Dáil Éireann debate -
Wednesday, 5 Apr 1933

Vol. 46 No. 16

In Committee on Finance. - Railways Bill, 1933.—Committee (Resumed.)

Question again proposed:—"That Section 3, as amended, stand part of the Bill."

Mr. McGilligan

When speaking on the section previously I was endeavouring to show that at a time when we are attempting to inaugurate a new transport system, recognising that that transport system has to be a mixture of road and rail, we do not at any rate entice those people whose money we shall require for the new transport undertaking to embark their funds in it by reason of the treatment of the debenture holders. The Minister asked what enticement I would give the debenture holders. That can be answered simply—give them a continuance of their rights. I would have them free from interference of this type, arbitrarily taken, the choice made arbitrarily by the Minister, that there should be some interference and the mode of interference based on a scheme given in to him and described as guesswork. The Minister has made great play with the value of these stocks for sale in the market at the moment. It does not help the railway company to get out of its difficulties, whatever these difficulties are, to reduce the sale price of the securities in the market. The Minister will preserve the interest that has to be paid but if the price of the stock is going to be lowered artificially it does not help the railways. It may help some chance of the stock holder hereafter getting the old price in the market of the stocks. That does not matter one way or the other. It would not help the railways, because there is no question of the railways having to buy out a lot of these stockholders.

Arguments directed to what the value of the stock is in the market at the moment, are quite useless. The whole point of the reduction is that you say hereafter the four per cent. shall not be paid; you will pay instead something in the region of £3 12s. You will put the ordinary shareholder in the position that if hereafter railway earnings did increase he will be faced with a definite clamour. The Minister must know quite well that if, in four or five years, when something of this is forgotten, and they set out to pay people holding ordinary stock revalued as under this Bill, and they want to pay them one per cent on their old holdings and the phrasing is ten per cent., as it would have to be, a clamour will inevitably arise. As far as the writing down of the stocks is concerned, the only thing of value is that you say in regard to the debenture holders that you will not pay £4 in future, but something in the nature of £3 12s. That is the move that is on. Alternatively one could see a case being made by the Minister, showing that the railways were in difficulty and required help in order to get them over the bad period between now and the establishment of a better transport undertaking and, for a couple of years, a percentage would not be paid on the old debenture stock.

Even this argument might be put forward: "We are going to give you two or three years in which to reconstruct the company. Get special capital if necessary, and make every endeavour to bring the new transport system into a proper working condition, and if possible be in a position to pay dividends in the ordinary way; but if you are not in that position at the end of two or three years, then we will be obliged to enforce this scheme on you." There might be some argument like that put forward, but it would be still breaking the principle. These shareholders had certain guaranteed rights, and for no great cause shown these rights are being taken from them.

We are told by the Minister that it is not a four per cent. dividend stock at the moment. This year for the first time it is not a four per cent. stock. The Minister's argument is that the railways have not earned the moneys they paid out to their shareholders for years past. What was the first year in which they did not earn enough with which to pay at least the debenture holders? Who is to be the judge as to whether they wisely or unwisely took from reserves for the payment of shareholders? What are reserves for? There is not a great deal of good in giving a company power to pile up reserves against an evil day, and then not allowing them to use the reserves when the evil day has come upon them. Surely it would be wiser to say: "You are under notice, and even under suspicion. There is a certain sign given even by your own engineers that the maintenance is not being carried on in the old way." It might be argued whether maintenance of the old type is desirable, and whether the old safety factors are too big. It might be argued that the safety factors could be revised and maintenance might drop to a certain point. But you have no examination of that sort, and it is simply stated that reserves have been put to wrong purposes. After that argument is assumed to be correct it is declared that the railways were not earning enough to pay the shareholders, and consequently we can depreciate the shares to a certain extent without doing any harm. That is going far too far in an unconsidered situation.

I said before that even if there was a case made for a reconstruction of capital, no case had been made for this reconstruction. The Minister brazenly said that this was part of a well thought out scheme. I have here a quotation from the chairman's speech at a railway meeting early in March of this year. In the course of that speech he said:—

"To gain information, however, for ourselves, we employed an eminent firm of financial accountants and experts to examine our accounts and financial condition, and advise us as to the feasibility of evolving from them an equitable scheme of reconstruction. Their report laid it down that no scheme, based on anything but guesswork as to the future, was possible to be set up. Subject to this specific proviso....

—a very definite proviso, and one which throws suspicion and doubt on the whole scheme—

... they submitted a scheme for our guidance and criticism."

They passed it on to the Minister, and the Minister now says that it is a well thought out scheme. The firm of accountants who put it up in the first instance said it was guesswork.

Mr. Lemass

I stated that the decision to carry out the reconstruction of the company's finances was part of a well prepared scheme of transport reorganisation.

Mr. McGilligan

One item in this particular proposal regarding reconstruction. According to the accountants, this part of it is based on guesswork and yet this is the matter on which the House is asked to take a decision to-night. People much better acquainted with the subject than the Minister can hope to be have indicated their opinion very distinctly. That is one item in what the Minister has been brazen enough to describe as a well thought out scheme. Let us take the other side of the well thought out scheme, because it has a bearing on the finances. He certainly said in the arguments afterwards as to the exempted areas that he believed that the Road Transport Bill was going to work a great benefit to the railways; that it was going to assist them, was going to help them out of their difficulties and put them on their feet. That is his view of it as a transport undertaking.

Why not let that situation develop? Why say to the debenture holders at the moment when we believe we have got a scheme for transport in the country, when capital is required for its development: "We hold out here now a warning to people who are foolish enough to put money in the new transport organisation that as regards that new capital, if we think fit in a year or two, when our plans have miscarried, we will reduce that capital; the people who are foolish enough to put in money are not going to get a return on that money; that they will never again be likely to get it whether the company earns it or not." This is not a temporary business. It is cutting down this money for all time. I do not think it is wise, on the eve of the new transport system where new capital is required, to put that hindrance to people who are likely to invest in this new system.

There are two sets of people interested. Practically there are three sets of people, but there are two sets of which we are speaking at the moment. These are, first, the employees, and we have done the best we can for them in these two Bills, and in the second place, there are the shareholders and particularly the debenture stockholders. We have given the railways certain new powers and we have taken away certain restrictions. We have opened up what the Minister thinks is a new life for them and we recognise that new capital will be required to enable the undertaking. We do not at this moment hold out any hope to people so as to induce them to put their money into new transport undertakings.

Under these circumstances I think it would be a wise thing to delay and to put it up to the shareholders themselves. They can embark any other funds they have in the new transport undertaking. We should put it up to them that it is their business and duty to get the whole new undertaking into a sound footing, to make it solvent and put it in a position to earn and pay the dividends that they are looking for. There is a fair hope ahead of them that they may be brought to realise that it would be a good thing for the majority of them to sacrifice a little now, if they are going to embark some more of their own capital in a new venture, to relax a little of their own claims if they are to get the security they want.

That brings me to the point on which Deputy Dillon has spoken, that is in connection with the present debenture stock holders. Because of the antiquity of the legal instrument they hold, unanimity must be secured before any change can be made. I do not know if there is any difference between the shareholders and debenture stock holders and those in the most modern company. The scheme suggested was that there should be delay, that a reconstruction scheme should be called for and that that reconstruction scheme should be deemed to be approved of by the stock holders if it were approved by three-fourths. I think that was breaking in on a principle.

If there was an old right what was the old right? Unanimity was required to this extent that one debenture holder by objecting could threaten to put in a receiver and that a debenture stock holder or a group of them then had to be bought over or they had to be invited or induced not to exercise their strict legal rights. The real argument that used to be used towards them was that they would do far better by submitting to a scheme of reconstruction put before them by the big body of shareholders, than by going in as individuals. If there were one or two obdurate people they had to be bought out. That was the situation. The difference between that and the amendment was the difference between three-fourths instead of the whole as in the old situation.

