IRISH RAILWAYS. - STATEMENT BY MINISTER FOR INDUSTRY AND COMMERCE.

There is a private notice question to the Minister for Industry and Commerce in regard to the Irish Railways.

Yes, there is a question which I would like to ask upon the matter, and it is whether the Minister for Industry and Commerce has any statement to make respecting the Railway position.

Yes, I have a very long statement to make, and with the leave of the Dáil I will make it now, and at a later stage of the proceedings a discussion upon it might take place.

I think it would meet the convenience of the Dáil to have the statement now.

To understand the present position of the railways it is necessary to go back to the time when control by the British Government ceased — August, 1921.

Shortly after that date the question of wages and conditions of employment was referred to an Arbitration Tribunal set up by agreement between the Railway Companies and the Railway Trade Unions, the Tribunal being constituted of an equal number of representatives of the Companies and the Unions, with Mr. Carrigan, K.C., as Chairman.

The Tribunal issued an elaborate and detailed award in three instalments, the result of a long and careful examination of the case made before it by each party. These awards were issued towards the end of 1921.

On the awards being made the railway employees refused to accept them, alleging that their representatives on the Tribunal were not authorised to assent to terms such as the awards contained, and that during the sittings of the Tribunal the Union representatives on it had been so informed. The employees consequently asserted that the awards did not bind them. The Companies, however, prepared to put the awards into operation and a dispute arose which threatened to result in a general stoppage in the middle of January, 1922.

The Provisional Government, which had just assumed responsibility, decided that under the conditions then existing in the country it was not in the public interest to allow the railways to stop, and on January 14th an Order was issued suspending the operation of the Carrigan awards for a month, the Government undertaking to compensate the Companies for any proved loss due to compliance with this Order.

During this month's suspension negotiations were re-opened between the Companies and the Unions, which resulted in an agreement as to the wages and conditions that were to operate for a period of six months from February 17th, 1922.

The Government at the same time undertook to appoint a Commission to report as to the future administration of the railway service and as to arrangements for the avoidance of disputes. It was intended that this should be a joint Commission dealing with the whole of Ireland, but events which supervened before the Commission was appointed made it impossible for the Provisional Government to proceed with the proposal that the Commission should be a joint one.

The Provisional Government accordingly appointed its own Commission, which began its inquiry in May, 1922. Before the reports submitted by the Commission were published the six months period during which the agreement of February 17th was to run drew to an end.

As the result of negotiations between the Companies and the Unions, into which the Provisional Government was drawn, the agreement of February 17th was extended to December 31st. But the Companies represented that in some cases their financial position was at that time such that no guarantee could be given that particular lines could be kept open so long as December 31st on the terms of the February agreement.

Fortunately none of the Companies had actually to advise the Government of the closing of any part of the railways for this reason. But the military operations, and subsequently the serious damage to the railways, particularly in the South and West, rendered traffic practically impossible on many parts of the system, and this led to disputes, notably between the Great Southern and Western Railway and the Unions, as to the number of days' work which could be guaranteed to the men employed on those lines.

These disputes were, however, adjusted, the Government undertaking during the months of August and September to compensate the Great Southern and Western Company in cases where three days' work was guaranteed to the men, but the Company had not three days' work to give them.

Later in the year a dispute at Kingsbridge on a similar question led to a stoppage of work for some weeks, but this dispute was eventually settled.

The agreement as to wages and conditions which operated from August to December provided that if the Companies and the Unions had not come to an agreement before December 5th as to the basis of working after December 31st the Government was to be informed.

Early in December it appeared that there was likely to be a disagreement between the parties at the end of the month, and representatives of the Companies were first invited to meet the Government and discuss the position.

There were then two new factors to be considered which altered essentially the nature of the railway problem so far as the Government was concerned in it. In the first place, the Railway Commission Reports had been published, and in the second the destruction of the railways had seriously prejudiced the financial position of some of the Companies.

As the Dáil is aware, the Commission issued two Reports. The Majority Report recommended a system of State Ownership, with management not by the State, but by a body representing the users of the railways, the Trade Unions and the Ministry of Finance; the Minority Report, signed by Mr. O'Dea, recommended unification under the management of a similar body, with the addition of representation of the shareholders and a guarantee by the State to the shareholders of dividends on the basis received in 1921, which was practically the same basis as in 1913.

