will the Members allow me to answer? I said I was not aware that any payments had been made by the railway to Mr. Swanson, although $766.88 could well be in connection with travelling expenses or something like that. I don't know. I'm having it checked out, but I would point out that that's a far cry from the...let's see: the $10,000 in 1965; the $869 in 1969; the $11,592 in 1970; $979 in 1971.

That is in the neighbourhood of $30,000 paid to the man who bore the responsibility for ensuring that the railway conformed to adequate safety standards.

[Mr. Liden in the chair.]

I would say that is certainly a good deal more than any casual conflict of interest. That is akin to having the Railway Transport Commission paid by the CNR or CP Rail. The regulatory authority responsible for ensuring that those rail lines conform to certain predetermined standards was being undertaken by someone who was in the employ of the railway company itself. That occurred for six years. I say that is scandalous, absolutely scandalous.

Now I understand, too, that Mr. Swanson was not fired when the previous Minister of Transport learned of this situation, as the Member for South Peace River inferred. It is my understanding that the termination of Mr. Swanson came back after he had received two or three extensions. He was terminated when he had reached age 67, which is a requirement under the public service superannuation Act and bore no relationship to whether or not Mr. Swanson was doing an adequate job for the Department of Transport or whether or not he was in a conflict-of-interest situation.

So don't try to slither out from the situation in that matter. It is just not factual. Unfortunately that seems to be the forte of the opposition by leaving impressions which are certainly not correct. That is the record. It is available to anyone who wants to check the public accounts on it.

[ Page 3626 ]

I can say this, that if Mr. Swanson or any other director is in a conflict-of-interest situation, undoubtedly that will be dealt with. The Minister of Transport and Communications (Hon. Mr. Strachan) indicated quite clearly how this government feels about any conflict of interest. But what I do regret, and what I do appeal to the opposition for, is to be responsible in the House, to determine the facts very carefully before anyone's name is besmirched by allegations that perhaps are put forward in a fairly frivolous way.

I don't know what the payment is for. Certainly there are methods of getting that information by simply placing a question on the order paper to the president of the railway. That information could be elicited.

MR. PHILLIPS: Oh, will you fly it over to London, too? Going to fly his answer back?

HON. MR. KING: I am under the impression that you are such sleuths and investigators over there that perhaps you have had that information for some considerable length of time. Have you inside sources in the railway? I don't know how you come to have that information, but certainly the public accounts route or the questions on the order paper are an appropriate way to gain further information on it.

But to suggest, simply on the basis of a $766.88 payment, that there is a conflict of interest, is pretty harsh. The Member may have travelled to the North to inspect the railroad and incurred expenses in that regard for all I know. I don't know, and I have asked the vice president of operations to get information for me so that I can reveal that to the House. If that is available, I certainly will do so, but I don't really think it is the appropriate time, in debating committee stage of a bill to advance the borrowing power of the railway, to deal with questions which are obviously public accounts issues.

So, Mr. Chairman, I think the opposition should be consistent. Surely they are in a very questionable and shaky position to question conflict of interest with a record such as has been revealed from public accounts of their stewardship and operation, with a record of interference by a board director, with a firm of auditors who did the books for that company under the Social Credit regime that was found by the comptroller-general of this government.... They seem to either ignore these findings and these indictments or simply attempt to turn aside by saying: well, that guy is a political appointment.

There is no way Mr. Minty is a politician appointment. He has been there for many, many years. He was there under the previous administration and he is still there. I think it is irresponsible for the opposition to conduct themselves in that way. It is totally inconsistent, totally irresponsible, and you are going to be judged on that basis. Strident shouting and insulting language is not going to suffice. You are going to be judged. You are going to be judged.

I know that the railroaders on the Kootenay used to make some caustic and facetious remarks about the Member for Columbia River when he was out there handing up train orders on the hoop. They used to suggest that "if you voted for Chabot, you would watch the Kootenays rot," and things like that. But I accept that he is a pretty good railroader. He eventually got a bit of a promotion and got a little wagon to drive around in and advance the sales of CP Rail. I think he has a genuine and sincere interest in the BCR because he is elected to the official opposition now. I think he should show his commitment by standing up and supporting passage of this third reading of this bill to provide the much-needed financing for a competitor of CP Rail. And to show there is no conflict of interest in his motivation I'm sure he'll do just that. (Laughter.)

MR. BENNETT: Mr. Chairman, I think the Minister is trying to slide out of what could be a very serious area here of conflict of interest. He said: "Why not bring it up in the question period?" Does he not recall that this financial statement was not offered to the opposition to bring before any committee or put any question on the order paper? The Premier introduced it at noon as he had one foot on the airplane and one foot in the Legislature.

HON. MR. KING: And you had one foot in your mouth!

AN HON. MEMBER: That's not true — both feet are there.

MR. BENNETT: In fact, we even identified this amount to the Premier quickly before he left in a quick perusal of this report.

I think that a conflict of interest, as the Minister of Transport and Communications (Hon. Mr. Strachan) has said.... He said "whether it's five cents or $200." It's not the amount....

