Madam Speaker, I am happy to talk on third reading of the CN privatization bill.
Railway politics in Canada take a prominent place in our history. I know from growing up in this country and working on the railways part time I have a great sense of history. The member for Kenora-Rainy River is another part time railroader. The ra ilways are very important historically to the country.
I am reminded of the railway on Vancouver Island, E&N Railway, very important in the development of the west coast. There is an ongoing contractual commitment in this country to keep that railway going despite some pressures the other way. Those contractual commitments date back to prior to the turn of the century.
In terms of our contemporary history, we are seeing great changes, the stability of our railways, or the instability in the beginning. It is a whole new ball game now. Why is it a whole new ball game now? Government operations and crown corporations can no longer function in the way they functioned for the last several decades.
This is unavoidable because of our fiscal situation and I am reminded of this every day. Two-thirds of government revenues are derived from personal federal income taxes. One-third of federal revenues are to service our national debt. It does not take much of a mathematician to figure out 50 per cent of people's personal federal income tax is going to service our debt.
This situation despite the last budget is getting worse because part of our revenue dedicated to servicing debt is increasing over the next couple of years. We are treading water and sinking slowly. This message is slowly being accumulated by the population at large. It is being expressed in a lot of different programs of government and it is being expressed in how we unavoidably must deal with our crown corporations.
The transport committee, the task force appointed by the minister in September of 1994 which put its finding forth in January of 1995, identified a number of things which I think were largely known to most.
CN and CP are both facing very strong competition from other industries and from the U.S., particularly on the north-south routes, north-south markets. The railways are losing market share to trucking. Deregulation of the U.S. railways is obviously impacting a great deal on the Canadian railways. The eastern routes are losing money and the western routes are declining in profitability.
This same task force also identified that all major North American railways were privately owned with the exception of CN. One wonders why Canada would have such a different contemporary situation. This bill is quite predictable. The privatization was to occur. All the market pressures were there and governments around the world are privatizing crown corporations.
The task force also identified that as a crown corporation CN had been subject to many politically motivated moves and that much of this results from the president and the board basically being patronage appointments. There is a message in all of this for other crown corporations of government.
The standard provisions of any privatization bill are essentially the same no matter what crown corporation is being privatized. What is different are the bells and whistles which deal with investor attractiveness, some of the social ramifications, how it deals with existing employees, how it deals with the public interest and those kinds of things. Essentially that is what most of the debate in the House and in committee has been about. The amendments proposed by the Bloc and by the Reform Party have largely been about the bells and whistles of the bill.
In terms of investor attractiveness, the bells and whistles are a very strong signal of what kind of regulatory environment the new owner is to face when they try to run the railroad. The signals we are sending out with this bill are all wrong. Most of the amendments deal with the signals we are sending to potential purchasers of the railway.
One amendment is the requirement that CN's headquarters remains in Montreal. We have heard several times in the debate that this requirement is absurd because the marketplace can make that decision better than anyone else.
That it exists in Montreal today may have some social and employment ramifications which is why a sunset clause is not a bad idea. We have seen in the history of Canada that different jurisdictions over time have different natural advantages. There are population shifts and differences in trading patterns and all kinds of rationale for which private investors would want to retain the option to move their office to a different location.
Before I get into further amendments I will talk about the way the bill was handled in the House. The bill went to committee after first reading, which was a new process. Normally a bill goes through first reading when the legislation is tabled and through second reading debate and then the bill goes to committee.
Conceptually there are some very nice things about sending legislation to committee after first reading when in a non-partisan way people can get all their points in before the legislation becomes set in any way and then a better bill can come before the House. The concern with respect to this bill was that if the environment was not there after first reading when it went to committee, to take all the best of everything people had to say about the bill to make it the best legislation possible we have really missed the opportunity of second reading debate. We want to have a very close look at the process before we commit
ourselves to a continuation of it whereby we essentially eliminate debate at second reading.
The next point I would like to speak to is about restricting the percentage of shares that any one individual, corporation or association may own. This has a very negative impact on bringing in the kind of investor that would like to purchase a major portion of the new company and bring in a management style that would revitalize the whole company.
The chair of the transport committee, the member for Kenora-Rainy River, said that this had been looked at. The 15 per cent restriction was quite plausible because CP had never had more than 11 per cent single ownership. Surely our view of the world extends beyond the gaze of Canadian Pacific. We have to look at this on a global scale. We have to look at it from a totally different perspective. Government once again is talking about privatization yet government still wants to retain control. There is an irony about this and it is inappropriate.
One investor said that the 15 per cent restriction circumscribes the deal. It certainly does. It dampens investor confidence. It freezes out many investors who would otherwise look at this. It sends out all the wrong signals.
With respect to CN's debt, this is repetitive but CN currently owes about $2.5 billion. It has been established by experts that CN will never sell this debt level. It must be reduced to a level which would allow access to a BBB credit rating. The general concurrence is that amount would be about $1.5 billion.
CN currently has $300 million to $400 million on hand through recent company sales such as CN Exploration, and excess capital reserves. The market value of CN's non-rail estate assets are $400 million to $600 million. In a perfect world this alone would be sufficient to attain a BBB credit rating.
Clause 12 of the proposed legislation gives the minister the power to reduce CN's debt to any amount he chooses. This is a major problem. This is something the other place should look at very closely if we cannot change anyone's mind in this place because there are two major risks in this.
The minister may choose to reduce the CN debt well below the amount at which the taxpayers can receive a return on the sale. This would raise the cost of shares making it appear more attractive but producing a lower yield for taxpayers. As well, excessive reduction in the debt of CN would put CP at a disadvantage which is all too familiar. This was done during the privatization of Air Canada. The intent of the Reform amendment was to limit the minister's power in reducing the debt of CN.
Clause 15 provides for a permanent requirement that CN retain the official languages policy and operates under both official languages. Once again, this is another signal of a regulatory atmosphere that is inappropriate when one is trying to attract investors.
The government does not have official languages control over the private sector. Privatization of CN removes the mandatory compliance of the Official Languages Act. The Reform amendment was to include a five year sunset clause on the mandatory retention of operating under both official languages. Unfortunately this was voted down.
Then we have the Canada clause. The bill does not provide any restrictions of foreign ownership, nor should it. However, the Reform amendment would have allowed a 90 day sale period open to Canadian individuals and corporations before opening it up to foreign markets. This provision would have allowed all Canadians first crack at investing in a Canadian institution. What could be more appropriate? This would have allowed a win-win situation but once again it was voted down.
The marine strategy report proposes that all national ports must become self-sustaining and that all loans must be obtained from the private sector without government backing. Reform agrees with that proposal.
The Sarnia tunnel is a viable access from Atlantic Canada to the American midwest. The Halifax Port Corporation believes that through upgrading the port facilities in Halifax it will secure the handling of the new high capacity deep draft freighters and thus the economic future of marine operations in Atlantic Canada. In order to secure the financing, it needs to ensure that CN connections will be there to connect the ports to the rest of Canada.
The Reform amendment would have included a clause ensuring rail service to the port of Halifax for a period of 10 years, thereby ensuring the development of the port facilities allowing them to compete with U.S. ports on the eastern seaboard and ensuring investor confidence once again. This amendment was not allowed. We call that the Atlantic clause.
The Reform Party supports the bill although the provisions laid out in it are too restrictive and involve too much government interference in what should be a much more complete move to the private sector.