The Minister says that this Bill is a recognition of the stock holders' old rights. But all the time he has made no attempt to deal with this. As far as sub-section (10) is concerned, the debenture stock holders are debarred from trying to enforce certain payment due by the appointment of a receiver. That phrase blatantly shows how badly the debenture stock holders are being treated.

It was said by the Minister that the difference between 4 per cent. and the £3 odd, whatever it is going to be, is going to mean the safety or failure of the new transport system. All we have to weigh in the balance as far as it is possible is the difference between the old 4 per cent. and what is paid on the depreciated £100 now deemed to be £85. That is what is in the balance and that is what is going to make the difference. On the other side of the scale there is a complete disappointment of the stock holders, the defeating of them and their legal rights. There is a point that will cause much more annoyance and that is that an impediment is put upon the people who ought to be glad to put money into the new transport concern started under the decent auspices under which it was started. I say that because people will not avoid the reflection that what happened once will happen again. They had a signpost to that in the last Bill as it concerned the people on the passenger side. They were assured of a profit in certain transport licences. Now the Minister comes along for the power compulsorily to acquire these and hand them over to somebody else.

If the new transport undertaking that we are setting up, was held out to us as one that could carry on without any extra moneys, then I do not think the policy is an honest one and I do not think it is made more honest by that fact but it is less dangerous. But facing the fact that new capital is required, to say with regard to the people who own the line at the moment that they cannot enforce their rights to a return of their loans and that we are going in this arbitrary way to cut down this stock is, I think, a very bad procedure. Sub-section (10) takes away these rights. Remember what the rights are at the moment, whatever the reserves are, whatever the value of the company's profit is, whatever could be got for it if sold in any way, the debentures have first charge upon that and that right has been taken from the debenture holders. There is no consideration being given to them. I mean they cannot go back again to their old 4 per cent. position. This is complete. The Minister may say that they have no equitable claim to these moneys. But that again depends upon the judgment which I do not think he is capable of giving or that anybody except that board itself after an inquiry has been made by it into the whole matter. I do not think that anybody is capable of saying that there has been any misuse of the reserves, such a lack of attention, that they have, in fact, ousted themselves in the equitable sense from the right to this money. In these circumstances I would ask the Minister to pause before he forces this sub-section through. I would ask that he would weigh very definitely the advantages he is to get by the difference between that 4 per cent. guaranteed as it was and whatever the new payment is to be and the disadvantages of not being able to get new capital as freely as he wanted for the purpose of the new undertaking.

Mr. Good

If the Minister is going to close now——

Mr. Lemass

I wanted to.

Mr. Davin

On that point, is it not a fact that there is no such thing as closing now?

An Ceann Comhairle

Not on the Committee Stage.

Mr. Good

The point in this amendment is the principle of writing down capital. I was anxious that the Minister would intervene at this stage, as so far he has not given adequate reason that would justify any ordinary person in agreeing that his intervention was right or was wise. Before the State interferes with the capital of a private concern it must give a good and sufficient reason for that intervention, which will satisfy the ordinary shareholder and the ordinary investor. The first thing that strikes one about this problem is that if the Minister was satisfied that a reduction of capital was essential, why did he not suggest to the railway company — and he had many interviews with the directors — that a reduction of capital would be of advantage, and that he would like to see the company making the reduction.

Mr. Lemass

I am saying that I would not be prepared to propose to the Dáil the other provisions of this Bill, or of the Road Transport Bill, if a reconstruction of the capital were not taken in hands simultaneously.

Professor Thrift

Why?

Mr. Good

We are anxious to get information. I will give way to the Minister now, and let him explain to the House why he has come to that conclusion.

Mr. Lemass

I explained it.

Mr. Good

With all due respect to the Minister, he has not explained why State intervention is necessary. I think it is essential he should do so.

Mr. Lemass

Well, we will drop the two Bills and let the company go bankrupt.

Mr. Good

There is no use arguing in that fashion. Pistols of that sort do no good. We have too much of that sort of thing in this State. If we had less of the pistols and more commonsense it would be better for the whole of us — the Minister and everyone else. What I object to, and what all reasonable people object to, in the Bill is the compulsory writing down of capital by the State. This is a private company and the capital was subscribed by private individuals. Like all railway companies, this company has fallen on lean times, and when it falls on lean times like all other industries, its earning power is lessened. But its earning power is not going to be increased by writing down the capital. I have heard the suggestion put forward that the company will reap the advantage of writing down the capital. I would like to see it. As a shareholder it makes very little difference to me whether I draw £2 10s. on £100 or £1 5s. on £50. The earning power of the company is the important feature in connection with a company of this character. How is that earning power going to be increased by writing down the capital? I want some of the advocates of that method to explain it. If that proposal was put before the shareholders by the directors then I could see the reason for State intervention. I cannot see it at the moment. In the ordinary course of business directors are elected to look after the interests of shareholders. If the directors thought it was to the interests of the shareholders to write down the capital, then it was their duty to put that proposal before the shareholders. If they approved of it they could then take the necessary steps to get the sanction of the court. That is the ordinary procedure as we know it in business. The extraordinary thing about this Bill, and about the action of the Minister, is that he goes to the directors and says: "I am satisfied the capital should be written down." Apparently, the Minister did not put any reason why that was desirable before them. As I know them, they are business men. He did not put before them the advantages that would accrue from writing down the capital. He goes to them and says: "The capital has got to be reduced, and I am going to take steps in this Bill to compel you to reduce it." They are business men, and if the Minister wanted to act reasonably, why could he not say to them: "There are obvious advantages which will accrue from writing down the capital, and as trustees for the shareholders it is your duty to take those steps?"

Mr. Lemass

I did not go to the directors. The directors came to me.

Mr. Good

Put it any way you like.

Mr. Lemass

That is the position. I am responsible for the protection of the public interest. They came to me to introduce Bills which were going to impose on the public certain burdens, in their interest.

Mr. Good

The directors went to the Minister. Did they ask him to bring in a clause in this Bill writing down the capital?

Mr. Lemass

I would astonish the Deputy if I mentioned all the things they asked.

Mr. Good

I do not want the Minister to quibble. I want a straight answer.

Mr. Lemass

The directors came and asked that certain legislation be introduced for their benefit. I said I was prepared to introduce that legislation subject to certain other conditions applying.

Mr. Good

I want to get this matter clearly. We have had endless innuendoes on these Bills. I want to know if the directors came and asked the Minister to include this provision for writing down the capital.

Mr. Lemass

I have told the Deputy.

Mr. Good

The Minister has told us in general terms. I want it boiled down to what happened. Did the directors ask the Minister to introduce this compulsory clause for writing down capital?

Mr. Lemass

I told the Deputy that the directors came and asked that certain burdens should be placed on the people of this country, and that certain rights of private property should be interfered with.

Mr. Good

That is not the question.

Mr. Lemass

I said to them that in part I was prepared to do what they asked, but that I considered that an essential part of any such scheme should be a reconstruction of the company's finances, and that unless such a reconstruction took place I was not prepared to go ahead on the other lines.

Mr. Good

As I understood the Minister's answer a few moments ago, it was to the effect that this suggestion did not come from him but from the directors. I want a definite answer on that point.

Mr. Lemass

And I will answer it. It was I indicated that a reconstruction of the finances of the company would be a necessary part of any reorganisation scheme, and the directors agreed.

Mr. Good

We will take it that the directors agreed. We have got so far that the suggestion came from the Minister.

Mr. Lemass

And the directors agreed.

Mr. Good

Can the Minister show me any parallel case for State interference of this character.

Mr. Lemass

Can the Deputy show me any case of a private company coming and asking for the concessions which the railway companies are looking for?