HON. MR. KING: I have additional information if the leader would like it.

MR. BENNETT: So we'd like an explanation. I asked for an explanation of that amount last Friday and I asked yesterday, not in relation to a charge, but as to how it would happen.

I also would like to point out that if there was a conflict of interest before, it certainly doesn't make it any better to have a conflict of interest today.

HON. MR. KING: Correct.

[ Page 3627 ]

MR. BENNETT: If someone had a conflict of interest in supplying the railway while part of a government department, certainly it's worse as a director of the railway, particularly after the information was known. Whoever appointed someone to the most important position of the railway — one of the four or five directors — would certainly have the responsibility of guaranteeing the integrity of those appointments.

HON. MR. KING: I have additional information if you would like it.

AN HON. MEMBER: He doesn't want to hear it.

MR. BENNETT: I want to finish my statement.

The fact that companies operate in conflict from outside government to a Crown corporation is not as serious as the rules and regulations that would require a director of the company and the ethical conduct that's demanded of them. The positions, although both important, the case...while both serious, directors have a higher responsibility. They are appointed, they direct the affairs of the company — they direct them on behalf of the people of B.C. We asked the questions about if there were regulations yesterday of both the Attorney-General (Hon. Mr. Macdonald) and the Minister. At that time they chose not to provide the answers if there were regulations for conflict of interest — whether there were standards. We didn't relate it to a specific case. We're trying to find out if it related to anyone generally dealing with Crown corporations.

We were concerned then; I don't think we dismiss the matter lightly now. I don't think we should dismiss the matter lightly now. We still have no knowledge, as the Premier suggested before he flew away, that he was going to at the same time Friday table the expenditures for 1974, because they weren't tabled. Although he said he was tabling them at the time, they were not included in this document. We have expenses for 1973 — a year late — and by July 1 at the end of this month, of course, the statements for 1974 will be past due.

We're concerned. It was a serious request; It was brought up with all respect both on Friday and yesterday. It was chosen to be ignored as a serious question by the Premier first on Friday — the president of the railway — and the Minister yesterday. At those times they had ample opportunity to provide research and look for the answers — Answers that were requested with great respect and with great restraint. (Laughter.)

I'd like to deal with depreciation, if I might, because depreciation has been much a factor on this railway. The report which I'll table when given the first opportunity when the committee rises is a research and development report for the British Columbia Railway. It's a comparative analysis with other railways. It's a report that hasn't been made available to this assembly to help us in our deliberations.

The Minister talks about tabling of reports, but they're selective reports. This report was done in 1973 during the time that the present Minister of Labour was a director — June of '73. It was done inside; it was a comparative analysis of the accounting and performance procedures of this railway — the B.C. Railway, which has done so much to build this province of British Columbia and the prosperity. We have a commitment to that railway. We have a commitment to it running efficiently and we want to know how it's being run. This report deals with areas such as depreciation and talks about the standards between different railways. It talks about the differences in both operation and construction and types of freight; it talks about how depreciation is calculated. It shows that the B.C. Railway, rather than being out of step with other railways as a percentage of gross, was right on.

But rather than read the report, I think if I table it later it will be self-explanatory as to the success performance of this railroad in the past. This railroad has operated for years, and the operations have got to be a measure of success of any railroad, and that's operating expense as a percentage of revenue. This railroad operated in the 70 per cent category as a percentage of revenue. That made it one of the finest railroads in this country and on this continent. It had a record on freight hauling that was better than most, per freight mile. It had indeed an enviable record on return of equity.

Indeed, it is a railroad of which we can be proud because in those years, regardless of depreciation, this new adjusted factor, this railroad, on a cash basis, was always profitable and didn't have to come to the Legislature for operating money. But now, for the first time, they have fantastic losses for the years 1973 and 1974 in this railway.

If we are looking at the success of the railway, if we are looking at the railway as to what it means to British Columbia, let us take a look at this railway that now costs us, under the new accounting, 120 per cent of revenue to operate.

Interjection.

MR. BENNETT: Well, you couldn't. If that was in the private sector, it would be broke...

HON. MR. LEA: Not with proper accounting procedures.

MR. BENNETT: ...with no different accounting procedures in the operation.

The poor Member for Kamloops (Mr. G.H.

[ Page 3628 ]

Anderson), whose own secretary worked against him to get him defeated for the nomination, and his own people know him best, wants to question. But he doesn't understand the difference between operating as a cash flow and the restatement of depreciation, that this railway now has losses of $32 million, but on cash flow....

MR. PHILLIPS: It's $47 million.

MR. BENNETT: We are now running well in excess of revenue. This is new; this is a new experience for the railway. Forgetting construction, forgetting the expansion that built the railway and built the province, now, having gone through the boom times of 1973, a boom year — it was considered a record year in the world and in the province — we have the railway losing money. We have revenue of only $48 million in 1974. No acceleration of revenue, but a great increase in the expenses of the railway.

