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CONTENTS

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

Committee stage.

On section 1. Mr. Phillips — 3631

TUESDAY, JUNE 17, 1975

The House met at 8:30 p.m.

Orders of the day.

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

Leave granted.

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

BRITISH COLUMBIA RAILWAY COMPANY
CONSTRUCTION LOAN AMENDMENT ACT, 1975

(continued)

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

MR. D.M. PHILLIPS (South Peace River): I would like to ask the Minister of Labour (Hon. Mr. King), who is trying to pilot this third reading of this $200 million bill through the House, what provisions there are in this borrowing to build the railroad to the Sukunka coal field. Is there anything in the projection if Brasscan decide to go ahead with their options, and Brameda? Is there any money in this bill available to build the railroad down to get this coal out and to get it to the ports?

I would like to ask the Minister, Mr. Chairman, what port he intends to take the coal to. Is it going to go to Squamish? I'd like to know what the government has done to develop the port of Prince Rupert, if this is where the coal is going to go, and where in this regard we're going to go.

HON. W.S. KING (Minister of Labour): Mr. Chairman, the matter of possible future development of the railway is something that would be dependent on day-to-day decisions of the management and the board. I have no information about possibilities in regard to development of the coal deposit referred to.

While I am on my feet, Mr. Chairman, I would like to jog the House's memory regarding some statements that the Member for South Peace River (Mr. Phillips) made earlier this afternoon when he was discussing one Robert E. Swanson and accusing that gentleman of a conflict of interest in terms of his duties as a board member of BCR and certain alleged recompense which he received for doing work with the BCR.

Now it has been clearly established, as I revealed earlier, that Mr. Swanson received only expenses incident to his travel as a director of the board. At that time I outlined also that Mr. Swanson, at a date prior to his appointment as a board member, had formerly been the chief engineer for the provincial Department of Commercial Transport under the previous administration, and during his tenure in that position had, in fact, received payments from the railway over a six-year period in varying amounts. I found that to be a serious type of conflict due to the fact that he, in effect, was the regulatory authority over the operation of the railway and at the same time was drawing pay from the railway that he had the responsibility for inspecting and ensuring that the railway engineering standards and so on were in compliance with the standards required under the provincial Department of Transport.

At that time, Mr. Chairman, the Member for South Peace River got up in his place and indicated to the House that Mr. Swanson had been fired as soon as that information became apparent to the former Minister of Commercial Transport.

Interjection.

HON. MR. KING: He said he was fired. He said he was terminated. I find the Department of Commercial Transport report under the signature of Mr. F.A. McLean, the professional engineer and Deputy Minister of Commercial Transport for the year ended December 31, 1971, and that report reads as follows:

"I have the honour to submit the annual report of the Department of Commercial Transport for the year ended December 31, 1971. Early in the year both the Deputy Minister, Mr. A.J. Bowering, P. Eng., and the chief engineer, Mr. R.E. Swanson, P. Eng., retired after a combined total of more than 66 years of service to the Province of British Columbia. During the subsequent period of adjustment a considerable load was placed on various members of the staff, and their efforts during this period are acknowledged."

It is very clear that Mr. Swanson retired in the normal method as the chief engineer for the Department of Commercial Transport, without censure or without any question being raised as to a possible conflict of interest between the money he had received from the railway and his duties as the chief inspectional officer of BCR.

Now it is clear, Mr. Chairman, that the Member for South Peace River has given erroneous information and left an erroneous impression with the House.

AN HON. MEMBER: Character assassination.

HON. MR. KING: I really don't know what to expect from the Member, Mr. Chairman. I would think that a Member of this House. who was of good

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intent, would certainly want to clear up the kind of impression he had left. I can only speculate on what the conclusions of that group over there would be, had I provided this kind of false information to the House. I would undoubtedly be accused of lying and a variety of other hysterical allegations which that group frequently levels. I think it is important that the Members of this House understand that the Social Credit party's concern with possible conflicts of interest seems to be completely new-found. They are prepared to stand in this House and assassinate by implication any individual in this province who does work for the government without respect to any evidence that politics are involved. They are prepared to level charges in the most off-hand and the most frivolous manner.

Yet, Mr. Chairman, when the facts are checked and the evidence is in, it is clear that their own record was such that perhaps they do have grounds for their wild suspicions of every initiative this government takes. They can't seem to acknowledge that it is possible for an administration to approach the administration of Crown corporations on a non-partisan and purely efficient and sound managerial basis.

I think the Member should be prepared to stand in his place and apologize to the House for a completely improper and false impression that he left.

I believe that Hansard will show that he clearly and unequivocally stated that this man was terminated summarily when it was revealed that he had received recompense from the railway for services rendered. That is completely untrue.

I pointed out, and will reiterate that if there are grounds for suspicion, as there undoubtedly are from time to time, that a top-ranking public servant or anyone else is in a conflict-of-interest situation, in terms of their obligations to the government and the position they hold, then there is a responsible way to approach it. That responsible way is to, first of all, elicit sound information as to what the facts are, and to discuss those facts with the Minister responsible so that a thorough investigation can be made before someone's character and reputation is besmirched by innuendo that is sometimes not supported by the facts. That is a pretty reckless way to do business. I think the opposition owes it to the public of British Columbia to be more responsible than that.

Mr. Chairman, if all of the concerns that the opposition are expressing are based on the same kind of faulty foundations, then that is perhaps the kind of import that we should attach to them.

The Member for Columbia River (Mr. Chabot) usually starts chirping away with personal insults when they are caught out. That is just a measure, I suppose, of the fact that they love to dish it out, but can't stand the heat at all when they are caught out and exposed for the rather ineffective opposition that they are.

MR. PHILLIPS: Mr. Chairman, we have listened to the irresponsible statements of the Minister of Labour who is probably the most irresponsible Minister of Labour this province has ever had. As a director of the railway he was the most incompetent director the railway has ever had. That is why he was fired by the Premier.

Mr. Chairman, he is talking about letting people go in the public service. I want to tell you that we don't fire people on TV, as the present government does; we have a little more regard for people who work for the public service. As a matter of fact, when the previous administration was government, the public service was not politicized; they were completely independent. They had security of tenure. There was no competition in the public service. They didn't have to worry about opening their mouths and speaking against the government.

SOME HON. MEMBERS: Oh, oh!

MR. PHILLIPS: They didn't have to worry about big Daddy Bear coming along with a big club and firing them on TV. We had a complete regard for the persons involved in the public service. They respected the government, and the government respect them. Mr. Chairman, this is now changed.

We have seen indiscriminate firings on TV — indiscriminate firings by the Minister of Education (Hon. Mrs. Dailly), whom we sometimes refer to as "the fire department." The disgraceful way that the public service in British Columbia is being treated today shows the complete disregard for it by this socialist government that is supposed to be looking after the little people of British Columbia.

We are not prepared to assassinate people the way the Minister of Labour fired his Deputy Minister, with complete character assassination. He fired him in a devious way. The Minister of Economic Development (Hon. Mr. Lauk) fired his Deputy in a devious way.

But, Mr. Chairman, when the Deputy Minister of Commercial Transport was not given another tenure after he had retired, there was no big to-do made about it because we respected the Deputy Minister and the service he had given to the people of British Columbia. It was unknown to the Minister of the day that the Deputy was carrying on a business with the government. As soon as this came to light, the Deputy Minister's tenure was not carried on another three months. The great opposition of the day, which had access to the public accounts and all the records of the government, did not come up with anything. As soon as the government of the day found it out, the Deputy Minister was relieved of his duties.

But today, in the British Columbia Railway, all the

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supervisory staff are scared spitless.

AN HON. MEMBER: Hear, hear!

MR. PHILLIPS: They've got the fear of God in them for fear of speaking out against that government and being fired by that government, the same as the management that was replaced because of a report by Mr. Swanson.

The public service in British Columbia today is completely political. When that government came to power they brought in political hacks...

AN HON. MEMBER: By the hundreds.

MR. PHILLIPS: ...by the hundreds, and put them in positions of supervisory power over the Deputy Ministers who had carried on for years and years in this province.

Mr. Chairman, I did not say that the Deputy Minister was fired. I said that his services were terminated; he was no longer required when it was found out that he was doing business with the government. But, Mr. Chairman, that Minister of Labour, who was so inappropriate as a director of the British Columbia Railway, who proved yesterday to this Legislature that he doesn't even know what depreciation is, doesn't know any bookkeeping — and he has proved again today his complete disregard for any of the principles of good bookkeeping....

I asked him a simply question, and what did he do? He got up and went on a tirade against the opposition. I asked him if there was any forward planning in the British Columbia Railway where we are asked to okay a $200 million loan to the British Columbia Railway.

I asked him a simple question, a question that has been on the minds at the British Columbia Railway for over two and a half years, a question on the extension of the Sukunka coal fields. He said that is due to the day-to-day decisions of the management of the British Columbia Railway today because any management that could lose $32 million of the taxpayers' money in one year and suffer a cash loss of $46 million has not earned my faith. I have no faith in them whatsoever but I will ask the Minister again: is there any forward planning as to the capital requirements of the British Columbia Railway, other than one year ahead which is not enough?

If we are going to extend the railway into Dease Lake, we are going to have to think more than one year ahead. Maybe that is the reason the Minister of Labour was fired by the Premier as a director of the British Columbia Railway, because he had no vision, no foresight and no aptitude for the job. I would like to think that there are some people in management positions on the railway who are better equipped to have some of that vision and courage that is needed to carry on a resource railway. Certainly, they will get no leadership from the Premier, no leadership from the Minister Without (Hon. Mr. Nunweiler) and no leadership from the Minister of Economic Development (Hon. Mr. Lauk) who is the new vice-president of the railway. This is what is going to befall the railway, Mr. Chairman.

What we need on the railway is a little of the courage and a little of the vision that built these great railroads across Canada, that united Canada — the same type of vision and courage that built the railway into the north, that built it from North Vancouver to Squamish, from Quesnel to Prince George, on into Chetwynd and Fort St. John and Dawson Creek, and on north into Fort Nelson. But all of that vision and courage is lacking today. That is what concerns me today about passing this legislation to loan the railway another $200 million when there is no forward-planning, no projection of capital costs and no projection of load factor. The policies of this government in resource development have completely killed the potential of the Dease Lake extension.

HON. MR. COCKE: So vote against the bill.

MR. PHILLIPS: I won't vote against the bill because I want to see the railroad continue, but I do want some questions answered.

Maybe, Mr. Chairman, we can beat a little sense into this government. Maybe there's still hope.