Mr. Good

The Minister will not keep to the actual point; he always goes off on a side line. It is extraordinary when Deputies become Ministers how quickly they all slip into this method. We have got this far, after what one might call a surgical process, that the Minister put up the suggestion to the directors. When he put up that suggestion the directors got no opportunity of considering the proposal or putting it before their shareholders.

Mr. Lemass

They produced the proposal.

Mr. Good

The Minister said they produced it. The Minister told us before that the difficulty was that the directors were not alive to the situation or to the responsibilities, and that they did not really consider at all this question of writing down capital.

Mr. Lemass

On the contrary, I say they agreed that it was necessary.

Mr. Good

When the Minister then pressed them, they showed him immediately that they were quite alive to the situation, and that they had been consulting economists on the subject. As a proof of their consultation they showed him advice which had only just reached them, and he immediately seized on to that and embodied it in the Bill — a raw, unbaked proposal.

Mr. Lemass

Three months have elapsed since then.

Mr. Good

This proposal was put forward to assist the railway companies. We have spent now the best part of two weeks considering these Bills of the Minister which are to improve the lot of the railways. They have been called by Deputy Davin pro-railway Bills.

Mr. Davin

No. The Minister called them pro-railway Bills. The Minister baptised the Bills.

Mr. Good

The Deputy has a wider vocabulary than I have. I will allow him to put his own name on the Bills; I will put mine. We have put the Road Transport Bill through this Dáil. Will the Minister tell us quite frankly of any clause in that Bill which will put off the road one of the 8,000 lorries that are running the railway companies off their tracks at the moment? I am a business man, and can understand advantages as well as the next. Boiled down, what advantages are going to accrue to the railway company under the Transport Bill? We agree that it is full of pious hopes, but you cannot run businesses on pious hopes; you want something more substantial. Boiled down, what is this Bill going to do for the railway companies? The Minister says it relieves them of certain financial obligations. The Bill of 1924 put heavy financial obligations on the railway companies, and I am satisfied that much of their financial trouble at the moment is the result of those obligations, the imposition of which I protested very strongly against in this House. Burdens were then put on the railway companies which they were obviously unable to carry. The answer that I got from the then Minister was: "You are going to get a standard revenue which will enable you to discharge those monetary burdens." Those monetary burdens have all been discharged up to this, and the companies have never had a standard revenue in any one year. Though they discharged their financial burdens in the last year they did not get within half a million pounds of the standard revenue. That is largely the cause of the financial plight of the railways at the moment. The State put burdens on them and then said: "Oh, we have provided for a standard revenue." They never got that standard revenue.

Mr. Lemass

What burdens?

Mr. Good

When the Minister talks about those advantages he is only trying to remove some of the grievances from which the unfortunate company has been suffering since 1924. As Deputy Dillon pointed out to-day, he removes burdens with the one hand and shoves them on with the other. There is an obligation which will accrue — we will be discussing it at a later stage of this Bill, and it was discussed very strongly on the Second Reading — whereby a director is to be removed. The removal of that director is going to place an obligation of £100,000 on the company to redeem a debt of £100,000. That, as the Ceann Comhairle pointed out, will arise at a later stage. In addition, we are going to lose a monetary advantage to the extent of £20,000 a year, in order that the Labour Party and the Minister may have the satisfaction of removing a director who is objectionable to them. What I want to say to the Minister is that there is in these Bills, as I see them, no advantage given to the railway company which would justify the State in coming in and saying: "If we are going to give you those advantages we are going to interfere in those other problems." There is no such right at all in this Bill.

The Minister should consider the differences between the stocks. He seems to classify all the stocks as if they were one and the same. I pointed out on Second Reading that there is an extraordinary difference between the debenture stock and the ordinary preference and ordinary stocks of the company and the guaranteed preference stock. The guaranteed preference, the ordinary preference and the ordinary stock are dependent for their interest on dividends on the earnings of the company. Debentures are not in that position at all. Debentures are not stock in the ordinary sense. They have nothing to do with the earnings of the company, and are in no way dependent on them. A debenture is money advanced by the debenture holders on the assets of the company. It is just the same as if the Minister or any other Deputy here advanced money as a mortgage on a house down the street. He has the security of the house for the return of his money, and for the payment of the interest. The debenture holder has the security of the railway for the repayment of his loan. If the Minister is going to interfere here and write down the value of a mortgage of this character there is no guarantee whatever that he will not step in tomorrow in the case of the farmer, and after he has done with him go round to the other communities, and, as Deputy Dillon said to-day, take a mortgage which is £100 at the moment and write it down to £80. Is that the principle we stand for in this Bill? If so, it is going to shake the whole security of the State. The Minister must realise what he is doing. There is no use in his putting these proposals here before us and telling us that it is necessary to do this in these particular circumstances, because his successor — or he himself within the next 12 months or two years — may, in some other circumstances, adopt exactly the same principle, telling us that he is only doing what was done in the case of the Great Southern Railways Company, and that if we object to it we should have objected then when the principle was being established. These are not things which one likes to see done in a new State. We ought to be even more careful in a new State than in an old one, because the security is not so good, to see that the steps of this character we take are likely to be of advantage to the State rather than a disadvantage.

As Deputy McGilligan has pointed out, it is quite obvious that if the company is to continue it will have to get additional capital. The Transport Bill foreshadows that. The Minister told us, in the discussions on that Bill, that a great advantage to the railway company will be this: that it can buy up its competitors. Before I would say that is any advantage I would like to know the price it is going to pay. The advantage will depend entirely on the price to be paid. It is even possible to pay too much for gold. The Minister seems to hold that the right to do that will be of great advantage to the railway company. But if they have to pay too high a price to purchase a company, by reason of having to pay off its employees, in the end the thing may be a disadvantage rather than an advantage. Everyone agrees that the company will want capital. If this Bill is passed, and if this interference is approved of by the Parliament of this State, is it going to be easier to get capital in the future? What will likely investors say to the directors who make the issue. They will point to what is happening here, that the State intervened, that the capital of the company was written down and that even debentures, which should have been sacred, were written down.

How is the company going to get additional capital in these circumstances? As far as I can see, it is going to be exceedingly difficult for it to do so and that is a point that I think should weigh with the Minister in his desire to get Irish capital invested in Irish industry. This is one of the few industries in the State in which capital has been invested to any extent. When people talk about investing money in the State they ought to bear in mind that there are exceedingly few securities in the State in which money can be invested. That is one of the difficulties about this State. But here, one of the largest companies in the State is being interfered with in such a way by Parliament as to weaken its credit. That is not going to make the problem of getting money into Irish industry easier. In fact it is going to shake confidence in Irish industry to such an extent that the problem will be much more difficult than it is by reason of State intervention in this particular case.

I ask the Minister to bear these points in mind. If there is any advantage that he can point out to us that will accrue to the company as a result of these proposals he ought to let us know what it is. I would urge on the Minister that the ordinary channel through which this reduction in capital should come about is that which is recognised and availed of by companies of this character. It is only in the event of a company refusing to take the steps which it was obvious to any ordinary individual would result in advantage to the company — in the event of failure of that kind that, to my mind, State intervention would be justified.

Mr. Dowdall

Deputy Good has objected to the cutting down of the capital of the company by the Minister. I rise to suggest the reason for it. It has been explained that new capital will be required. If that be so, it will only be supplied by the public if there is a reasonable chance of its earning a dividend. That reasonable chance will not be there for the new capital if there is a very large bulk of old capital that has to be provided for. Therefore, the reason for the cutting down of the capital of the company is this: that if new capital is to be provided at all the old capital must be written down so that a reasonable chance may be provided for the new capital to earn a dividend.