That is why we await with interest the filing of the new report that will show us how much the expenses went up last year. We've got 1973. We want to find out how the wages on the railway relate to the other lines, the CNR and the CPR, whether there are expenditures beyond the financial ability of the railway, whether there are costs, accelerated under this management, beyond the ability of the railway to pay. All of a sudden we have jumped to $32 million of loss in the last year, and apparently it will be worse in the fiscal year we are in now. They are talking about cash requirements of $10 million, $15 million and $20 million, not for extending the railway, they're talking about excessive cash requirements for operating losses in advance.

That is something that should be accountable to this Legislature because they have never before been asked to do this. We have got to be concerned about that. Last year we had losses and losses.

Interjections.

MR. BENNETT: And the drop in cash flow, yes, sure — $46 million, a drop in cash flow.

We are concerned, but let me just point out one thing. I think the committee should be aware that when we are dealing with depreciation, depreciation has been much a part of the discussion of railways not only in this province, but in this country for many, many years.

In 1968 the Provinces of British Columbia, Alberta, Manitoba, Ontario, Quebec, Saskatchewan, and the Maritimes, had a transportation committee representing the provinces. It was the Railway Transport Committee. What did the provinces want to do? They wanted to talk and they wanted to bring some sense to the various depreciation rates that were on all railways in the country.

MR. CHAIRMAN: Mr. Member....

MR. BENNETT: It was controversial at that time. On page 53.... Mr. Chairman, do you want me to move adjournment? I just have a little more to go.

It says on page 53 in dealing with the Canadian Pacific Railway that those provinces which had resource railways, and those which had private railroads within their boundaries, were concerned about cost accounting not only for raising capital, but cost accounting as a depreciation factor. At that time this province did participate in studies that pointed out, as I say.... On the Canadian Pacific Railway, it says that the CPR treats depreciation separately from the cost of money. Depreciation is treated as a cash expense, and is related to output service units in the same manner as cash outlays for maintenance.

That's no relation to the depreciation factor we had here or the one that has been achieved, but it was the way they stated depreciation, Is anybody saying "fraud"?

SOME HON. MEMBERS: No.

MR. BENNETT: No. Is anybody saying it was illegal, deceit, what they're saying? In the considered judgment of the railway, that's the way they related depreciation. It said:

"In the case of road property depreciation, the depreciation and maintenance accounts were in the past added together to form the dependant variable from multiple regression costing procedures. Both railways, and this includes now the CP and the CN, followed this procedure in the exhibits presented to the McPherson royal commission; and it was accepted at that time without comment.

"In the EBS paper on multiple regression methods it appears that depreciation is now separated from other maintenance expense, although still allocated on multiple regression basis. Depreciation on rolling equipment is not combined with maintenance outlays and each in analyzed separately."

And then it says:

"For the CNR the statistical costing procedures employed by CNR are less refined than those used by the CPR."

Did anybody call for an enquiry into whether there was fraud in the CNR?

AN HON. MEMBER: No.

MR. BENNETT: It's operated with great huge public subsidies for many, many years. And yet here it says:

"The statistical costing procedures employed by CNR are less refined than those used by

[ Page 3629 ]

CPR. Because of the weaknesses in the underlying accounts CNR property accounts are not available in geographic details so that neither road property accounts depreciation nor property cost of money, can be associated with service."

Now here we have the provinces of Canada, the Province of British Columbia, participating in their concern for depreciation and an understanding of depreciation, and how it should be allocated to their railway in the future.

They made a study. They participated in a study that related to not only provincial railroads but it related to the national railroads. Then in its own research and development study which they conducted in 1973 under the new directors they talk about the difference in their railroad both in depreciation and in construction standards and relating both depreciation and construction to the economic facts and the load expectation of the railway.

They admit they're different because they are different. This is not a railway, Mr. Chairman, that operates the same as the CNR. It's not given tremendous national subsidies. It is not carrying a passenger service. It does not have a coast-to-coast freight network. It does not have the CPR....

MR. CHAIRMAN: Order!

The House resumed; Deputy Speaker in the chair.

MR. CHAIRMAN: Mr. Speaker, the committee reports progress on Bill 27 and asks leave to sit again.

Leave granted.

MR. W.R. BENNETT (Leader of the Opposition): Mr. Speaker, I ask leave to table a report.

Leave granted.

MR. D.M. PHILLIPS (South Peace River): Mr. Speaker, I ask leave to table a letter.

Leave granted.

MR. PHILLIPS: Mr. Speaker, I ask leave to table a report.

Leave granted.

MR. BENNETT: Mr. Speaker, I ask leave to table a further report dealing with the submission of the provinces and dealing with depreciation of freight costs.

Leave granted.

HON. MRS. DAILLY: Mr. Speaker, on behalf of the Premier (Hon. Mr. Barrett) I wish to present the annual return for the calendar year, 1974, submitted in accordance with section 53 of the Administration Act, Revised Statutes of B.C., 1960....

Hon. Mrs. Dailly moves adjournment of the House.

Motion approved.

The House adjourned at 6:01 p.m.