The Government found itself unable to accept either Report. The system recommended by the majority, namely, ownership by the State, divorced from control over management or expenditure, is one which appears to the Government unsound and impracticable. In the Government's view, the taxpayer would be ill-advised to allow the State on his behalf to incur the immense liability involved in the purchase of the Irish Railways, and then to commit the management, control and expenditure of the undertaking acquired at his expense to a Board representing limited sections of the public, on which the general body of taxpayers would not, and could not, be represented at all.

If the State is to purchase the Irish railways the State must retain control over their management and expenditure, and a Minister must be answerable to the Dáil for all branches of their administration. The Government is not in favour of this policy, and it is indeed condemned by the Majority Report itself, which has little faith in the capacity of a Government Department to manage the railway system. Whether that view is justified or not, it is certainly the case that the Government, which cannot expect for some time to have organised efficiently the administrative machinery necessary for its present functions, is not in a position to provide also the elaborate organisation necessary for a new Government Department responsible for so complex and technical a function as the management of the Irish railways.

Moreover, apart from the question of the capacity of the State to manage the railways, the Government is not satisfied that the true financial position or future prospects of the railway system in all its parts is now so clearly ascertainable that a considered opinion can be formed as to the advisability or otherwise of its purchase by the State. Much thought has to be given to the question of how far the existing railways are really adapted to the needs of the country, how far they really serve the public interest, how far they are in parts comparatively useless, before the State agrees to purchase what might turn out to be in some respects a white elephant.

In any case, purchase by the State would involve a financial operation which both Reports recognise would be embarrassing to the State at the present time.

For all these reasons the Government regards State purchase of the railways as a proposition which could not be entertained under existing circumstances.

To the proposals of the Minority Report there are objections equally strong. The essential points in that Report are control by a body similar to that recommended by the majority, with a guarantee by the Government of the dividends received in 1921. As the result of control by the British Government for the first part of that year, and payments by the British Government to the Companies in the second part as compensation for control, the dividends received in 1921 were substantially the same as in 1913. 1913 was the peak year for the Irish railways in the matter of dividends, and the Government can see no good reason why railway shareholders should, under the conditions now existing in the country, be given a guarantee of the best return they received since the railways were opened. If the railways are able to earn these returns the Government will not prevent them; if they are not able to earn them the Government is not disposed to guarantee them, and in this attitude it has the support of the Majority Report.

The Government's policy on this question is in brief to see that the present owners of the Irish railways bring the transport service for which they are responsible to the highest attainable degree of efficiency and economy. It will then be comparatively easy to determine whether the railway system is capable under private management of adequately meeting the country's needs and of providing reasonable conditions for its employees.

But the Government is not prepared, while the admittedly antiquated and wasteful arrangement of some 45 separate railway undertakings, with 28 separate and distinct managements, remains in existence, to conclude that private enterprise is so incapable of providing an adequate railway service as to necessitate the State taking over the uncertain and probably onerous financial burden that nationalisation might involve.

With these considerations in mind, the representatives of the Government who, as already stated, discussed the position early in December with representatives of the Companies, informed the latter that they were not justified in pressing a serious conflict on their employees with a view to securing large reductions in wages without at the same time taking any steps to put their own house in order.

It was pointed out to the Companies that every Commission which had examined the Irish railway question had condemned the present system of management by many separate undertakings — that all investigators were agreed on the prime necessity of putting the whole railway system under unified management whether the ownership rested with private enterprise or was assumed by the State — and that the Companies could expect no public support in an attempt to enforce economies solely at the expense of their employees, with no effort whatever on the Companies' part to meet the universal criticism of the wastefulness inherent in the division of responsibility among so many separate Boards.

The Companies were definitely informed that the policy favoured by the Government was the unification of the whole railway system under one management and the securing of the maximum economies in organisation and administration that unification rendered possible. With all avoidable waste, extravagance and overlapping thus eliminated, experience would show whether private enterprise could provide a satisfactory service, and, if it could not, whether its deficiencies would be remedied by State ownership or whether the true remedy did not lie in supplementing the railway service by some of the other forms of transport which recent years have seen so rapidly develop.

The larger Companies, on their part, represented that the objects desired by the Government would be better secured by a system of grouping than by complete unification. To this the Government has replied that it will keep an open mind upon grouping as compared with unification, and that if all the Companies can agree upon a grouping scheme that will secure the same degree of economy and efficiency as is to be expected from unification, without prejudicing in any way the interests of trade and industry in An Saorstat or of its ports, it will give any such scheme its most serious consideration.