Mr. Dockrell

I doubt if the Minister appreciates the difference between capital being reduced by agreement amongst shareholders and being reduced, presumably under compulsion, by the Government. That, to my mind, is what is at issue here. Companies that have passed through bad times before have reduced their capital. But it was done voluntarily, after a meeting together and a hammering out of an agreed scheme. It has been pointed out that the railway directors could not, under the existing circumstances, hammer out a proper scheme. I think it was Deputy Dillon who suggested that the Minister should take powers under this Bill to alter the law as far as the debentures are concerned, so that a writing down by agreement amongst the shareholders could effectually take place. I would urge the consideration of that on the Minister. The Minister argues: "Well, the debenture shareholders' security is gone; he could not realise his £100." Although he was pressed several times to state the reason why this scheme was necessary to the success of the Bill, the Minister has left me personally without the information as to why it was necessary. I cannot understand why it is necessary. One can only speculate the reason is that the Minister expects the railway company to make such enormous profits under this reconstituted measure that the shareholders would be in danger of receiving their previous dividends on their ordinary stock. That is the only reason I can conceive why this scheme is absolutely necessary here and now.

Other Deputies have urged very forcibly the danger that will accrue to the credit of this State and the companies in this State through the writing down of debenture stocks by the Government. Broadly speaking, if this reconstruction is carried out by the Government — there is no use putting a tooth in it — the railway debentures will cease to be debentures. That is what it amounts to. No doubt the Minister can get suitable guarantees that a proper effort will be made to carry out the reconstruction by the company, but I would urge him to consider the enormous difference there is between a voluntary scheme, as evolved by the shareholders and a scheme imposed upon them by the Government.

Mr. Moore

I have no very strong views on this question of compulsory reduction of capital, but having heard Deputies Dockrell, Thrift and Good referring to the danger to the credit of the State, I feel bound to state that they seem to be overlooking one important aspect of the matter. I think they are overlooking this very important aspect, that the State is coming to the rescue of a company rather than allow it to go bankrupt. That seems to me a very big precedent and a very big and favourable thing for the credit of the State. The position is, if we are right in the bases of our discussion. that this big company is faced with bankruptcy and the Minister, in order to prevent that bankruptcy, comes along and demands sacrifices, not merely from one section of the community but from practically every family in the country. He demands such big sacrifices from some that their businesses are actually to be taken from them — from people who are accustomed to a life that probably represents the nearest thing we know to economic freedom. He demands that people who are used to an independent existence, earning their living by their own effort and through their own enterprise, shall abandon that way of living, and that they will abandon it for compensation, which they know is the vaguest thing that can possibly be described — a thing so vague that they have not the faintest idea what it will amount to; and he demands from the general public the sacrifice of conveniences and amenities to which they have been accustomed for years. He demands, in my opinion, so much sacrifice in that way that it is very doubtful if the Bill will be workable, so much sacrifice is the Minister demanding from the ordinary person living in this country and particularly from the farming community.

The Minister is compelling all that sacrifice in order to keep the company from bankruptcy. Now, the debenture shareholders have to be visualised as citizens of the State. Surely they have an interest, too, even if under bankruptcy their property or their investments were safe—surely they also have an interest in preventing such a catastrophe as the bankruptcy of the Great Southern Railways Company, Is the Minister taking too much liberty in saying that the debenture holders of the Great Southern Railways Company are not people who would object to some sacrifice for that end? It is to be remembered that we are all taking the liberty of saying that the objections of the farmers of the country and the people engaged in road transport must be overruled. In that respect I should like to remind Deputy Good that one investor is as much entitled to consideration as another. Deputy Good — I do not mean it in any offensive way — has not shown any great concern as to whether a man who invested £300 in a lorry in the past three or four years, shall get adequate compensation now that he is deprived of his living. Is a man who invest £300, with a view to making a decent existence for himself, not entitled to as much consideration as the man who puts £300 or £400 into debenture stock of the Great Southern Railways Company?

Professor Thrift

Certainly.

Mr. Moore

We must remember that the State has not shown up to the present any discouragement of that form of enterprise.

Mr. Good

The State is not writing down the value of his lorry by 50 per cent.

Mr. Moore

It may do so. It may be writing it down by 90 per cent. for all he knows. Remember that the State has given every encouragement to people like that to embark on such enterprise. We have spent, probably, £12,000,000 from a Government fund alone on the improvement of roads during the past ten or 12 years. That improvement was intended purposely, and is still intended, to encourage motor transport on the roads. And now, without warning, without consent from these people at all, we come along and say: "That type of enterprise must cease; we are going to take your business from you; we are going to take your livelihood from you; you have got to look in some other direction for a means of living, and we will give you certain compensation, but, with regard to the terms or the amount of that compensation, we can promise you nothing." In face of sacrifices of that kind, that are being demanded from a certain section, is it such a colossal thing to ask the debenture holders of the Great Southern Railways Company to agree to a reduction of their capital in this way?

As I said before, the debenture holders must be assumed to be citizens of the State anxious—particularly anxious — for the credit of the State — and surely it will redound to the credit of the State if we are able to prevent that big company, perhaps the biggest company in the country, from going bankrupt.

Mr. Good

I do not want to prevent the Deputy from completing his speech, but may I point out that there is a difference between voluntary action and compulsion? No mention, so far as I know, has been made to the debenture holders, nor has any request been made to them to reduce their capital. The Minister is there, and in all the discussions he has not told us that any attempt whatever has been made to approach the shareholders.

Mr. Lemass

That is not my fault.

Mr. Good

The Minister holds a pistol up to the heads of the debenture holders and says: "We are going to write down your capital by ten or 15 per cent."

Mr. Moore

I think that Deputy Good is overlooking the fact that a pistol is being held also to the heads of a great number of other people besides these.

Mr. Good

That is no justification.

Mr. Moore

I admit that it is not a desirable proceeding. I admit that it is not a good thing, but the alternative, I think, is not desirable either. As I have said previously, I doubt if any debenture holder, if it were put up to him, would prefer to realise his assets by the bankruptcy of this company rather than in this way. If it were put up to any debenture holder that he could only realise his assets either by the bankrupt way or this way, I doubt if he would say: "Give me the bankrupt way."

Professor Thrift

He ought to be allowed to be the judge anyway.

Mr. Moore

But remember that there are a great many people who ought to have been consulted, if it were possible to have consulted them. If it were possible to do so, it would be right under democratic rule to consult everyone concerned. I doubt if any such interference with the ordinary life of the ordinary family in the country was ever attempted before as is attempted, not so much under this Bill as under the Road Transport Bill. I do not think that any of us realises the extent to which it will affect the ordinary life of the people and I am inclined to think that the Minister has overdone it in that interference. But necessity knows no law and the consequences of the bankruptcy of that big concern will be so great that nearly all of us, I am sure, are prepared to agree that that bankruptcy must be avoided at all costs. In my opinion, looking at it in that way, so far from discouraging investors or people who are interested particularly in investments, I think that it will redound to the credit of the State and that its merit will be rather on the credit side of this country's investment attractions in the future.

Professor Thrift

I do not think I ever listened to such pessimistic speeches as those we have just heard from Deputy Moore and from the Minister. One would think that they were contemplating, as the ordinary course of things, that the state of trade and business is going to remain permanently at the low level to which it has been reduced during the last 12 months.

Mr. Lemass

Not in the last 12 months only.

Professor Thrift

I do not know any Deputy in the House who would have said 12 months ago that the Great Southern Railways Company was a bankrupt concern.

Mr. Lemass

The directors would have said it.

Mr. McGilligan

Look at the account for the year.

Professor Thrift

There was a question of their being able to pay the debenture interest; but I say with confidence that the abnormal state of things, this enforced depreciation of the capital of the shareholders and the debenture holders, and all this crisis in the affairs of the company was brought about by political action. I do not want to introduce anything extern into this debate.