HON. E. HALL (Provincial Secretary): Hah!

MR. PHILLIPS: Well, the Minister of....

HON. MR. HALL: Provincial Secretary's the word you're looking for.

MR. PHILLIPS: The Minister of the Provincial Secretary laughs and scoffs when we talk about forest planning. It was he who publicly had to reprimand the Minister of Transport and Communications (Hon. Mr. Strachan) for signing a contract with the tourist bureau to put brochures on the ferry. He had to reprimand that Minister publicly and then had to cancel the contract. Give a contract that's costing the taxpayers of British Columbia thousands of dollars a year — that's our Provincial Secretary. No forward planning.

Mr. Chairman, I'd like to ask the Minister in charge of putting this bill through — the Minister of Labour (Hon. Mr. King) — if he has consulted with the Minister of Mines (Hon. Mr. Nimsick) or the Minister of Economic Development (Hon. Mr. Lauk) about the possibility of extending the line which will go down to the Sukunka coal fields on into the Denison Mines at Quintette Mountain, which hopefully will come on stream in at least two years. Has there been

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any forward projection of load factor or the cost of extending that railway down into that area?

HON. MR. KING: Mr. Chairman, the Members across the way are fun to deal with, you know. They make all kinds of charges and then when they're pinned down and it's demonstrated quite clearly that their allegations are without foundation, they branch off in all directions with another scattergun attack, including personal attacks against the individuals involved — that I was fired from the railway and all these kinds of...well, I wouldn't call them cheap, but they're certainly inexpensive charges.

I suppose the theory is that if you repeat them often enough then people will believe them.

MR. G.S. WALLACE (Oak Bay): That's what Goebbels used to say.

HON. MR. KING: But anyone of good faith who has some regard for the facts would have the common decency to accept the facts for what they are and not to continue to mouth otherwise. I suppose it would be appropriate, in view of the Member's obsession with the operating revenue position of the railway, to go back once again and to lay out the facts as we found them when we took over from the former administration in September, 1972.

HON. MR. HALL: Don't call them cheap, Bill. Look how much it's cost the taxpayers.

HON. MR. KING: Yes, indeed. The cost is high.

We accepted at face value the reports of the BCR as we found them at that time. But during debates in the House, I believe it was the First Member for Vancouver–Point Grey (Mr. McGeer) was raised a serious question regarding the methods used of reporting the deficit and profit picture of the British Columbia Railway. The Premier assured that Member that in view of his concern we would undertake an investigation of the accounting methods and the financial control on the railway. As a result of that investigation, which was undertaken by Mr. John Minty, the comptroller-general of the province, certain findings were noted, the most damning of which, I believe, was the conclusion that the external auditors had not only been unduly restricted in setting the terms of their audit engagement, as appeared to be the case in the past, but there had been undue restrictions placed upon the auditors by a former board member, one Mr. Gunderson.

Mr. Minty reached very disturbing conclusions. That report of Mr. Minty was tabled in this House and it led to a good deal of further speculation as to the accuracy of annual reports and financial statements which had been filed with this House over a period of years. It led to concern with respect to the awarding of contracts for the extension of the railway on the Dease Lake line and the Takla subdivision.

Subsequently, another more detailed investigation was commissioned by Price Waterhouse. The Price Waterhouse report revealed that the administration of the BCR was cumbersome, inefficient and inadequate, when referring to financial accounting and control practices. These were all matters for grave concern as far as the new administration was concerned.

It should be remembered that in one instance Price Waterhouse noted that the cost of 1,000 freight cars bought in 1971 for $16.3 million was written off as a charge to equipment rental over 15 years. They said: "In our view this is not in keeping with generally accepted accounting practices." So we had the Minty report by the comptroller-general. We had the additional investigation by Price Waterhouse which came to some of the conclusions referred to. Subsequent to that, the existing firm of auditors of B.C. Rail resigned: the firm of Buttar & Chiene.

At that time the Leader of the Opposition, in questioning the president of the railway in this House, made some very, very serious allegations. As I recall it he suggested that the auditors had resigned because they had been subjected to undue pressure by the government. I believe his exact words in Hansard on November 18, 1974, were: "They resigned because they were not prepared to change the auditing procedures because of the mounting losses that the railway wished to hide this year." That was a serious allegation that the Leader of the Opposition made.

HON. W.L. HARTLEY (Minister of Public Works): What year was that?

HON. MR. KING: That was on November 18, 1974. Subsequent to that we found that the individual who was the central figure in the firm of Buttar & Chiene was called before a panel of the professional institute of chartered accountants, before an inquiry board panel. A complaint had been filed regarding his conduct in terms of auditing the British Columbia Railway books. I'll read for the edification and for the refreshing of memories in this House the findings that that panel came to. I quote:

"And 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

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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 67(a)(3) in force at all material times, and also of bylaw 68(a)(3) in force at the present time, as alleged in paragraph 3 of the statement of complaint."

On December 20, 1974, the inquiry panel ordered by a vote of four to one that Mr. Walker be suspended from the accountants institute until December 17, 1975. That was a censure.

MR. WALLACE: I think we heard all this before.

HON. MR. KING: Yes, I think we have, but apparently the official opposition is not prepared to recognize the matters which created the whole debate in terms of the accounting practices and the financial control on the railway. They keep introducing, Mr. Chairman, matters which appear to be desperate measures to divert attention from the facts as they were placed before this House. And if I must keep reminding them of the documented facts that are irrefutable and that have been presented to this House, then so be it. If their attempts to obstruct the extension of additional borrowing power to the railway are going to be so transparent, then we must reveal them for what they are: simply attempts to interfere with the ability of the railway to serve the whole north-central area of British Columbia.

So that's the background against which this government engaged in an assessment of the financial controls on the railway, against the accounting procedures that were revealed to be less than factual. They were the facts against which we had to compare the stated profit structure of the railway in 1972 when a profit of $992,000 was indicated for the year ended 1972. Peat, Marwick and Co., the auditors that were subsequently retained by the railway to not only clean up the accounting procedures but to reassess the records that had been placed before this House and before the public, revealed that in fact there was not a profit position in 1972 but a serious loss amounting to quite number of millions of dollars. I believe it was in the area of $8 million. Now they are facts that are irrefutable.

So it's not good enough for the Member for South Peace River to get up tonight in the House and suggest that the working capital position of the railway has declined seriously in the interim period. There is simply an honest method of accounting now which lays it on the table.

The point is that they used any method to hide the loss position of the railway in the past. It is now in conformity with not only proper accounting systems but also with the Canadian Transport Commission accounting system — which was alleged by the railway in all previous years.

These are the facts of the case. The opposition can rant and rave as much as they wish but these are facts that are documented by the most reputable firm of accountants in the Province of British Columbia. They are facts that are on the record with this House. It is futile for the opposition to try to side-step those facts by simply filibustering this debate. They can wiggle on the hook all they wish, but it becomes pretty patently obvious what their game is. That is simply to delay the passage and extension of borrowing power to the railway at any expense.

The facts are all there and have been placed on the table days ago. Simply refusing to accept the facts as they are does not alter them one bit.

Mr. Chairman, I can only suggest that the official opposition is not prepared to accept the facts even when they are documented in an irrefutable way before this House.

MR. PHILLIPS: I just want to say, for the purpose of those in the gallery because I certainly don't have to say it for those in the House or in the press gallery, that if I seemed disrespectful when the Minister of Labour (Hon. Mr. King) was talking it is because I have heard that speech 14 times. Every time I asked a question this afternoon about the future of the railway, I got the same speech. I know it off by heart. The Minister of Labour has been asked to pilot this bill through the House while the Premier is off, at the taxpayers' expense, on a little sojourn to New York and London. They asked the Minister of Labour, who he fired as a director of the railway, to pilot this bill through the House. The only defence that Minister has is to get up and make the same old speech 14 times over. After every question that I have asked him, I have heard that same speech.

Also, for the benefit of those who did not listen to the debate this afternoon, the Minister is trying to say that we are holding up the passage of this bill and that people on the railway can't be paid. As I said this afternoon, they should have the Minister of Lands, Forests and Water Resources (Hon. R.A. Williams) put this bill through because he spends public money without passing any bills through this Legislature. He has bought the Princess Marguerite at taxpayers' expense.

MR. CHAIRMAN: Order. That has nothing to do with section 1.

MR. PHILLIPS: Well, neither does what he said.

MR. CHAIRMAN: I think it was to do with the railroad.

MR. PHILLIPS: Anyway, those of you in the

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gallery can see that as soon as we touch a touchy point with the government, the Chairman shuts us up. Anyway, the Minister of Lands, Forests and Water Resources goes off and spends public money without any legislation whatsoever. So I am not really too concerned about the people of the railway getting paid. If they had the Minister of Lands, Forests and Water Resources, who is the most powerful Minister in the cabinet and in British Columbia, he would spend taxpayers' money without any legislation. So I am not really too concerned about the Minister of Labour and his accusation that we are holding up this bill.

The Minister of Labour referred to the Price Waterhouse report. I would like to say again that as soon as the Premier and Minister of Finance (Hon. Mr. Barrett) became president of the railway, he commissioned three reports on the railway. One had to do with a review of financial reporting and control practices of the British Columbia Railway by a very reputable accounting firm named Price Waterhouse & Co. He commissioned a report on the engineering practices of the railway by Swan Wooster & Co., which is a very well-known engineering firm in British Columbia. And he commissioned a report on the management and organization of the British Columbia Railway by Mr. Cliff Sawyer, a very well-known adviser to business in British Columbia and very well respected by the government as well as the opposition.

I want to tell you that all of these three reports practically gave the British Columbia Railway a clean bill of health. In none of these reports is reference made to any cheating, any method of trying to cook the books, any method of trying to be deceitful to the people. But the Premier and the other directors, of which the Minister of Labour was one at that time, were not satisfied with this report. They knew that in the year 1973 the railway was going to have a great loss because of political interference in the management of the railway.

They also foresaw that in 1974 they were going to have a loss which would be greater than the previous 15 years of the operation of the railway, and they wanted in some way to think up a scandal to cover the losses on this railway. They wanted something to cover the fact that the Dease Lake extension was going to be a complete dud because the resource policies of that government had killed any load factor on the railway. So in an endeavour to cover these losses, in an endeavour to cover up their incompetence, in an endeavour to cover up the fact that the top five people in management of the railway had either quit in disgust or been fired because of political interference in the railway, they wanted to dig up something from the bottom of the barrel. So they commissioned other reports and they got political reports.

