“It has been accepted by them as a definite policy that a national railway system be built up of the various lines owned by the Government, which in all respects will be the equal of the Canadian Pacific Railway in its ability to give the communities it serves good and adequate railway service. To carry out such a guiding policy it has been necessary to assume that ultimately the traffic for which the main lines of the system were laid down would be developed. Where any limiting condition exists which prevents the above-mentioned policy from being carried out it is the aim of the directors to remove such a condition. It has therefore been necessary, in addition to taking up deferred maintenance, to make a start on the progressive programme of improvements to the physical properties of the system. It is a matter of regret that much of this work, which could not further be postponed, had to be undertaken during the last two years under conditions which added largely to the expense. This situation was intensified by the fact that initial tie and bridge renewals for a long section of the main line came due within the period under review. The extra outlay which it has been necessary to make in an effort to put track and equipment in the proper physical condition is largely indicated by the increases in the principal headings of expense already set up in the statements being placed before you. “This has involved the expenditure of money to improve locomotive terminals; extend sidings and switching yards; to put in double tracking, and improve many other operating conditions, so that a greater efficiency can be secured from the equipment now owned, and so that additional traffic may be handled without congestion. It has also been necessary to undertake some branch line extensions, particularly those on which some work has already been done prior to the war. “Additional rolling stock and motive power has been required, large additions to the equipment being necessary to put this system in a position properly to handle its proportion of the traffic of the country.” Because of the enormous amount of work to be done, and of the cost of materials having increased to unprecedented figures, even then--although the later increases added greatly to the burden, and wages were also much higher and labour less efficient--we had to consider carefully the order in which the programme should be carried out. We therefore, placed the works in the following order. 1. Those absolutely necessary to the continued operation of each line. 2. Those absolutely necessary to the reasonably satisfactory handling of traffic. 3. Those not absolutely necessary but which would reduce the cost of operation sufficiently to justify fully the expenditure. Under such a policy we carried on for over three years. Each year increased the burden of troubles and anxieties due to advancing costs of materials and wages, as you may now see.