Mr. Lemass

The necessity for this reorganisation of the finances of the company, the necessity for the provision of the other two Bills, were discussed by the directors of the company with me before the emergency situation arose and they agreed that reconstruction of the finances of the company was necessary.

Professor Thrift

Admitted! But the matter was one that demanded to be dealt with as a general transport problem. Nobody would have suggested that it was a situation that would require permanent depreciation of a trustee stock of the country. That situation has developed because of the entirely abnormal situation which prevails at present. I believe I am as amenable to reason as anyone, but it does not influence me, in the least, for the Minister to get up and say, time after time, "we were convinced this transport scheme must be associated with reconstruction." He stated that on Second Reading and he stated it several times since. It does not influence me one bit to have that reiterated. What I want to know is why is that so? I cannot see any way in which general ease in the transport situation is going to be effected by the carrying through of this reconstruction scheme. On the contrary, to my mind, it makes the whole trend of this remedial legislation nugatory. It interferes directly with the operations of these transport Bills and their likelihood of producing a permanent change in our general transport situation. I am not under any delusion in this matter, neither is the Minister nor Deputy Davin. These Bills — and I put them together for the moment — are not introduced for the benefit of the shareholders. They are introduced in order to unify and put on a proper footing our transport system.

The railways are necessary for our national life. There was danger that things would so develop, that the railway services would have to be curtailed so much that the number of railwaymen unemployed was likely to be increased more and more. That was the reason for these Bills, and for that reason I approve of these Bills. There was a hope that by these Bills some good might be done to put the railway system in a more stable condition. It was for that reason alone, and not for the benefit of the shareholders at all the Bills were introduced. Therefore, there is no point in the Minister trying to insist upon this as something that the railway company had to expect if they were to get the other measures. That is neither here nor there. It is not a bargain in which the railway companies have to give up something in order to get something. That is not what we want to secure. What we want is to get the transport service into a proper state. I agree with Deputy McGilligan and others that the only way to get that is to put the company into such a position that if necessary it can reconstruct itself; that it can put itself in such a state of stability that it may improve, and put itself into such a position that even if necessary it may be able to get fresh capital. To my mind that is as clear as daylight. I do not see how anyone can fail to see that if this reconstruction scheme is passed here it will absolutely prevent the raising of fresh capital. I do not see how any man in his senses is going to put up fresh capital for the Government to take it away. It will be said they have done it once and they may do it twice or three times if they want to. No one would be such a fool as to throw away money like that. In that way you are absolutely preventing the company developing itself or bringing about a unified transport system of its own motion apart from a measure like this.

This is a reconstruction scheme! Hold it up for twelve months. Give a chance of seeing if these other measures are capable of stabilising the company. Refrain from doing any harm. And you are going to do definite harm and, I am convinced, far more harm than you think by this measure. Again I appeal to the Minister to hesitate. There is no necessity for combining this reconstruction scheme with the other scheme. Hold up the reconstruction scheme for at least 12 months and give the company a chance to rehabilitate itself. I am not pessimistic enough to believe it is not going to rehabilitate itself or that it will not be able to raise money through its own shareholders. It will be found solvent if you do not put this reconstruction scheme through. Why cut down the debenture holders 15 per cent. and not cut off by 15 per cent. every other commitment to everyone else. You should no more pay the full 100 per cent. to ordinary creditors than pay it to debenture holders. The Minister made a small point against me in his reply, and it was the only point he made, that I might have been construed as saying that the debentures were losing capital. I know that the debentures are irredeemable, and, therefore, the debenture holder could not recover his £100 from the company, but that did not matter. He would get a permanent four per cent. as long as there was hope of its being permanent. His stock was valued at £84.

Mr. Lemass

The value in the market was £35. The value of the debenture stock never reached £85 since 1924.

Professor Thrift

I dare say but you forget everything that happened since 1914, and the 1924 Bill made things worse and worse as Deputy Dillon pointed out so well. This Bill is going to make the position worse. I appeal for time in this matter. Give the company a chance to get on its feet; do not attempt to force this reconstruction scheme through at the very worst crisis. Let us get back, partially at any rate, to the ordinary times before you do this. Again I say, there is no real reason for connecting this forced reconstruction with the other clauses of your Bill.

Mr. Davin

I am certainly not a financial expert, nor can I describe myself as having any great technical knowledge of this section of the Bill. I think everybody is in agreement with the Minister that reconstruction of the capital of the company is desirable and necessary, either now or as soon as it possibly can be brought about in the proper way.

Mr. McGilligan

Question!

Mr. Davin

What does the Deputy say?

Mr. McGilligan

I am only questioning that I agree with that.

Mr. Davin

The one thing that I am concerned with, being concerned about the future of the country as I am, is whether the scheme devised by the Minister and brought into the Bill is likely to prevent people putting into the company the new capital they require for reconstruction purposes. Deputy Dowdall said this reconstruction scheme was necessary in order that a reasonable dividend might be provided on the new capital. I do not know whether the Minister is in agreement with him or not. The most amazing comparison I heard in this debate came from Deputy Moore. He endeavoured to persuade Deputies that the person who is to-day the owner of a lorry worth £300, purchased on the hire-purchase system and paid for by the lorry owner out of revenue on the instalment system, is in the same position as the person who invested £300 in the debenture shares of the Great Southern Railways Company.

Mr. Moore

I made none of these qualifications.

Mr. Davin

That is the language which he used.

Mr. Moore

No.

Mr. Davin

That is the only inference to be drawn from the comparison which the Deputy made.

Mr. McGilligan

What about those who own their lorries?

Mr. Davin

I admit that a very small percentage of those engaged in road services paid for their lorries. Deputy McGilligan knows, and the Minister knows, that the majority of the single lorry owner-drivers, and a number of others who have two or three lorries, bought their lorries on the hire purchase system in England from the Leyland Motor Company and are paying for them on the instalment system. Surely there is no comparison between those who are going to be compensated as existing carriers under the Bill and people who put a certain amount of money into the debenture shares of the Great Southern Railways Company. The only thing I am concerned about, and personally I have a good deal of doubt about it, is in what respect the procedure proposed by the Minister is going to injure the future of the company. If the Minister came to the House and told us plainly that he was bringing forward this proposal for the reconstruction of the capital of the company fully convinced that within 12 months he was going to ask the House to hand over the property at the reduced figure to the State, to be worked by the State, then I would say there was some good reason for it. Is that in the Minister's mind? If that is at the back of his mind, let him have the courage to say so, and I will for that reason, if he gives that as a reason, say that there may be some justification for his action. I listened very carefully, without having any expert knowledge in a matter of this kind, without being in any way concerned in the matter other than being concerned as to the future financial stability of the country, to Deputy McGilligan, and I believe he made an unanswerable case against the procedure adopted by the Minister in this section. The Minister has made no attempt, as a matter of fact, to answer him, up to the present. Perhaps he will, before the debate concludes deal with the pertinent points made by Deputy McGilligan in his last speech.

Mr. McGilligan

I should like to add something to what I said previously arising out of what Deputy Moore said and what was said by Deputy Dowdall, who always asks what is the truth and will not wait for his answer. I want to stand on common ground with Deputy Moore in one thing, that I do not think the farming community have as yet realised what these two Bills mean to them. Putting the farming community in perspective first, and leaving the railway community — employees, shareholders, etc. — out of it, I do not believe the farming community yet realise what the Bills are going to do. I think undoubtedly they are going to suffer immediately, and if they do not suffer eventually it will be only because the railway company will reconstitute themselves with a decent transport system and that they will take over, not merely some lorries, but the lorry activity of the people whom they displace. Deputy Moore and I will probably have common ground in cur view that there is scant justice being done to some of these lorry owners. But let us leave that aside for the moment and concentrate on the greater good to the greater number in this community; the people who want goods transported with a certain amount of convenience, with certain small handlings, with certain reduced expenditure, and the certainty of arrival in a particularly short period. I do not believe for a moment that the farming community yet realise the change that is going to be worked to their detriment by the Bills. We ought to assist the railway company to lessen the harm that is likely to be done to the farming community and to lessen it in the shortest possible time. The only way the railway company can do that is by running an auxiliary road service to the rails they have. For that they will need capital.