I would like to read, as the Minister of Labour did, from the Price Waterhouse report. The Price Waterhouse report is dated August 31, 1973, and it states that they were not impeded in any of their investigations. They had a full, open book to do any investigation into the accounts practices of the British Columbia Railway. It says, and I quote from the report: "Our study was carried out in accordance with your instructions" — and they are referring to the Minister of Finance's instructions — "to review certain of the matters raised in the special report of the comptroller-general dated March 29, 1973." The report of the comptroller-general, to which the Minister referred and to which Price Waterhouse referred is the comptroller-general of the Province of British Columbia.

"Your terms of reference excluded any requirement for us to examine the financing of the railway or its physical operation" — and, as I said, there were other reports being conducted at the same time by other people — "in this aspect and it was understood that other consultants had been retained to examine overall corporate planning and organization and construction, estimating, bidding and costing procedures. In all other respects there were no restrictions placed on our review and we were requested to exercise our own judgment in determining its scope."

Now this is the report that was sent to Mr. G.S. Bryson, the Deputy Minister of Finance, August 31, 1973.

"We advised you that we did not consider it appropriate to undertake a detailed financial audit of the railway accounts but, in light of all the circumstances, a management-oriented review designed to produce constructive recommendations for improvement would be desirable. To this end it was agreed with you that the main emphasis of our study would be placed on such matters as management reporting, financial planning, budget control, accounting practices and systems..."

Of course, this is what the Minister of Labour was referring to a short time ago — accounting practices and systems.

"...electronic data processing, internal auditing and other accounting practices and finance division organization and so forth."

It goes on to say:

"We would also note that while the report of the comptroller-general" — which the Minister of Labour referred to a short moment ago — "raised a number of valid concerns about the effectiveness of the railway's financial systems and controls, in other instances our more detailed studies placed a different perspective on the comments and criticisms that were

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made."

Now I'm not going to say that Price Waterhouse differed with the comptroller-general. I will leave you people to make your own decision. But nowhere in this report is there one word about cheating or hiding any of the financial facts or figures of the British Columbia Railway which is alluded to by the Minister of Labour and which the Premier of this province and president of the railway, when he gave his sermon on the mount a week ago last Friday, took an hour and a half to try and scrape the bottom of the barrel to dig up a scandal on the British Columbia Railway.

Now I just want to read you some of the report, some of the recommendations with regard to management accounting, and I want you to pay close attention, and I want you to be the judge as to whether or not there has been any cheating, any methods of deception on the part of the past management of the British Columbia Railway.

"The accounting systems of the British Columbia Railway in the past have been directed primarily towards the traditional role of reporting financial transactions in a manner consistent" — and I want you to pay specific attention to this — "with the requirements of the uniform classification of accounts of the Board of Transport Commissioners for Canada."

Now both the Minister of Finance and the Minister of Labour would have you believe that the accounting on the British Columbia Railway was not consistent with the Board o f Transport Commissioners of Canada. But this is a report from Price Waterhouse which says, and I quote again: "...with the requirements of the uniform classification of accounts of the Board of Transport Commissioners for Canada."

Now I ask you to believe...who? This is the Price Waterhouse report which was commissioned by the Premier and the president of the railway. They go on to say:

"While existing accounting and reporting practices may have been adequate to meet requirements of the railway management in the past, with the anticipate; growth and diversification of the railway there is now a clear-cut need for change and improvement."

Certainly the British Columbia Railway has been a resource railway, but with the anticipated growth.... And of course this anticipated growth was certainly before the resource policies of this province came into being, before this government pushed the petroleum industry out of the province. There was anticipated growth particularly in the north and particularly on the Dease Lake extension, and that's why that extension was going ahead.

Now I ask you to listen to me while I read some more recommendations from the Price Waterhouse report, particularly with regard to capital expenditures. It says: "Our principle conclusion, stated briefly, is that financial control and reporting of capital expenditure in the British Columbia Railway is inadequate and should be improved as soon as possible." It should be improved, but they didn't say that there was any method of cheating or trying to cook the books or political chicanery, as the Premier alluded to. What did they say? "This is not meant to imply there has been an improper use of railway funds in the past, rather it means that from a management control standpoint, present practices are lacking in effectiveness," which we accept.

I ask you again: is there any allusion to cheating, deception or trying to cook the books? None whatsoever. It's an independent report that I'm quoting from — Price Waterhouse, one of the well-known accountants in the Province of British Columbia.

With regard to accounting practices, which the Minister of Labour is trying to allude to and which he tries to cover up on any questions I ask him about the future of the railway....

Depreciation. This is what the whole new financial statement of the British Columbia Railway is based on — a new method of depreciation. It says: "On January 1, 1956, the British Columbia Railway adopted the uniform classification of accounts prescribed by the Board of Transport Commissioners for Canada." Yet that government would have everybody in the province believe that the British Columbia Railway was not using accounting practices adopted and recommended by the Board of Transport Commissioners of Canada.

It goes on and says: "....commenced depreciation accounting for capital assets with provision for $492,000 in the year 1956." So you see, Mr. Chairman and ladies and gentlemen, all of this scandal and this deception is nothing but a phony smoke screen put up by the socialist government to cover up the loss which the railway has had in 1973 and 1974.

With regard to depreciation, I'd like to read something more from the Price Waterhouse report. It says: "We recommend that the company determine and define the objectives that it wishes to achieve through depreciation practices, following which, comprehensive accounting policies should be developed which would include definitions of what assets should be capitalized and the value placed on them."

Mr. Chairman, I'd like to reiterate that depreciation, so far as income tax, is a decision of the company. When you're doing your income tax as a private company, as long as you don't change your method of depreciation over a period of years, the income tax people will never bother you.

But depreciation is a policy of management. It was

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the socialist government that changed the policy of depreciation in order that they could bring in more severe losses over the previous years of operation of the railway so that they could try and dig up a scandal, as it were, to try and hide the fantastic losses that have been on the British Columbia Railway since they took over. Since they took over political interference in the management of the railway, the railway has gone downhill.

This is the method, the devious method, that that government has used to try to put a smoke screen over their incompetence and their inability to manage that great railway that has brought prosperity over years and years to British Columbia, that great railway that could have brought prosperity to the north and opened up the natural resources of this province.

Mr. Chairman, I had to go over this again because of the speech just recently made by the Minister of Labour. For the sake of those who haven't heard this debate before, I want to point out one other fact. I am referring to the auditor's report, the financial statement, of the British Columbia Railway for the year ended December 31, 1974. Any of you who are in business know that your real profit is based on your actual cash flow.

Last year the working capital, the actual liquid cash, of the British Columbia Railway decreased by $46,105,057 — decreased in one year. The financial statement of the British Columbia Railway, which was tabled by the Minister of Finance and president of the railway, shows that the railway had a loss last year of some $32 million. I want you people to know that had we used the old accounting system, the accounting system that has been used for years on the British Columbia Railway, the railway last year would have lost not only $32 million, but the railway would have lost close to $60 million. That is why, Mr. Chairman, the accounting practices on the British Columbia Railway have been changed — not to bring up losses in the past, but to depreciate the loss on the British Columbia Railway during the year 1974.

In the year 1973, just as comparison, the cash flow of the British Columbia Railway increased by $7 million, and in the year 1974 it decreased by $46 million. Mr. Chairman, you know as well as I know that the management of the railway has been completely intervened in by that socialist government. The top five management people in the railway have been replaced by political appointees or quit in disgust. The directors of the railway have been political appointees.

HON. MR. COCKE: Name one!

SOME HON. MEMBERS: Who? Who?

MR. PHILLIPS: Mr. Chairman, the Minister of Health, who is also commonly known in this Legislature as the "Minister of Defence," says: "Name one." I will ask the people to be the judge. In two and a half years, the top five management of that railway have either quit in disgust or been fired or been asked to resign by Mr. Swanson, the new, politically-oriented director of that railway. That is the reason that the railway is losing money. Over the years, many of those people grew up through the railway, particularly Mr. Trask, who was the mucilage that held the morale of that railway together. I ask you: were they politically oriented, or did they just quit in disgust? You will have to be the judge. The Premier and the Minister of Finance says: "Oh, no, never have we entered into political appointments on the railway." Name one," he says, "name one."

I have to ask you Mr. Chairman: if those people just quit in disgust, why are we losing millions and millions of dollars on the railway when before we were actually making a profit? It was the best-run railway in British Columbia, the railway that brought 20 years of prosperity to this country, that opened up the natural resources and now is losing millions of dollars. We ask that Minister of Labour who was asked to pilot this bill through the House. When we ask him a question, we get the same old speech 14 times over about the politically oriented reports that he brought in.

So I will have to ask the Minister one more question. When this government came to power, we heard that great agreements had been made with the CNR for northwest development, opening up the Port of Prince Rupert: "Oh, when we are going to run our natural resources out, and there is going to be a line from Ashcroft over to Clinton, and there is going to be cooperation with the CNR." And there were grandiose plans about the northwest of the province. Oh, we heard it all from the Minister of Lands, Forests and Water Resources (Hon. R.A. Williams) and we heard it from the Premier and Minister of Finance, who is on a world trip tonight at taxpayers' expense. China, Japan — you name it, he's been there. What happened to all of those agreements with the Canadian National Railway? What happened with the agreement to get the line from Ashcroft over to Clinton? What happened to the agreement to extend the CNR north of Terrace and up to meet with the Dease Lake extension?

Where are all those grandiose plans that we heard about in this Legislature? Where did they go? Are they continuing? Is it part of this $200 million that the taxpayers of British Columbia are being asked to underwrite tonight going to cover the costs of those extensions? Is part of it to cover the agreement with the CNR? These are the questions that we want answered, Mr. Chairman, and we don't want another tirade from that Minister of Labour about all of those politically oriented reports and all those scandals he

[ Page 3639 ]

tried to bring up! We want some definite answers before we pass this legislation this evening.

MR. D.E. LEWIS (Shuswap): Hallelujah!

HON. MR. KING: Mr. Chairman, I will certainly try not to go into a tirade. I think the House has had quite enough tirades for one evening.

The question of the Price Waterhouse report, as opposed to the Peat, Marwick report, should be stressed and should be laid to rest once and for all in this House. I indicated earlier, and it has been indicated many times, that first of all, the Minty report was commissioned by the comptroller-general in response to questioning raised by opposition Members in this House. That revealed ground for concern by the new board of directors. It was a rather superficial report, but it was enough to determine that procedures were not as they should be.