It may be said that the Government believes that a unified or grouped management, conscientiously devoting to the problem all the available skill and experience, can secure advantages both for the users of the railways and for the employees considerably greater than are anticipated in some quarters, but that it must necessarily take time and concentrated effort before the best results possible are attained.

The future of the Irish railways has been uncertain ever since August, 1921. In the view that the country cannot afford to allow the question to drift any longer, the Companies have been informed that if they do not produce an agreed scheme of grouping such as the Government can approve within three months from 1st January, 1923, legislation will be introduced with the object of bringing about unification within a period of six months from that date. Such legislation would require to include provision for dealing with rates, fares and charges, with machinery for avoiding disputes and for consultation with the employees on matters concerning them, and with many other matters on which existing legislation is not adequate or satisfactory. Pending legislation, the Trade Unions will be well advised to adjust the differences between themselves which make effective negotiations so difficult.

The policy outlined is not likely to be acceptable to the Labour Party, which insists on nationalisation. But the Government believes that in proceeding cautiously and in adopting a course which should disclose the real merits or demerits of private management when brought to a higher degree of economy and efficiency than can be attained at present, and also disclose the essential facts required for a final judgment, it will have the support of all those who wish this matter, so important to the economic future of the country, to be considered not in haste or in a theoretical spirit, but with due regard to the interests of the community as a whole.

So much for the first of the two new factors in the railway problem. The second factor is the financial position of some important Companies.

During last month negotiations have been proceeding, as everyone is aware, on the subject of the rates of wages to operate from 31st December. But unlike previous negotiations, in which all the Companies have been represented, three Companies only have been concerned — the Great Northern, the Midland Great Western and the Dublin and South Eastern.

These are the only Companies operating in An Saorstat which at the time regarded themselves as being in a position to make proposals to the Trade Unions such as offered a prospect of a settlement by agreement. The other Companies asserted that their financial position was such, due to damage to their lines, or abnormal increases in working expenses, as to offer little prospect of an agreement on the subject of wages with their employees.

Accordingly the negotiations of December necessarily took an unprecedented course. The three Companies concerned were unable to reach an agreement with the Trade Unions. But the Government understands that these Companies do not at present intend to bring the differences between them and their employees to an issue, and that the existing rates of wages will be continued for the time being. The Government would suggest that these Companies and any others in a position to maintain existing wages and conditions should meet the Trade Unions with a view to drawing up a definite agreement.

It may be observed that the practice of giving unauthorised information to the Press, and of allowing statements to appear on behalf of one party which are not consistent with the statements made by that party to the other in the course of negotiations, does not assist a friendly settlement.

Five Companies in An Saorstat are not at present working, namely, the Cork, Blackrock and Passage.

Cork, Bandon and South Coast.

Cork and Macroom.

Schull and Skibbereen.

Tralee and Dingle.

Of the remaining Companies, the Great Southern and Western is, of course, the most important. This Company represents that the effect of the serious damage which has been done to the lines is to show a loss on working for the year 1922 which is barely balanced when all available reserves and the money still due in respect of the control period have been taken into account. This is the position without paying any dividend on the Ordinary Stock for the second half-year. In 1923 the Company estimates that, assuming the continuance of the present state of affairs, the excess of its working expenses over its receipts will amount to £10,384 per week, and that if provision is made for the payment of Fixed Charges and Debenture interest this deficit will amount to £15,177 per week. This sum includes nothing for interest on the Guaranteed, Preferred or Ordinary Stocks.

The position on the other railways which are still working is less accurately known, and some of these lines, which are baronially guaranteed, have always been run at a loss.

It may be observed that, certainly in the case of the Great Southern and Western, and possibly in the case of other lines also, even had the Unions agreed to accept the reduction in wages of 3s. 6d. per week for which the Companies who took part in the negotiations finally pressed, the estimated excess of actual working expenses over actual receipts would not have been reduced by more than 10 per cent. in the week. The problem in the case of these Companies is, therefore, not so much one of wages as of finance, and an agreement as to wages between the Unions and the three negotiating Companies would not necessarily dispose of the problem.

In the circumstances described, the Government understands that Companies which are unable, in a greater or less degree, to make both ends meet, may now, or in the near future, give notice that their lines will be closed. Indeed, the Great Southern and Western Company has already given a notice to that effect, which will take effect next week. The Government may, therefore, have to consider, and in the case of the Great Southern and Western Company has now to consider, how far it is necessary in the public interest to keep the lines open and how far it is possible to do so, having regard to the state of the public finances.