I should like to take up Deputy Davin on the only point raised worth considering. We are speaking only of the debenture holders, of the people who put money into the debenture stock of the railway company. We are leaving the rest out of consideration. Are people going to be frightened off putting money into the new concern — and it will need new money if the farmers are not going to suffer very severe damage — after what is happening to the debenture stock? I think you have only to mention what is happening to the debenture stockholders to raise that fear. What good is it going to do the new company? Here is the point on which I want to take up Deputy Moore. Deputy Moore says that is what we did in the last couple of days to the lorry owner. We did not do this. We did not say that when the arbitrator comes to fix what is going to be given to the owner of a lorry that he cannot give more than 10 per cent. of the value or that he cannot give more than 50 per cent. We have, at any rate, avoided doing that to the lorry owner. Here we say with regard to the ordinary stockholder of the railway company: "You are written down to one-tenth of what you were originally," and so on up with the rest. We, at any rate, have refrained from doing that.

Mr. Lemass

There is a considerable difference between what it originally was and its present value.

Mr. McGilligan

The value does not matter at present. It is now only a question of the dividend to be paid. What is the harm to the new concern if there is not enough money to pay the ordinary stockholders on the old original capital? They get nothing; the same with the preference. We come to the debentures in the end. What is the saving in this? You are going to do all this harm. I think, undoubtedly, that you have only to mention this scheme to indicate the harm that is going to be done. What are we going to save? £50,000 a year. That is the saving on the debenture holders. Deputy Dowdall has left the House. He thinks it will enable new capital to come in, because, as the chairman said, out of £477,000 that has to be paid you are going to save £50,000 in the year. Deputy Dowdall will probably march into the Lobby and vote at any rate for the possibility of saving £20,000 a year to the new concern and, at any rate, putting on the new concern the possibility of having to pay back £100,000 capital lent to them. Now where is the special harm done to the railway company in asking them to keep faith with the debenture stockholders to the extent of this £50,000 that is to be saved?

This is a section of the Bill which I think inevitably means the destruction of the £20,000 receipts that are now coming in and may impose the necessity for paying back £100,000. There is the point that there is £50,000 saving. There is too much talk of it being a bankrupt concern. I am speaking now only in relation to the debenture holders. This year, a terrible year according to the chairman's statement, the total receipts were £3,172,000 and the expenditure was £2,767,000. The net income was £520,000. The amount required to pay debenture stockholders on the fixed charges was £477,000. There was a surplus shown here of £44,000, but there was £2,000 brought in from last year. On the year's working, however, there was a surplus of £42,000. There is a surplus nearly to the amount that is being saved in this, without breaking credit with the debenture stockholders, after paying the debenture stock. Why should we insist on breaking faith with these people and prevent their seizing on the assets of the company which is their legal right? Why should we insist that that is necessary at the moment?

The Minister said, in an interjection, that if the directors had not put this up, at any rate they had agreed to it and he asked further had there not been shareholders' meetings since? What does the chairman say about reconstruction? He said: "The Minister, in all our interviews with him, was insistent in his demands for reconstruction of the company's capital simultaneously with the enactment of any measures of relief." Here is the phrase the Minister makes his point about: "He contended that it was obviously hopeless ever again to earn any dividend for the greater number of our shareholders so long as their existing nominal capital values remained unaltered. The chairman added: "That was an undeniable contention." I asked previously that the circumstances in which the chairman was asked to agree to that contention should be declared. He certainly did not mean anything about the debenture shareholders, because he goes on to say: "We pointed out to him that any effective scheme of reconstruction must embrace the debenture holders who were in regular receipt of their full interest and whom we did not represent." Definitely I hold the view which the directors held, that they must cut out the debenture holders from any recommendations, agreements or submissions that the Minister put to them.

There were shareholders' meetings. I think there have been three different meetings of different groups of shareholders since the proposals were made. Does the Minister mean that the shareholders accepted this reconstruction of capital? I have hurriedly searched the various statements that were made and I cannot find anything by way of agreement with reconstruction of capital anywhere in these statements. I find one shareholder saying that "it was a great shame that their shares should be scrapped like that." Another said that "it was one of the most infamous Bills ever put before a legislative assembly. Such a scheme of legislative robbery was never heard of in any country." A third shareholder said that "the policy of the Government had been framed on the basis that they were the owners of the railway and that the interests of the shareholders were a secondary consideration." Another shareholder suggested to the Minister that "it was a leap in the dark to reconstruct the capital of the company until he had some data to go upon in relation to the improvements that he thought were going to arise from the new Bills. Those Bills had as their origin an attempt to give better revenue, but nobody knew what revenue they would give — whether they would increase or decrease revenue. Let them bide their time for two, three or four years to see what was the effect of these Bills before they seriously suggested to intelligent people that they wanted the capital cut down to a definite figure for which they had no data."

I do not know what the Minister's interjection about shareholders meant. As far as the chairman was concerned, he said the debenture holders were definitely out of this. Once the proposals came before them, put before them merely as guesswork, the shareholders almost to a man were against the proposals. The Minister has said that the directors were ready to agree to the suggestion of a reconstruction of capital. I would like to query the Minister a little bit on that point. The ordinary way in which a reconstruction of capital could be brought about would be by those interested in the concern promoting a private Bill. Was that ever suggested to the directors, and, if so, what answer was given? I think that the answer they would be bound to give is quite obvious. What happened at the shareholders' meeting must prove them to be good judges of their own people. Imagine the directors of the Great Southern Railways Company going before the two Houses of the Oireachtas to reduce the capital of the company and being met in the attempt to prove the preamble of the Bill by their own shareholders, which undoubtedly would be the position. Is that what the Minister means by saying that he got the directors in the end to agree to a reconstruction of capital, or does he mean that what he got them to agree to was that, if it had to be done, it had better be done by him than by them, because they could not face their shareholders on the matter?

There is another point. It was announced at the shareholders' meeting this year that there was a net income of £525,000, sufficient, at any rate, to pay the debenture stock. The chairman indicated that they had lost so much during the year. What did he say was the extra loss involved to the railways by reason of the economic war? A very moderate estimate of £100,000. Are we going to have this as a permanency in our economic lives in this country, this extra loss of £100,000? Will Deputy Davin think that, that being the situation, there is any case made at this moment for the writing down of the debenture stock to save £50,000 at a time when we are adding on certain other charges to the company? I want to refer here to the case which was made in a rather aggravated way, in regard to the 1924 Act. Deputy Good said, joined by Deputy Thrift, that the 1924 Act injured the company. That that Act injured the company I have grave doubts. The chairman was able to tell us this year that economies had been effected under the impact of the 1924 Act, so as to reduce their working expenses by £1,700,000 in a year, after compensation paid to employees. That £1,700,000 would pay a great many shareholders, not alone the debenture shareholders, but other people also. If there was a transfer of the old stock into stock of the new company what was the standard given to the outside impartial body established to determine the value of the stock? It was this, that they should give them a sufficient holding in the stock of the new company, that new company being declared to be one which had a certain standard revenue equal to the aggregate standard revenue of a particular named three years — not the best in the history of the railway company, but nearly the best. So far from writing down the value, that was an attempt to put an appreciated value on the transferred stock, the stocks transferred into the new company. The standard revenue has not worked out according to expectations, not by reason of anything that is in the 1924 Act, but by reason of new circumstances, new circumstances which the present Bills are designed to meet. Why not give them a chance?