Accordingly, the Price Waterhouse firm was engaged to go into a more detailed report, but not a full audit, by any means. There were enough disconcerting findings in the Price Waterhouse report that it led to further concern on the part of the board of directors of the railway. In the interim period, of course, the firm of auditors of Buttar & Chiene, who had been the auditors and accountants for the railway for quite a period of years, resigned. I have already outlined the controversy that surrounded the resignation of that firm and the subsequent action taken against the principal of that firm by his own professional association.

A full audit of the railway was conducted by the new auditors, the firm of Peat, Marwick, Mitchell & Co., chartered accountants who are a world-famous firm, a perfectly reputable firm, both in this province and elsewhere.

Let me repeat what the auditor's report said:

"To the Lieutenant-Governor-in-Council, Province of British Columbia, dated June 3, 1975.

"We have examined the balance sheet of the British Columbia Railway Company as of December 1, 1974, on the statements of income and deficit and changes in financial position for the year then ended. Our examination included a general review of the accounting procedures and such tests of accounting records and other supporting evidence as we considered necessary in the circumstances.

"As described in note 2 of the notes to the financial statements, a review of the past accounting policies of the company has been carried out. It was concluded that the financial statements as of December 31, 1973, on an overall basis, did not present fairly the cumulative operating results of the railway to that date, and that certain of the past policies did not conform with the accounting regulations of the Canadian Transport Commission.

"In our opinion these financial statements present fairly the financial position of the company at December 31, 1974, and the results of its operations and the changes in its financial position for the year then ended in accordance with the generally accepted accounting principles, including certain changes in accounting policies which were instituted in 1974 as a result of the conclusions, with which we agree, described in the preceding paragraph and applied retroactively to 1973 and prior periods, and which, after giving such retroactive effect, have been applied on a basis consistent with that of the preceding year.

"Signed Peat, Marwick, Mitchell & Co., Chartered Accountants."

The Member for South Peace River (Mr. Phillips) got up and said that there was no suggestion that the previous audit had not been in compliance with the Canadian Transport Commission regulations. But the annual audit by one of the most reputable firms in North America found that was the truth, that, in fact, the audit had not been in compliance, that financial statements had been filed with this House showing an improper picture of the financial state of the railway. Mr. Chairman, it is like arguing with quicksilver to argue with the Member for South Peace River. You pin down one erroneous conclusion that he has drawn and he simply oozes out in all directions attacking individuals and simply ignoring the facts as they are. I find it futile to engage in any further dialogue with the Member. The facts are on the table, and they are completely supported with reports of professional groups — not by political assessments. And that is as it should be.

I would just comment on one other matter that relates to the position of the railway in terms of its financial position. The Member makes much of the fact that there was a decrease in working capital of $46,105,057 in 1974. A perusal of the financial statement clearly indicates that that relates mainly to the long-term debt of the railway and the differences in government grants that were made between 1973 and 1974.

There was a long-term debt in 1974 of $55,681,000. In 1973 it was $84,597,000. But there was a $25 million grant made by the government in 1973 which increased the debt to $109,597,000. Therein, basically, lies the difference. The difference is basically related to the amounts that were made available by the government in terms of grants, and hence increased the long-term debt of the railway. That is accounted for in the Peat, Marwick reports. The page is not listed, but I believe it follows the

[ Page 3640 ]

statement of income and deficit of the railway in the Peat Marwick report. That information is all contained in the audit. It is all available to the Members and they should be able to draw their own conclusions from it.

HON. MR. HALL: Mr. Chairman, I think that....

AN HON. MEMBER: Don't you usually shift from side to side?

HON. MR. HALL: There are 38 Members on this side, Mr. Member. I think we are entitled to speak 2-to-1 to you fellows any day of the week.

MR. PHILLIPS: Yes, the crushing majority.

MR. CHAIRMAN: Order.

HON. MR. HALL: Mr. Chairman, this debate on Bill 27 has been going on for over a week now. I think the gallery and the Members are entitled to some sort of summary, as well as some observations, from other Members, other than the particularly dramatic people who are taking part in the debate to date.

Mr. Chairman, I want to tell you that there are about five basic questions we should be asking ourselves as we enter this debate and as we look upon this chamber, this Legislature and Bill 27 over the last seven days. Those five questions I will deal with, Mr. Chairman.

The first question is: what does section 1 purport to do? The second question is: what has been the role of this Legislature, the government Members and the opposition Members, over the years when we have seen bills like this before? The third question I think we should ask ourselves is: what has been proven to date in the debate so far? The fourth question we might ask ourselves is: what is the official opposition trying to do vis-à-vis Bill 27 and the debate of this seven days duration? The fifth question I think we're entitled to ask ourselves as we engage in committee debate on Bill 27: what can we learn and what can the public draw from the debate to date?

Five questions, Mr. Chairman, which I suggest to the Members may have some consequence of some significance if they can seek out the answers.

The first question — reiterating — is what the bill purports to do. This bill, Mr. Chairman, purports to increase the borrowing powers of the British Columbia Railway Co. from $440 million to $650 million. That is an increase, as the Member for Langley (Mr. McClelland) will tell you, as he has 10 fingers and 10 toes, of $210 million. Much of the debate has wandered from that subject. Much of the debate has been taken up with a discussion and an analysis of what has happened on the railway for these last four or five years. The fact of the matter is that all the legislation purports to do is to increase the borrowing power.

That brings us to question two. What has been the record of this Legislature in bills of a similar consequence? What has been the rule of the government Members and the opposition Members in times hitherto? The answer to that question, Mr. Chairman, is very easy. There has been consistent support from either the Social Credit Party or the New Democratic Party for an increase in borrowing powers for the Pacific Great Eastern Railway — and the British Columbia Railway after the name was changed.

On each and every occasion, when the positions were reversed in terms of the years prior to 1972, the New Democratic Party Members supported unequivocally the increase of borrowing powers of this railway. Unequivocally.

MR. L.A. WILLIAMS (West Vancouver–Howe Sound): Never asked any questions, eh?

HON. MR. HALL: Unequivocally. We always laid it on the record of Hansard, partial though it may have been in the years 1970, 1969 and 1971. Partial though it may have been, it did deal with the question on second reading, did record the debate on second reading. We always laid on the floor of this Legislature opposition regarding support of this railroad and the fact that though we knew we were buying the shares over and over again, this railway should be supported. We voted for that legislation. The Social Credit opposition today will vote for this legislation, even though they've taken five days of haranguing. Even though they've taken five days of mischievous debate, they will vote for the legislation. Make no mistake about that. That's been our position over the years.

The third question is what is happening in terms of what is the political role that's sought to be achieved. What is the official opposition attempting to do on section 1 of this bill? What has been the record of administration before this one? Well, let me deal with the questions that the Minister of Labour (Hon. Mr. King) has just referred to. The fact of the matter is that the Social Credit administration in the years prior to 1972 are now inextricably interwoven with charges of misleading the public in the sense of cooking the books.

AN HON. MEMBER: Hear, hear!

HON. MR. HALL: No question at all about it! The Social Credit administration is inextricably accused and interwoven with those reports that the Minister of Labour and the Minister of Finance last week

[ Page 3641 ]

referred to. All the circumlocution, all the erudition, all the persiflage of the Member for South Peace River (Mr. Phillips) cannot eradicate that fact. It cannot eradicate that fact. And you will swallow that as you will vote for the legislation.

The fourth question I asked is what is the opposition now trying to do. This is in the summary, the story so far, as the serials used to have it when I was a lad. Mr. Chairman, it's unfortunate and I regret having to say this, but the opposition currently is prepared to ruin the economic reputation of this province by their actions over the last five days.

Mr. Chairman, while the Premier of this province is in New York, as his predecessor was in New York each and every year at this time, they are prepared to ruin the economic reputation of this province. The predecessor of the current Premier of this province went to New York every year at the taxpayers' expense. Believe it or not, he actually presented a bill to the Treasury Board to go to New York. W.A.C. Bennett didn't pay his own way to New York — isn't that terrible? And we're supposed to accept the criticism — that frivolity — from the Member for South Peace River (Mr. Phillips) that the Premier of this province has gone to New York at the taxpayers' expense. Mr. Chairman, if I may add parenthetically, to send Premier W.A.C. Bennett about the province in 1972, if you examine public accounts, cost us $13,000 a year. I've never heard the Member for Langley (Mr. McClelland) stand up and criticize the level of expenditure of the Premier to go on those affairs hitherto. Have you ever heard the Socreds once talk about the travel expenses of their Ministers? Not on your life.

Interjection.

HON. MR. HALL: While the Premier of this province is in New York the Leader of the Opposition (Mr. Bennett), in contradistinction to any previous Leader of the Opposition, is prepared to blacken the name of the province economically.

The last question I ask you to consider, Mr. Chairman, is: what should the public, draw from this performance? I ask you to consider what they've done over the last six or seven days. It's obvious that their lust for power far transcends any sense of responsibility they have for the good name of this province in any other place in this world. That's the conclusion the public must come to. The irresponsible actions and irresponsible criticisms should be registered by the public and frankly measured in the sense of what other oppositions in other jurisdictions and what the opposition in this jurisdiction in the last 20 years has done on the kind of bill before it.

Two final points, Mr. Chairman. First of all, to hear the Member castigate and attack a public servant in this House is really a bit much when I think of what we've been attempting to do in this province for a number of years about improving the public service. To attack Mr. Swanson, as the Member for South Peace River has done, is really a bit much. Mr. Swanson has achieved much for this province; Mr. Swanson has worked hard for this province. Mr. Swanson's efforts on behalf of some of the things that are currently success items in this province are well recorded. For that Member at this point in time to attack that kind of service is a bit much. I just ask all public servants — all people who seek a career serving this province, serving the public of this province — to remember the words from that side of the House well. Remember them well.

Lastly, Mr. Chairman, may I deal with this argument that I keep hearing chirping from the back from the Member for Victoria (Mr. Morrison), the Member for Saanich (Mr. Curtis) and the Member for Langley (Mr. McClelland) regarding the testified, signed note on the balance sheets of the B.C. Railway that the accounts are subject to the basic CTC standards. They say it's not required, as though that's an answer. It's a simple enough matter. Go to the Clerks' office and ask for document 42 that was filed in the last session. You'll see there the original document that is the statement of accounts of the B.C. Railway It's signed in ink — not a photostat, not a typewritten document, but in longhand it is signed — by the comptroller of the company and by Messrs. Buttar & Chiene. In that paragraph they signed, they talk about the CTC requirements.