The Government has come to the conclusion that it is necessary to maintain such railway services as are essential to the economic life of the community, and that where the Company concerned is financially unable to do so the Government must find the money to enable those essential services to continue.

But the cost to the State will be heavy. The situation is not one in which the Government would feel justified in providing out of public funds for the payment of any dividends on Preferred or Ordinary Stock to the shareholders of a Company which does not earn its working expenses. Nor would the Government feel justified in providing for the payment of interest on Debentures — such interest can be deferred and can be paid at a later date out of the revenue which the Companies may expect to earn when normal conditions are restored. The items included in fixed charges would also require to be examined with a view to eliminating any which it would not be reasonable in the circumstances to meet out of public funds. But even if the sum to be found is limited to the actual excess of working expenses over receipts it is estimated that the State may have to incur a liability up to £12,000 a week.

In order to reduce this liability to the greatest practicable degree the Government would propose to take control of any undertaking which it becomes necessary to keep open with the assistance of public funds, and to give such directions to the officials of the undertaking as will secure the greatest practicable economies. Only those services which are really essential would be maintained, and any expenditure on permanent way or rolling stock that could reasonably be deferred would be prohibited for the time being. Any Company so controlled would be required to render statistical returns in a special form by which its expenditure can be checked. The State would then have to find the money to meet any excess of working expenses over receipts which the resources of the Company affected were not themselves sufficient to meet.

It is proposed to take this course in the case of the Great Southern and Western Company from the expiration of the notices which that Company has issued.

Baronially guaranteed lines are in a different position to Companies such as the Great Southern and Western. The guarantors are under a legal obligation to make good all losses on the guaranteed line, and on some of them there is a regular annual loss which has to be made good, and for which the Government would not be prepared to accept any liability. The liability which the Government would be prepared to consider if it should be necessary to control and keep open any baronial line would be limited to the amount by which any present abnormal loss exceeds that normally falling on the guarantors.

So long as a railway remains open there is no occasion for any intervention by the Government. Accordingly it will not take any steps until the responsible Company decides on such action as would close the line, action which the Government would urge all Companies to avoid in the public interest. The Government will then consider how far it is desirable in the public interest to maintain a service on that line, and if satisfied that a service is required and that the responsible Company is not in a position to provide it, the Government will take control and see that the service is run.

So long as the Companies which are in a position to make their own agreements with the Unions continue to pay the present rates of wages the Government will also arrange for the payment of the present rates of wages on any line it controls. If these Companies make an agreement providing for a reduction in wages the Government will follow the agreement. The Government will thus avoid being involved in the wages question. But it is scarcely necessary to say that to the extent that reductions in wages are arranged the limited sum that can be made available in the present state of the public finances for keeping open lines that are temporarily insolvent will go all the further in providing services, and consequently employment.

It will be necessary to present a Supplementary Estimate for any expenditure incurred in keeping these lines open. But the Dáil will recognise that they must be kept open, and the necessary money consequently must be provided. The course which the Government proposes to follow is intended to secure that no greater expense is incurred than is in the circumstances inevitable, and it is hoped that both the Companies and the men will co-operate willingly in helping the country over this difficult time without unduly straining its resources.

The policy which has been explained has primarily the circumstances of An Saorstat in view. There are obvious difficulties in securing an entirely satisfactory reform of the railway system unless it applies to the whole of Ireland, and it is sincerely to be hoped that that can be arranged by agreement amongst all parties. If, however, agreement proves unattainable, the Government is still concerned to see that the transport system of An Saorstat is efficient, and has no reason to anticipate that such difficulties as may be met with are likely to be insurmountable.

I think that statement would justify discussion at a later stage, but at an earlier stage than that provided by the 7 o'clock rule. I would suggest that, if the Dáil would agree, if the business No. 1 and No. 2 on the Agenda was disposed of in anything like reasonable time, we might take this statement as a basis of discussion.

Is that agreed?

In the meantime will members of the Dáil who have not got a copy of the Report be provided with a copy of it? We cannot remember all that has been said, and as I believe there are two or three copies available I think Deputies should have a copy of it.

Copies are not available, I understand.

We cannot retain all that has been said, and I think that before any discussion takes place we should at least have the principal points outlined.

Can the Minister say for how long the solvent Companies have agreed to continue the existing agreement?

Of course the question is not in order, but they have given no guarantee as to any period.

That is part of your statement.

For the time being there is no definite date.

These matters can be raised on discussion. It is proposed to take the discussion after No. 1 and No. 2 on the Order Paper.

Agreed.