I want to get back to where I am on common ground with Deputy Moore. I have made the point over and over again with regard to employees and I want to stress it with regard to those who first embarked their money into the most strongly guaranteed stock that a transport concern could give them. I want to stress the point with regard to those who put their money into debenture stock, those who really built the railways. Why should they not be given a chance to get back to their ancient positions, to remake their ancient positions? They may have to add on new capital, but you have a better chance of getting them to add something if you leave their old debenture stock as it is than you will have by merely putting forward here a scheme based expressly on guesswork without the authority of the directors and without any attempt to get into consultation with the debenture holders. Your proposal here is to write it down to a certain figure. I plead with Deputy Thrift that this move is not necessary. It has not been shown to be an essential part of the new scheme. The savings are inconsiderable in relation to the harm likely to be done.

If anybody has a right to get benefit from the new transport undertaking, it ought to be the people who long ago embarked their money in this way. I am not saying that these are the original holders — the people who are now in possession — but if there has been a change how has it been worked? Owing to the peculiar situation which developed with regard to this type of railway stock, in the main all stock is held for the people whose funds were in the possession of the courts of the country — orphans, widows, people whose property had to be taken care of for them, people who were, to some degree, by reason of age or infirmity or some particular position which is regarded as a weakness, placed in the position that their money had to be taken charge of and embarked on what was supposed to be gilt-edged, safe, untouchable securities. Now the Government say: "We are going to touch them and we are doing it at a time when we say we need new money for the rehabilitation of the new undertaking which we are going to build on the foundations of the old." I say it is unwise and unnecessary.

Mr. Kelly

It is with some temerity that I intervene in this debate. I am not a railway debenture holder, I am not a lawyer and I am not a railway worker. I am sorry to say I do not read Acts of Parliament. I have not read a single Act since I came in here. I did not intend to read them and I made up my mind that probably the best way to learn about Acts of Parliament was to wait for the debates and hear what had to be said for and against.

Mr. Moore

You must feel very lonely.

Mr. Kelly

Not a bit lonely. You may be bored here, and bored excessively I will admit, but you are never lonely. The opposite side suffers from too many lawyers. I have found during my lifetime that lawyers usually pretend they know everything about everything and everybody. That is the position over there. I am sorry for it because the lawyers there are intellectual men — there is no doubt about that. I like to listen to them sometimes. They are young men, most of them, and they have to make their way in the world and I take an interest in them from that standpoint. According to them, however, everything that is proposed by the Government here is bad. The Road Traffic Bill is bad, the control of road traffic is bad, the Railway Bill is bad, and the Cuts Bill is bad. I suppose Ole Bill would be bad, if he were here — he is the man who wrote about the things that happened during the war. How is it that intelligent, intellectual men go on with that sort of nonsense? Surely, if Ministers here propose a certain measure that the Opposition think is not a good measure, ought not the Opposition try to be constructive and show that they could produce a better measure?

I was taught a certain philosophy long ago by a man who said: "If your neighbour puts up a matchbox, you put up a better matchbox. If your neighbour puts up a henroost, you put up a better henroost." I offer that philosophy to the Deputies on the opposite benches. I am afraid, unfortunately, that their minds are warped. I do not mention this for the purpose of raising a laugh. It is a very old story, as old as I am myself. A man was indicted before the court for some offence. He said: "I am a poor man. I have no money for a lawyer." The judge said: "Well, then, I will appoint Mr. So and So to defend you.""In that case, my lord, I will plead guilty," said the man. Let me say that I am indicted before a court. I have committed burglary — perhaps that savours too much of adventure for me — or I have picked pockets or I have been drunk and disorderly and have beaten the police. The Cumann na nGaedheal lawyers are present in court. I say to the judge: "I am a poor man. I cannot afford to fee a lawyer." Then the judge says: "Prisoner at the Bar, I name Mr. Cumann na nGaedheal to defend you." I say immediately: "My lord, I plead guilty and I throw myself on the mercy of the court." That is safer for me because I am perfectly satisfied the Cumann na nGaedheal lawyer would say: "This man has been a back bencher of the Fianna Fáil Party and if he is not in jail he deserves to be. My defence of him will be such that, while he might get three months by throwing himself on the mercy of the court, he will probably get six or maybe 12 months if I defend him." That is the position in crude, probably ignorant, language. According to the lawyers over there, everything is bad. The Minister here is making an effort to try and rehabilitate what is admitted on all sides to be a decaying industry. He is doing his best and putting all the wisdom and strength at his command into the work.

Professor Thrift

The Deputy ought to help him.

Mr. Kelly

I could not. If I had his ability and knowledge I would try. According to Cumann na nGaedheal, nothing good can come from the Fianna Fáil Benches. Why do they not produce better? That is a fair challenge. They are here to serve the country, just as we are. If I were in the position of a Cumann na nGaedheal Deputy I would be prepared to say: "Fianna Fáil are over there and I am over here. The only chance I have of getting back is to show I have a constructive mind and that I am not always criticising." I have to be careful about my words here, but if I were outside the Chamber I would know the word I would like to use. I merely stood up out of charity. There is an abundance of charity on these benches and we never get credit for it. The charity on the opposite benches would fit into an egg-cup. If those men wish to serve their country better than they are now doing they would endeavour to show where our proposals are wrong and prove that they could do better.

I heard about the 1924 Act dealing with railways. A number of us were not here in 1924 and probably it is a good job for us. Whatever mess was made of the railways in 1924, the gentlemen over there who were then in power are responsible. Our man says: "This is my effort." Then from the opposite benches we have all sorts of destructive criticism. I have been sitting here a patient man for a long time and I am going to be patient no longer. We back benchers are looked upon as a lot of duds. People are beginning to say outside the House that all the intelligence is over there. We sit here and we want to do the work. That is what we came here for. I did not come here to make speeches. A quarter of an hour ago I had no more idea of making a speech than any of you here, but I cannot help it; I cannot stick it any longer. I am going to give you fair notice now that we are going to be very assertive for the future. We want our Ministers' work done. The only people whom we care about are the people who sent us here. If they say "You did not do your work well," then we are prepared to go out; but until they do say it we are going to help our Government as far as we can and we are going to stand up definitely against the great intellectuals over there who, unfortunately, are not doing much constructive work.

Mr. Lemass

This matter of the reorganisation of the Great Southern Railways' finances was discussed at considerable length during the course of the Second Reading debate and also this afternoon, and I do not think that any useful purpose could be served by taking the discussion further. It is quite clear that those Deputies who have spoken on the matter have already made up their own minds as to the attitude they are taking, and nothing that is likely to be said now will alter them. I want to get them right on the facts. First of all, as to the history of this proposal, I have this to say:— The directors of the Great Southern Railways came to me, in the first instance, and said their enterprise was in a bad way. They pointed out that since 1924 they have never succeeded in earning the very restricted standard revenue fixed by the Act of 1924. They pointed out that in the year 1932 money would not likely be available for the payment of interest and dividend on the debenture stock, if the full charge for the maintenance of the permanent way and the rolling stock was to be met.

They pointed out that for the arrears in respect of maintenance on the branch lines a sum of over £800,000 would have to be provided. They showed that the position of the company had been steadily deteriorating not last year but for a number of years past and they asked that certain legislative action should be taken. They asked that their competitors should be brought under very rigid control so that they would be in a position to put them out of business altogether. They asked that certain debts due to the State by the railway company should be cancelled. They asked that they should be released from the statutory undertakings which were imposed for the purpose of protecting public interests, and they made other requests too.