Mr. Chairman, if there's no requirement for them to have observed the requirements — if there's no legal responsibility for them to have done so — I just simply ask myself a question: why did they bother to tell us that they had done so? It's as simple as that. To say to us over and over again that they didn't have to is no answer to the charge that they did. They damn well did, whether you like it or not — they said so. I'm talking to you, Mr. Member for Saanich and your ilk of today. I say that to chirp away like that shows a complete lack of appreciation of what independent audits are all about; it shows a complete lack of appreciation of what financial accounts are all about.

Mr. Chairman, those five questions are the ones that should be pre-eminent in this debate. Why are we doing what we're doing today in terms of borrowing money? What has been the record of this Legislature in similar bills? What have the Social Credit administration of the railway of previous years done, and what do they stand charged as having done? What is the Social Credit opposition party currently trying to do to this province? Fifthly, what is their motivation for doing what they're trying to do to this province? That's the debate and that's the problem on which the vote should be taken.

[ Page 3642 ]

MR. PHILLIPS: That was a very interesting speech that the Provincial Secretary made. He alluded to the fact that the Premier of the province is in New York, and talked about the previous Premier making trips. But the Premier is in New York now, when the heat is on. Last fall, when there was a strike threatening the ferry system, when there was a strike threatening the teachers' association throughout British Columbia, when we were facing a crisis in British Columbia, at that time the Premier took off for China to view the Great Wall of China and to consult with his socialist friends in China.

I believe he said that the opposition is trying to ruin the financial situation of the province. Mr. Chairman, it is known throughout the width and breadth of this province, from north to south, that it is the socialist government in British Columbia that has wasted the resources of this province, that has killed the resource industries of this province, and that has spent the surpluses that were left to them by the previous administration.

The Provincial Secretary said he wanted you people to know what had happened in the last six or seven days in this Legislature. I want to tell you what has happened, Mr. Chairman. I see the Provincial Secretary has left the chamber — he, like the Premier, runs when the heat is on. What has happened in the last six or seven days is that the Premier of this province and the president of the railway took an hour and a half over a podium a week ago last Friday to unveil his supposed scandal on the railway, a scandal which had been alluded to in this Legislature since April 10. Yet, knowing that they were changing and cooking the books of the British Columbia Railway, they still filed a prospectus in New York based on the old financial statements of the railway, when they knew full well that they were trying to change the financial statements of the railway and that they were trying to change the depreciation methods of the railway.

I want to tell you, Mr. Chairman, losses in British Columbia amounted to $34.2 million in the Insurance Corp. of British Columbia under this socialist government. The Transit Authority of British Columbia last year under B.C. Hydro lost $20 million. The ferry system in British Columbia lost $25 million. The flippant Attorney — General says: "Oh, when these corporations lose money, the people of British Columbia gain." He doesn't seem to realize that it is the ineptitude and the financial bungling of the present government that makes these Crown corporations lose the money they lose. Political interference, the same as it is on the British Columbia Railway, has caused us to lose money.

I want to tell you, Mr. Chairman, and I want to tell all the people here this evening, that it is the socialist government that has ruined the financial status of British Columbia. That is why our financial rating in New York has decreased!

Make no mistake, you can't blame the fact that the ferry system lost $25 million on the opposition. You can't blame the losses of the British Columbia Railway on the opposition. You can't blame the losses in the Insurance Corp. of British Columbia of $34.2 million on the opposition. You can't blame the fact that the Minister of Public Works (Hon. Mr. Hartley) has spent over $400,000 on vacant office space on the opposition. You can't blame the fact that 15,000 new civil servants have been hired in the Province of British Columbia. You can't blame that on the opposition. You can't blame the opposition for ruining the resource industries of this province. No, Mr. Chairman, all of those chickens are going to come home to roost on the socialists who have ruled this province for nearly three years.

This government filed a bogus financial statement in New York when they knew there was going to be changes in the financial statements of the British Columbia Railway, It is this government that went to the OPEC countries to put the people of this province in debt at high-interest rates and would not divulge to this Legislature what country they were borrowing from, what country they were indebting the people of this province to when they borrowed money in a secret country. When we asked, they tried to involve us in a conspiracy of secrecy. They were the ones who went to those countries and secretly borrowed money when there was no need to borrow money.

Since 1966, the previous government never had to go outside the Province of British Columbia to borrow money for any of their Crown corporation operations. But because this government has spent money like a drunken sailor on a Saturday night and wasted the taxpayers' money, now they have to go not only outside of the borders of Canada, not only outside of the borders of North America, but they have to go to the OPEC countries to indebt the people of this province for years and years to come. Your sons and your daughters and your grandchildren will be paying the interest and repaying that money, and that is the full responsibility of that socialist government over there. With money rolling in 1973 and 1974 like it was going out of style, when the lumber industry demands the highest price and they would never agree to the demand, the money rolled into the coffers of that socialist government, and they spent it like water!

In 1974 with the greatest demand and the highest prices for minerals, the money rolled into the coffers of the socialist government like it was going out of style. And what did they do with it? They wasted it; they squandered it like a drunken sailor on a Saturday night. In two years that government overspent their budget by $719 million. Had they been frugal with the taxpayers' money there would have been sufficient money in the coffers of British

[ Page 3643 ]

Columbia today that we wouldn't have to be passing this bill to borrow $200 million to shore up the British Columbia Railway. It would have been in the bank here in British Columbia. Let no mistake be made about that.

I want the taxpayers of British Columbia to know how that socialist government has squandered their tax dollars in the last two years. Money rolled in like it was going out of style, and what did they do with it? They presented two budgets, and then went out and overspent by $719 million.

MR. CHAIRMAN: I hope the Member will try and get back to section 1.

MR. PHILLIPS: I'm talking on section 1 because the whole policy and the whole principle of section 1 is overspending by that socialist government.

MR. CHAIRMAN: Section 1 deals with the railroad.

MR. PHILLIPS: The cost of running the Province of British Columbia under that socialist government has increased two and one-half times in two years.

MR. CHAIRMAN: Section 1 deals with the railroad, I remind the Member. I want to remind the Member that section 1 deals with the railroad.

MR. PHILLIPS: I realize that section I deals with the railroad, and we are talking about borrowing additional money to shore up that railroad due to losses incurred by political interference in the management of that railway. It is a scandal of colossal height. It all rests on the shoulders of that socialist government because had they been frugal, had they looked after the taxpayers' money, we wouldn't have to be debating this bill tonight to go to New York and borrow money from those horrible capitalists which the Premier stands in this Legislature and condemns day after day after day.

Mr. Chairman, I'm going to ask that Minister of Labour the same question that I asked him a moment ago, and to which he gave no answer. He got up and gave a tirade, and the Provincial Secretary (Hon. Mr. Hall) got up and gave a tirade. Where is the agreement with the Canadian National Railway to build those lines in the northwestern section of this province? Where are those grandiose plans? Where are the plans to build the spur line into Ashcroft, which the Minister of Lands, Forests and Water Resources (Hon. R.A. Williams) talked about?

Mr. Chairman, I asked a simple question a few moments ago. I got no answer. I remember when this government came to power they were talking about a new deal with Ottawa. They were going to cooperate with Ottawa. They said the previous administration left millions laying on the table because they couldn't cooperate with Ottawa.

What has happened now? Our relations with Ottawa have never been at a lower ebb due to the fact that they don't know how to negotiate with Ottawa. This government of British Columbia is the laughing stock of Canada. What do we get when the Premier goes down there? We get political flamboyancy; no negotiation. He goes down there unprepared. He comes back and says, "Oh, I won a great victory for the people of British Columbia." He's won nothing. He's leading us down the garden path.

I want the Minister of Labour to stand up at this time and answer a simple question: at what state are negotiations with the CNR with regard to the development in the northwestern part of the province, and with regard to the extension line into Ashcroft? Is part of this $200 million going to be used to build those extensions? Is there going to be an agreement with the CNR? Are the people of the northwestern part of this province going to be disappointed by this government again, as the people in the rest of the province have been disappointed, or are you going to go ahead? How much of this money is going to be used for those rail line extensions?

HON. MR. KING: Mr. Chairman, there are two answers I would like to give the Member. It is not true that the financial rating of the Province of British Columbia has deteriorated. It is as good now as it ever was in New York. That is absolutely false, and I would not think that the opposition would want to leave that kind of impression abroad and impair in any way the financial rating of the Province of British Columbia. Those facts are not true. I think the Members in the opposition, if they are responsible, should applaud that fact.

The negotiations with the CNR are continuing. I think the Members in the opposition will appreciate that negotiations sometimes take a long time to develop. Certainly those who were involved in the negotiations of the Wenner-Gren deal, under the previous administration, recognize that sometimes negotiations even bog down and disappear altogether. But negotiations with the CNR and the federal government are still underway. When there is a conclusion, undoubtedly the president of the railway will be reporting to the House.

MR. H.A. CURTIS (Saanich and the Islands): Mr. Chairman, this is the first opportunity I've had to speak since the Hon. Provincial Secretary (Hon. Mr. Hall) gave us his version of why we are here and what we should be doing.

I want to correct an impression which I'm sure he left mistakenly with the committee. While other Members in the opposition seats have referred to the CTC in the course of this debate in second reading

[ Page 3644 ]

and in committee, I , speaking this afternoon for the first time, made no mention whatever of financial statements of the B.C. Railway nor of the CTC. I did refer to one point that I would like to canvass again with the Minister — whether we are heated with this or whether others wish to learn as much as we can.

I discussed with the Minister of Labour today the basic issue before the committee. It is fundamental to the shortest bill, I believe, but I could be wrong, on the order paper this session. The briefest bill on the order paper this session is Bill 27, British Columbia Railway Company Construction Loan Amendment Act, 1975. The entire purpose is to permit the BCR to increase its borrowing authority from $440 million to $650 million.

I referred this afternoon also to what I believe is known in the financial world, and certainly in the area of funding over a long period of time, as a comfort letter. I explained to the best of my ability to the committee and to the Minister at that time that this comfort letter, or cold comfort letter, is sent out by the borrower, in this case the Province of British Columbia or one of its Crown corporations, to either — and I add this this evening — the Securities and Exchange Commission in the United States or to the underwriters — either the principal underwriter in the management group or the entire group. It is an updating from the time the prospectus and other material has been prepared and forwarded.

It is a reassurance, if you wish to use that word, to the underwriters or the Securities and Exchange Commission, or both, that nothing significant has taken place in the interval which would affect the credit of the borrower, that there has been no major development or serious problem. Throughout this debate we have asked and debated on both sides of the House the possibility — and I emphasize possibility — that information transmitted to New York at the time of the B.C. Hydro and Power Authority $150 million loan may not gibe fully and completely with information that has appeared elsewhere. It is a possibility. A number of Members have canvassed that.

