Article

Guarantee Act

Published Online February 7, 2006

Last Edited March 4, 2015

Guarantee Act, 1849, conceived by Francis HINCKS and carried in the Legislative Assembly of the Province of Canada, established the principle of government assistance to railways. Under the terms of the Act, any railway more than 75 mi (120 km) long was eligible for a government guarantee on the interest of half its bonds as soon as half the line had been completed.
Sir Francis Hincks, politician
Hincks was briefly head of the government of the Province of Canada, but was defeated amid accusations of corruption (courtesy Library and Archives Canada/C-3160).

Guarantee Act

 Guarantee Act, 1849, conceived by Francis HINCKS and carried in the Legislative Assembly of the Province of Canada, established the principle of government assistance to railways. Under the terms of the Act, any railway more than 75 mi (120 km) long was eligible for a government guarantee on the interest of half its bonds as soon as half the line had been completed. Several railways received assistance under this Act, most notably the GREAT WESTERN, the ST LAWRENCE AND ATLANTIC, and the Ontario, Simcoe and Huron. Indeed, with the incentive of the Guarantee Act, as well as with the aid provided by the 1852 Municipal Loan Act, railway building became a mania in the Canadas, the amount of track increasing from 106 km in 1850 to more than 3200 km in 1860. The darker side of this policy was the economic recklessness that government assistance encouraged: by 1860 railways in the Canadas were suffering severe financial problems, and many municipalities had so overextended themselves that they were having difficulty meeting their obligations to the MUNICIPAL LOAN FUND.