The Provincial Secretary (Hon. Mr. Hall) rushed in this evening and gave us his version of why we are here and what is wrong with the opposition. I think at the opening of his remarks he referred to the official opposition; he identified the Social Credit Party. I would like to remind the House, with just one paragraph, of the statements yesterday in this committee by the Hon. Member for West Vancouver–Howe Sound (Mr. L.A. Williams). According to the draft version of Hansard, he concluded his remarks in this way:

I think we are entitled, before we give this government the right to go into the market or use funds under the control of the Minister of Finance to the tune of $210 million, to know what this government is going to do in a positive way which will change this revenue picture....

He had detailed at length the very sorry state of the revenue of the British Columbia Railway. I digressed for a moment, but continuing with his statement:

...which will continue to flow into that railway instead of the steady drain out of that railway.

To repeat just part of it, Mr. Chairman:

I think we are entitled, before we give this government the right to go into the market or use funds under the control of the Minister of Finance to the tune of $210 million, to know what this government is going to do in a positive way...

That is why we are here, and that is why this debate has taken so long. And that is why a number of concerned Members on this side of the House have repeatedly risen in their places to put questions first to the Premier and Minister of Finance and now, in his unavoidable absence, to the Minister of Labour (Hon. Mr. King), who must really wish that the Premier, were here carrying on with what is one of his first responsibilities.

I referred to the British Columbia Hydro and Power Authority prospectus which is dated May 22, 1975. As the committee well knows, it is necessary to catalogue the indebtedness of Crown corporations. This leads us directly to the British Columbia Railway Co. On page 33 or the prospectus there are three or four paragraphs which are well known to the committee and to the House as a result of earlier debate. We have, in the second paragraph:

"The province owns all the issued capital stock of the railway, representing an investment of $185 million at December 31,974. The British Columbia Railway Construction Loan Act authorizes aggregate net borrowings by the railway and by the province for railway purposes of $440 million, which is proposed to be increased to $650 million.

"At December 31, 1974, securities outstanding with the provincial guarantee" then parenthetically "(before deducting sinking fund investments of $53.5 million) totalled $442.3 million." We're discussing, therefore, the present indebtedness of the British Columbia Railway. All the other issues, I feel personally, are perhaps secondary to this very fundamental issue.

I again ask the Minister of Labour, as the individual piloting this bill through committee stage, if he would seek from the Department of Finance what is called a comfort letter, or file with the committee or with the House — whichever he prefers — all other documentation which has been sent to New York from the period December 31, 1974, to the date that prospectus for the B.C. Hydro and Power Authority was filed.

From what little I know about this business, Mr.

[ Page 3645 ]

Chairman, I would suggest that a prospectus is not just slipped into a brown paper envelope and put in the mail to New York. There must be accompanying documentation. There must be documentation which is either sent either before the prospectus is filed or documentation which is sent as a follow-up — an update, if you wish, after the prospectus has been filed.

I think that the Minister of Labour could assist the committee greatly and perhaps resolve a number of unanswered questions to the satisfaction of the committee, and indeed, the people of B.C., if he issued tonight, or first thing tomorrow morning, the instructions. Let's have everything that has been sent along to New York, to the SEC, to the underwriters or to anyone else associated with the May 22 B.C. Hydro and Power Authority loan — the $150 million loan. May we have that information? May we have it tabled?

Today when I referred to the cold comfort, the Minister said that it was in the prospectus. Again, I submit to the Minister that there must be material other than that contained in the prospectus. I hope he will comment on it tonight or in a subsequent sitting.

HON. MR. KING: Mr. Chairman, the Member who just took his seat, due to his municipal background, should know something about those matters. He should know that the letter of cold comfort referred to in the Hydro prospectus is authorized only to deal with Hydro matters. There is no authority for the Hydro auditors or directors to deal with railway matters. The information that he apparently is seeking has all been made available in the prospectus that was provided for the borrowing for the railway in New York, as I understand it.

Interjection.

HON. MR. KING: The supporting document to the prospectus — it's been made available in that way. But there's no authority for embodying the railway material in the Hydro letter of cold comfort. That should be clearly understood. He wouldn't find the information he is apparently seeking in that way.

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

The Member asked one other question regarding the borrowing limitations of the railway, and stated that it appeared that the railway had, indeed, exceeded the borrowing authority. That could well appear to be the case. But it should be understood that from the aggregate sum there are deductions for payment of discount, for commissions, for brokerage and for all other expenses involved in such loans, so the gross amount indicated is not in reality the exact amount borrowed. Therefore after those deductions the amount did not, as I understand it, in fact exceed the borrowing limits. That is the normal practice — to deduct those kind of facets from the total amount. There may have been appearance of exceeding the borrowing authority, but that is not the case, as I understand it.

MR. P.L. McGEER (Vancouver–Point Grey): Mr. Chairman, as you know, I haven't taken a great deal of the committee's time in discussing this bill. It has been difficult — there have been some loquacious debaters during the past week. The Provincial Secretary (Hon. Mr. Hall) referred to them. But I think perhaps a remark or two is in order at this juncture.

Before the Premier left for his trip to New York and Britain, his parting shot was that we were faced with a crisis as far as the B.C. Railway was concerned. He's the president of the railway.

It's becoming an increasingly transparent fact that the trips of the Premier and the cabinet Ministers are no more than tourist junkets at taxpayers' expense. It isn't quite good enough, Mr. Chairman....

MR. CHAIRMAN: Would the Member please refer his remarks to section 1, not to the Premier's trip?

MR. McGEER: Yes, I'm pointing out, Mr. Chairman, that the Premier is the president of the railroad. If he's got no more respect for that railroad than to leave a critical bill for that railroad in the middle of debate, he should have resigned before he left. To disappear to New York and abandon the House in mid-session is something that no Premier in the history of this province would dare to have undertaken. We're told, Mr. Chairman, that following his holiday in New York he's off to Britain for an audience with Prime Minister Wilson, for heaven's sake, to discuss a refinery in Surrey, a refinery that we have no guarantee of oil from; and the only person who can give us that guarantee is in Alberta, unless it would be in Washington, D.C.

What is he going to do — get oil piped from the North Sea down to his refinery here in British Columbia? This is what the president of B.C. Railway is doing at a time when a bill which he himself described as a crisis for the railway is before this House. Mr. Chairman, I tell you that that is gross irresponsibility and the Premier should resign forthwith from New York and abandon any responsibility for that railway, because he is clearly not in charge either of the railway or this House.

MR. P.C. ROLSTON (Dewdney): Boy, you should talk!

MR. McGEER: Now, Mr. Chairman, I want to talk

[ Page 3646 ]

about another meeting that was scheduled for 8:30 this morning before the public accounts committee. I said that I was very pleased yesterday, when I finally got the floor, Mr. Chairman, to see some of the chief executive officers of the railway sitting in the background while this bill was being debated; because we're looking not at the executives and directors but at the management of the railway. Then I discovered, Mr. Chairman, that the reason for the cancellation of the public accounts committee meeting to discuss the affairs of the B.C. Railway at a time that the railway was coming, through its management and directors, before this House for emergency funds was a refusal of those directors and managers of the railway to appear before public accounts at a time when they were in the City of Victoria. I consider that again the kind of gross irresponsibility that should require responsible Members of this House to vote against the bill....

MR. R.H. McCLELLAND (Langley): Lack of respect for this House.

MR. McGEER: ...as I intend to do. On the one hand, Mr. Chairman, people are coming before this House claiming an emergency and, on the other, the president of the railway is vanishing on a trip at taxpayers' expense. The management of the railway is right here in the City of Victoria refusing to appear before public accounts.

Now, Mr. Chairman, I'm not accusing the management of the railway. I'm accusing the directors of the railway who sit on the Treasury benches of blockading the appearance of those people and of preventing the public from hearing at first hand what the situation is.

Mr. Chairman, it's nothing short of disgraceful that we should have a bill before this House, an alleged emergency in the B.C. Railway, when the people who are responsible for directing the affairs of that railway, responsible for carrying out the day-to-day management, are ducking the elected Members of the House who are here to ask the questions on the public's behalf.

Make no mistake about it, it is the public of British Columbia, not the users of the railroad, who are being asked to pay the bill. They're being asked to pay for it in their gasoline taxes, in their income taxes, in their sales taxes and in all the general taxes that would otherwise go to services for the people of British Columbia. And while this kind of subsidy is going directly towards the B.C. Railway, the directors and the executive officers are ducking the elected Members.

Mr. Chairman, it isn't good enough. There should be a shake-up in that railway starting right with the president and going through the directors and the managers. And I'm going to vote against this section and against this bill.

HON. MR. KING: Mr. Chairman, the Member made quite a number of statements but he shed very little light on the debate. As far as the willingness and the ability of the railway management to come before the public accounts committee of the House, the officials of the railway tell me that they had one day's notice....

Interjections.

MR. CHAIRMAN: Order, please!

HON. MR. KING: Mr. Chairman, would the opposition like to have some answers or not?

SOME HON. MEMBERS: Yes!

AN HON. MEMBER: Let's get on with it!

HON. MR. KING: Okay. When they run down, Mr. Chairman, we'll proceed.

It is my information from....

Interjections.

HON. MR. KING: They're a group of complete obstructionists over there, Mr. Chairman. They make long, high-powered speeches, then they don't want to give me...

Interjections.

MR. CHAIRMAN: Order, please.

HON. MR. KING: ...the courtesy of an opportunity to answer. It seems like there is a coming together over there of certain groups that have splintered off recently. The Member who just sat down issued a call, a clarion cry, for the Premier's resignation. Well, those three people in the back benches over there know all about resignations. They don't stay in any one spot long enough to be consistent in any way, so perhaps we will seem them moving on again very shortly and that is why they are piping up at this point in the debate. But that is kind of frivolous stuff.

The fact of the matter is that the railway management is prepared to appear in Victoria to give a full and factual accounting for the policies and the expenditures of the railway. They would like to have some notice so that they can get their staff together and have prepared for the public accounts committee all the records to which they will have to refer in answering the questions. I don't think it is unreasonable to suggest that the railway management should have a few days or, hopefully, a week's notice

[ Page 3647 ]

so they can prepare to have the kind of staff here necessary to deal with every aspect of the railway's operation, to have at hand the records and so on that would be required. I can just imagine, Mr. Chairman, who the first critics would be to level their fingers at the railway management if they were unprepared for some of the questions that will be asked. Certainly they are going to have their records intact and they are going to be prepared to give a full and factual accounting of the railway's operation over the past year.

The First Member for Vancouver–Point Grey (Mr. McGeer) should not try to relate that to the present debate going on in this House. It is certain that this bill before the House to increase the borrowing power of the railway is a critical bill to the railway's operation. It is uppermost and overriding in terms of the management's preoccupation on the railway. While they are here in Victoria to provide support and interest in terms of the passage of this bill, they are hardly in a position to get geared up for the public accounts hearing that, hopefully, will follow soon after passage of this bill.

MR. FRASER: I want to say a few things regarding the public accounts committee. As the chairman of that committee, I said it this afternoon, and I will say it again tonight: on June 6, this House was informed of the financial statement of the British Columbia Railroad by the Premier and president of that railroad. As chairman of the public accounts committee, I wrote that railroad, the executive house, on June 11. That was last Wednesday, Mr. Chairman, not one day. I wrote them last Wednesday to be available to a public accounts committee the following Tuesday, which would be this morning, the 17th, at 8:30. As I repeated to you this afternoon, I was in the interior and I phoned here to find out if any word had been received from the BCR. It had not been. Then I said: "Find out what is going to happen, because there are 14 MLAs on this committee." There are not six public servants, there are 14 elected MLAs on this and it is hard to get them together, as you well know, being a chairman of a committee. I said that I am not having them at a committee meeting if we can't get these senior management people to the meeting for Tuesday, the 17th. An hour later I got a phone call in Horsefly, Mr. Chairman, to say that the management couldn't be available and they needed 10 days notice.

AN HON. MEMBER: Ten days?

MR. FRASER: Ten days notice to appear before a public accounts committee with 14 elected MLAs.

MR. CHABOT: Shame!

MR. FRASER: They are too busy to appear.

MR. CHABOT: Shades of King Farouk.

MR. FRASER: I want to say here tonight, Mr. Chairman, to that Minister: give a commitment to this Legislature tonight that this senior management of this railroad will appear before the public accounts committee on Thursday morning, at 8 o'clock, June 19.

This Minister made a big harangue all day about the public accounts committee and how we can find out what we want to know, I say to you: how do you get the management of the railroad to the committee? He says that the committee should look into it. I throw it right on him here tonight to give assurance to me and the 13 other MLAs that senior management will be here on Thursday morning, June 19, at 8 o'clock in the morning. They are here. They are here now, and I can assure you they will be here tomorrow too, for the debate on this bill increasing the credit line of the railroad. I want this Minister to reply tonight. What is he going to do to assure that they are at this meeting?

HON. MR. KING: I would like to tell this Hon. Member for Cariboo that we will certainly do our best. The facts of the matter are, as I understand them, that, indeed, the Member for Cariboo did write his letter on June 11. The operating vice-president of the railway tells me that that letter was on his desk yesterday morning, Monday morning. Now I think any realistic individual would admit....

AN HON. MEMBER: Six days from Victoria to Vancouver for a letter?

HON. MR. KING: That's when that arrived on the desk of the operating vice-president of the railway. There is a Liberal government federally, so anything can happen.

I think the Members should understand that there is considerable preparation involved in getting ready to appear before the public accounts committee. I would not want to arbitrarily send out a dictum, a command to the railway management that on such and such a day you appear before me and my court to answer for the policies of the railway. I think any reasonable Legislature and any reasonable group of people would want to provide adequate time for the management to get together their staff and their records so that they can give a full and proper accounting of the questions that will undoubtedly be raised.

Interjection.

HON. MR. KING: Well, I don't see any reason

[ Page 3648 ]

why the committee can't have adequate time in terms of giving advance notice to the railway board. There is no problem there. There should be no diminution of the time available to the public accounts committee to do their questioning and their investigation. We are all full-time Members of this Legislature. There is no problem there.

MR. W.R. BENNETT (Leader of the Opposition): Mr. Chairman, just further, the statement of the B.C. Rail was late this year and I would have thought that the senior management of the railway, realizing the date that it was being brought down, and realizing that public accounts had been advised to wait until such a statement would be brought down, in anticipation would be prepared.

I notice that they are well prepared to come here quite quickly to back up you, because you apparently don't have any answers on the railway. Certainly that information should be at their fingertips in anticipation of the legislative committee and particularly a legislative committee in which the statement has been brought down in what the Premier said were the dying days of the session. He kept saying the session was going to be over quickly, and certainly if public accounts was to have the opportunity it should have been prepared.

Part of the job would be anticipation that they would be called before public accounts. Now I think the chairman has made a reasonable request. The Minister is there and senior management is there. Certainly we could come to an accommodation and an answer tonight on staying over and being able to sit for the 14 MLAs from both sides of this House....

MR. CHAIRMAN: Could we have order, please, for a moment? I think this subject has been well canvassed and I would like you to return to section 1, if you wouldn't mind.

MR. BENNETT: Well, I am, Mr. Chairman, but it is only that the Minister many times, when he was stuck for an answer said it would be better brought up in public accounts, and I'm not trying to find out when public accounts will be allowed to have the opportunity to question the senior management. That is all.

Interjection.

MR. BENNETT: That's what he said. I would like to find out.

Further to the statements and the questions from the Member for Saanich and the Islands (Mr. Curtis) regarding the covering letter to the underwriters for the preparation of the prospectus for the Hydro underwriting in New York which incorporates the statements of other Crown corporations with provincial guarantees, I would remind the Minister, who said that only the letter from the Hydro Authority was necessary and they couldn't send statements from the railway, that this prospectus is signed by the Deputy Minister of Finance, who is also the secretary of the railway, and in the statements contained with the financial statement of the railway and the statement of earnings for the year 1969, 1970, 1971, 1972 and 1973, there is an updating qualification that says that the railway is going to get more money — and that bill was brought in in February of this year. It wasn't brought in previous to last year, so you have partly amended already. What I would like to know is why the letter wasn't sent, because there is no letter from the Deputy Minister advising the changes. There is no letter on file that we can find advising changes. Phone calls are not letters.

Now it says in here that there is a proposed change in borrowing from $440 million to $650 million. That is a partial updating. That bill was brought in February 28, so the argument that only the statement as of the end of December, 1973, was necessary is wrong, because you have provided additional information.

Now why, when you have gone that far, wouldn't you have told them right in the notation that the earnings were being restated because of the restatement of depreciation? I find it even more curious that there would be a partial qualification without a covering letter. Even better, what should have been done in the first place by the Premier of this province was to withdraw this prospectus until after he had brought down his amended statement. The confusion that exists in New York, the distrust of the financing of the Province of British Columbia, isn't the responsibility or the fault of the opposition, Mr. Chairman, it is the fact that the Premier didn't recognize his ultimate responsibility to withdraw the prospectus until he could give them the amended statement on the BCR.

Right now we have a statement as part of the prospectus that does not agree with the statement he filed in this Legislature a few weeks later. As the Premier of the province, the Minister of Finance and the president of the railway, he had the opportunity, authority and responsibility to either present the statement earlier to the Legislature or hold the prospectus up — one or the other. Clearly I see that the Minister of Labour is upset because he has probably got word back from New York, from the Premier, that they are upset. I don't blame them, but the opposition didn't do it; the government did; the Premier did. He had the authority and he is the one who should have withheld the prospectus or brought his amended, rewritten statement down earlier in this Legislature.

[ Page 3649 ]

The Minister of Health (Hon. Mr. Cocke) can chew his gum and chomp and smirk all he wants. This doesn't relieve the responsibility of the Premier of this province and president of the railway from taking one action or another. If we are the laughing stock of New York it rests on his head, not the opposition's that pointed out what was wrong, not the newspaper columnist who wrote it up, but the Premier who didn't recognize his responsibility to withhold that prospectus until he had brought down his amended financial statement and included it within the prospectus.

If they are laughing in New York, they are laughing at your Premier, your leader and your government. Although I hate to see it happen to British Columbia, I don't blame them.

MR. A.V. FRASER (Cariboo): I asked the Minister to give a commitment that the senior manager would appear before the public accounts committee and he did his usual push job and said this, that and everything. He could get here fast enough for this debate. I now ask him formally to withdraw this bill so they can appear before the public accounts committee. We can go on after that.

HON. MR. KING: Mr. Chairman, there is no intention of withdrawing this bill. Public accounts will be available to the Members. The railway management will require reasonable time to prepare. I should mention once again that if the official opposition would appoint a responsible chairman to the public accounts committee it should function very, very well. They have that option now when the opposition in this House never used to have the option of having an opposition Member chair the public accounts committee. There are no undue restrictions placed on that committee whose one manner of courtesy and common sense was required. That is to give the railway management of this very, very large Crown corporation an opportunity to prepare for what will undoubtedly be a day of very, very detailed questioning on their operations.

The haste with which the opposition wants to get them there would indicate that they are more concerned with trying to embarrass the railway and impede it in some way rather than trying to elicit information from the railway in an organized and intelligent way.

The Leader of the Opposition has gotten into his tirade again about what he hints is the impropriety of the prospectus filed in New York not being qualified to the extent that an investigation was underway on the railway and to the accounting system.

Interjection.

HON. MR. KING: A re-statement or re-appraisal or whatever you want to refer to it as. The fact of the matter is, as the president of the railway and the Premier stated and as I am re-assured by the people from Finance, both the underwriters and their counsel were notified of the investigation and re-assessment that was going on on the railway. In their wisdom, they chose not to ask that that be noted or that there be any caveats contained in the prospectus. I am informed that the Deputy Minister of Finance was apparently in telephone conversation with the individuals involved. They were satisfied and I find no reason on earth why the Leader of the Opposition would not be similarly satisfied unless he has motivations other than that which was accepted by the underwriters and legal counsel for the people putting up the finances.

The Hydro borrowing, of course, pertains only to the Hydro prospectus. There is no authority for them to comment or provide data on the railway. That was provided in documents accompanying the prospectus. The Deputy Minister and the Premier have indicated and I am informed by Mr. Harvey of the Department of Finance that both the counsel and the underwriters accepted that. The Hon. Leader of the Liberal Party, the Second Member for Victoria (Mr. D.A. Anderson) indicated that when he was in telephone conversation with the individuals in New York that he found the....

Interjection.

HON. MR. KING: That was my understanding — that a representative from his office substantiated the facts as I have laid them out. If the Members of the official opposition are unprepared to accept that, then I can only ask what their motivation is. Are they seriously trying to impair and undermine the financial reputation of this province? If that's the case, they are taking a very good position to so do. I think it's absolutely unacceptable and a scandalous performance by the official opposition in this House.

Interjections.

MR. BENNETT: I would only ask the Minister, Mr. Chairman, to file a copy of the letter. It's easy to talk about phone calls. I found out the other day that with three people listening on a line in my office I could get a different answer from the Liberal leader (Mr. D.A. Anderson) as to what took place on that phone call the next day although three people listened in the day before. Certainly there are phone calls and there are phone calls. Government business should be transacted on the printed word and on contract and with copies. I would ask the Minister to file the copies of the letters with those qualifications in the House. If this bill is passed or if we have gone through the votes on this bill, I would ask the

[ Page 3650 ]

Minister to make a commitment to file that copy later in the session.

SOME HON. MEMBERS: Oh, oh!

MR. BENNETT: That's all — file it later in the session and I'll accept it.

HON. MR. KING: Mr. Chairman, the Leader of the Official Opposition purports to be a well-qualified big businessman, and he frequently derides Members of the government for lacking the experience that he allegedly has. He should know that these kind of arrangements are often conducted through committee meetings between the principals involved. If the prospectus and the accompanying documents that were presented to the financiers were acceptable, if it was acceptable to their legal counsel, if it was discussed in committee stage between counsel in Victoria and the principals in New York, I find it peculiar and I find it quite mystifying that the Leader of the Opposition insists that there must be a letter to cement what was something that was completely acceptable and found to be not an issue in terms of the agreement for financing between the principals involved.

Interjection.

HON. MR. KING: There is no letter; this was not required. The underwriters were completely satisfied with the knowledge that they had relating to the reappraisal of the railway accounting system and the possible profit and loss picture. The other thing that the Leader of the Opposition should know is that the market is very fluid. The market conditions change rapidly and frequently, and timing in terms of going to that market can be extremely crucial. To attempt to set up unnecessary obstacles that might interfere with the proper timing could again be invidious to the interests of this province. I don't think the Leader of the Opposition would like to see that kind of situation obtain.

MR. BENNETT: Mr. Chairman, everybody wants the best deal for the province.

AN HON. MEMBER: Oh, yeah?

MR. BENNETT: Certainly. Long after you're gone this province will be paying for your mistakes and your high interest rates. Don't try and kid us that we're not looking for the best deal. What we're talking about here is a matter of weeks.

Interjections.

MR. BENNETT: A matter of weeks. Certainly the accuracy with which the province presents however they want to write the financial statements.... Even if that statement had said, "The province is restating the depreciation which will ultimately change the financial years in the view of the present management of the railway," it would have been accurate. But you didn't do it. You did say that you were going to go from $440 million to $650 million — that bill came in February 28. The management of the railway had already made arrangements and given direction to the accountants to restate depreciation by that time — that was already going on. So you could have said that you had instructed your auditors that the management of the railway — the directors — had instructed the auditors to restate depreciation. But you didn't do that. Instead, you chose to have the type of confusion which has proved embarrassing to the Province of British Columbia — not just to the NDP but to all British Columbians. Your government abroad is considered the representatives of all our province.

One thing I would like to bring up, because the Minister has continually talked about Buttar & Chiene. He has talked about them as if they had been an employee of the British Columbia Railway. I want to state — because the confusion exists in the way the Minister has presented it — that there is some difference between the former comptroller, Robert Miller, who was an employee, and Buttar & Chiene, who are the outside auditors and were the outside auditors before the last government took office and had been for many, many years, and through 1973 were the auditors for the Vancouver Stock Exchange. I notice you are not blaming the Vancouver Stock Exchange for....

Interjections.

HON. MR. KING: He was irresponsible.

Interjections.

MR. BENNETT: The Minister there will yell all sorts of inaccuracies over in his attempt to interrupt. But the point I am making is that the comptroller of the company who worked for the BCR was named Mr. Robert Miller. He has since been replaced. He was accountable to the directors. He was accountable to management. The outside auditors are accountable to the ethics of their profession in meeting certain requirements. That is to guarantee that the client, the client in this case being the B.C. Rail, the client in other cases being the Vancouver Stock Exchange, gets a satisfactory and accurate audit that is represented to them.

That is exactly what auditors are for. External auditors are there to give an outside opinion on the external auditing. They must give a full audit under the

[ Page 3651 ]

requirements of their own professional organization. They are not an employee directly responsible to the management of the day. These are outside accountants who authenticate the documents. If they do a bad job, if they don't meet their professional requirements, they are in trouble with their own profession.

The particular case you suggest on Buttar & Chiene and Mr. Walker has to do with one fiscal year only. It has a professional reprimand on the amount of time and the accuracy of the search, or the extent of the search of the books that took place in conclusion of the fiscal year ended December 31, 1972, an audit that would have taken place in the spring of 1973.

I would point out to this Minister, Mr. Chairman, that that audit took place while he was a director, while the Premier, Dave Barrett, was the president, and while Mr. Swanson and others were directors of the railway. It didn't take place under the last government. Neither were the years 1971, 1970, 1969, 1968 mentioned in the reprimand — only the year 1972. The reprimand dealt with the extent of the audit and that they didn't do as extensive an audit as they had ascertained they would do. Let's get that clear.

The comptroller of the company was a Mr. Miller. The comptroller of a company is responsible to the directors. If the Minister wishes to make a charge against the comptroller, that is entirely on them, because the auditor would clearly work with the comptroller of the company then as they would work with the comptroller now. But let us not try to confuse external auditors with financial employees of the company, particularly the function of the comptroller. That has been a confusion that has been elaborated on and expanded right from the Premier until we have the Minister of Labour repeating over and over the same political attack that the Premier gave us on Friday.

I would hope that nobody is confused as to the distinction between the functions of the comptroller and the external auditors, Buttar & Chiene, or the new external auditors for the railway. The comptroller is responsible to the management and the directors. The external auditor is responsible to his client for doing the audit he said he would do. The safeguard the clients have throughout B.C. Is that their own professional organization will reprimand them when they don't live up to that audit.

Now as far as restructuring the financial statement for a company, when you wish to restate depreciation, yes, your external auditors can take instruction such as they can from business. I know the First Member for Victoria (Mr. Morrison) is an expert, but in business it is quite usual, and not improper, for companies to have varying degrees of depreciation and varying methods of accounting and to give instructions to their chartered accountants as to which method they want to use on a continuing basis.

MR. C. LIDEN (Delta): To cook the books.

MR. BENNETT: No, because you would be saying that the change in accounting that took place.... There was no change in accounting in all of these years: the first change in accounting has taken place now in the year 1974 for restatement. But there was no change in accounting procedures. The documents I tabled this afternoon relating to the provincial study of depreciation, studying both the national railway and the provincial railways, should give you, if you bother to read it, some of the discussion that went on in all provinces and all jurisdictions about depreciation as it related to different types of railroad operation and the differences between resource-development railways and mainline railways and the fact that the CTC did not have necessarily a standard of accounting that was applicable, or should have been applicable, to all railways.

Regardless of what some Members may wish to try and present to this House, at no time has there been any suggestion of fraud. At no time has there been any suggestion that there was fraud. I've yet to hear it said.

What we have is a difference in management opinion and a difference in restatement. It is a difference in restatement that has embarrassed the province internationally on the financial market. Make no mistake about it. It is the responsibility of the Premier, president of the railway and Minister of Finance in this province who had control over the timing of his prospectus and his restated financial statement. Let's be perfectly clear about that.

HON. MR. KING: Mr. Chairman, the Leader of the Opposition again seeks to distort the facts. That's really the only way I can put it. He completely ignores the auditor's report, which has been read into the record of this House time and time again, where in the second paragraph it says:

"As described in note 2 of the notes to the financial statements, a review of the past accounting policies of the company has been carried out. It was concluded that the financial statement as of December 31, 1973, on an overall basis, did not present fairly the cumulative operating results of the railway to that date, and that certain of the past policies did not conform with the accounting regulations of the Canadian Transport Commission."

That is signed by Peat, Marwick, Mitchell & Co.

MR. BENNETT: You didn't read it all. You said

[ Page 3652 ]

you would read it all. You left out the words "completed management." You left them out purposely. They were right there; you left them out.

HON. MR. KING: The hysterical Leader of the Opposition, with his puzzled hazel eyes, starts to shout and snipe away whenever he is caught in a distortion again. I can only say that he is not interested in the facts; he is simply interested in twisting them. That is all he is interested in, Mr. Chairman. He is an irresponsible, pale, very pale, and insignificant, anemic image of the former leader of that once great party over there. I think it is a shame the way he has brought that party to disrepute and the way he jeopardizes, for his own political motivation, the economic health of the railway and the economic health of this province. It is a shocking performance. He went to extremes to say that it wasn't important that the CTC regulations were not complied with in 1972. He tried to infer that that was the only year in which the auditors had unequivocally stated that they had complied with that accounting procedure with an acceptable standard laid down for all railways in Canada and adopted for application on the BCR. In each report the auditors did certify that their audit was done in compliance with CTC standards. In each case that was concluded to be absolutely false by the detailed audit conduct by Peat, Marwick & Co.

I think it is shocking that the Members on that side are prepared to fly in the face of facts. They are prepared to distort and divert attention from the sorry record of the predecessor government in terms of their operation of the railway. They are prepared to write off completely the unbiased, professional assessment of qualified chartered accountants and auditors in this province. They are prepared to ignore the reports of unbiased engineering firms in this province who have looked at the operation and found it to be lacking. They just continue to attempt to obstruct this bill which is essential for the operation of the railway by building straw men which will get them off the hook in terms of culpability for the sins of the father.

Mr. Chairman, if they had done the right thing in the first instance when the startling and shocking facts were revealed in this House, and if the Leader of the Opposition has been more of a statesman than a replica of something of bygone days, he would have stood up and disassociated himself from the practices which were revealed by his predecessor. But he failed to do that. He has associated himself with all the questionable practices of the former administration. Now he is trying to use distortion, filibuster and obstruction as a method of diverting public attention from those facts. I don't think he is going to get away with it. He is heaping onto that very poor political judgment he has embarked upon the fury and the wrath of the people of the central interior who know that the opposition is simply here on the childish exercise of obstruction, throwing sand in the gears and trying to interfere with the efficient operation of the economy of this province. They will be judged for that facet too, Mr. Chairman.

The House resumed; Deputy Speaker in the chair.

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

Leave granted.

Hon. Mrs. Dailly moves adjournment of the House.

Motion approved.

The House adjourned at 10:55 p.m.