I said to them, as I have already said here to-night, that the majority of the things they asked were things that would have to be done in pursuance of any policy of transport reorganisation, but if they were to be done there should also be a reorganisation of the company's finances. I said that the main idea behind any scheme should be the provision of a transport system not so much with the view to the earning of dividends upon capital — the greater part of which was represented by assets no longer capable of earning revenue — as with a view to the better organisation of transport. The directors — not in a vague statement at an annual meeting this year — admitted to me in my office that a scheme of financial reorganisation was necessary and desirable. I told them that I would prefer to have that reorganisation of their finances undertaken by them and that we could secure the enactment here of the necessary provisions so as to give them the power to carry out that reconstruction. I told them definitely that it was the policy of this Government, over which it was prepared to stand, that the measure imposing these burdens upon the competitors of the railway company and the prospect of additional burdens upon a large number of people in this country would not be given effect to until the reorganisation of the finances took place. That is a matter of policy upon which division of opinion may exist. It happens to be the policy of this Government, and it is justifiable from every point of view.

The discussion on that particular matter took place long ago. It was not last week nor the week before. It took place well over six months ago for the first time, and there was considerable delay. It became quite clear to me that we would have to wait a long time for a reconstruction of the company's finances by that method. It was clear to me that the more straightforward scheme was the one we are now putting forward in this Bill because any scheme which the company would devise and which would be approved of by any class of shareholders would have to be as drastic as that in the Bill and probably much more drastic than that to meet the Government's views. I had intended saying here to-day, on Deputy Thrift's amendment, that in the event of any such proposal coming into operation and a scheme of reconstruction being considered by any tribunal, I would consider myself obliged to urge that having regard to the earnings of the company and the present market value of the different stocks and shares the reduction of the capital effected by the Bill was not sufficient and that in fact there should be a bigger reduction.

Professor Thrift

That amendment was not moved. In the event of the Minister not yielding anything that we asked for, I want to ask if he would be prepared to bring in an amendment of his own on Report Stage and get considered advice in the meantime. The position would have been well considered then?

Mr. Lemass

No. The details could not have been better considered than they have been. Supposing we called for proposals from financial advisers acting for the purpose, is there anything to prevent the very man who proposed this scheme in the Bill from being appointed and is there likely, in fact, to be a better financial proposal put before us?

Professor Thrift

Well, the financial advisers would have heard all parties anyhow.

Mr. Lemass

That is the position. It is a matter of Government policy and that is how it has come to be expressed in the form of the Bill now before the Dáil. Let us consider it from another line. The Deputies who spoke here to-night tried to make some point as to the possibility of the company requiring additional capital in the near future and urged that the adoption of the proposals in this Bill would prevent its getting that capital. Deputy Davin fell for that.

Mr. Davin

No, he expressed a doubt about it.

Mr. Lemass

If Deputy Davin believes that I would say that the proper place for him would be voting in the Division Lobby by the side of Deputy Good.

Mr. Davin

In the same place as the Minister found himself a few days ago.

Mr. Lemass

Is there any railway company in the world which would get fresh capital on a public issue now?

Mr. Dillon

If this policy is carried into effect, yes.

Mr. Lemass

Leave that policy out of consideration. Is there any railway company in the world in respect of which it can be said that fresh invested capital can be secured by a public issue?

Mr. Dillon

Of course, with monopoly.

Professor Thrift

They got it last year.

Mr. Lemass

The fact is that until the future of railway undertakings is more clearly known the prospect of any additional capital being raised for any railway enterprise is extremely doubtful, to say the least. The position, however, is that quite a number of industries of various kinds have carried out reconstruction schemes in recent years for the purpose of putting themselves in the position of raising fresh capital. Of course, we will be told that these reconstruction schemes were approved by the shareholders. What does that mean? In the majority of cases, the approval of the shareholders was purely formal, as the directors had prepared schemes for submission to the shareholders, and were able to ensure their acceptance. In so far as there was a minority, wherever there was a minority, it made no essential difference whether the reduction in the nominal values was effected by majority vote or by Acts of Parliament. As far as they were concerned, the effect of the change was the same. Still that action was taken in these cases to enable fresh capital to be raised, and I want to have it shown that the effect of leaving the Great Southern Railways finances unchanged is going to enable the company to raise additional capital before I am satisfied that that situation is not more likely to be achieved as a result of the measure before the Dáil. In any case we are in this position, that the proposal is an essential part of our railway and transport proposals. One part stands with the other, and I for one would not be prepared to recommend to the House, or to anyone, that these restrictions should be placed on road transport, or that additional burdens should be placed on the country and on the Exchequer for the benefit of the railway company, unless these essential measures of re-organisation were also adopted.

Mr. Davin

Who gave you the expert advice?

Mr. Lemass

What expert advice?

Mr. Davin

On the financial side.

Mr. Lemass

The proposals for financial reorganisation which appear in the Bill, as Deputies are aware, were originally drafted by financial experts selected by the directors of the Great Southern Railways. They came and asked me if they conformed to my ideas of what type the reorganisation should take place. They have said since that they had not considered them themselves and that they might have modified them. That, however, is a recent development.

Mr. Davin

You are taking the company's proposals.

Mr. Lemass

Until a better set of proposals is put forward. The proposals appear to me to be reasonable on the face of them, although I will admit, in relation to the minor stocks, that some modification will have to be made. We have asked for information from the railway company to enable us to decide what modification should be made. We have not got it. I am not at all clear as to the attitude of Deputies opposite. I do not know whether their view is that there should not be reorganisation, or that it should be delayed for a number of years. I am faced with the fact that those with intimate knowledge of the situation have agreed that reorganisation should be effected, or that there should be reorganisation concurrently with the scheme in these two Bills. If anyone has a proposal to make as to modification of the proposals in the Bill why are they keeping them to themselves?

Mr. Dillon

Did I not make a proposal to-day?

Mr. Lemass

The Deputy's proposal in effect was to postpone the thing indefinitely until the railway company was prepared to act itself. The Deputy referred to a guaranteed loan.

Mr. Dillon

I recognise that the Minister has had to face a great deal of work and a great deal of difficulty in connection with these Bills. I proposed to bring the debenture instrument up to date and to give the debenture holders a reasonable time to exercise their rights, so that they would not allow the whole transport system to be smashed, but to show that they were prepared to present a drastic reduction scheme on which the Government would be prepared to guarantee a loan.

Mr. Lemass

Why should we do that? I am saying to them that concurrently with the reorganisation of the capital we are prepared to enact legislation to put the railway company in a position in which they will be able to make the standard charges real charges. Deputy Good said that this Bill conferred no benefit on the railway company. The railway directors did not say that. Whatever these Bills may do when they become Acts of Parliament they will create the position in which the railway company will not have to cut standard charges to flitters. They will be able to make the standard charges the real charges and to estimate in relation to the volume of traffic what they can do.

Mr. McGilligan

What does that mean? Does it not mean raising them?

Mr. Lemass

It means raising them. In any circumstances if we are to have a sound transport reorganisation we must have higher charges, because the essence of the whole thing is that transport is being sold under the cost of production. Let us consider the position of the debenture holders. In essence what is the difference between the debenture stock and the guaranteed preference stock? No difference except that in certain circumstances the debenture holders can put in a receiver. Is it practical politics in any circumstances for the debenture holders to put in a receiver? The receiver cannot realise on the assets of the company. His only power would be to carry on the business until the arrears of interest were made good, and he would have to carry it on on sound business lines, making provision for depreciation and for the maintenance of the system. In present circumstances he would not be able to earn the debenture interest, much less the arrears of such interest. If he had power to realise on the assets, does anyone believe that he would realise £85 on every £100 worth of debentures? I do not like to quote the market value of these stocks, but we must appreciate the fact that that is some indication of the value of these stocks in the eyes of the commercial community. The capital of this company has been written down by the commercial community much more drastically than we propose. That is an argument on which no very great reliance can be placed, because of the smallness of the movement in the stock. Whatever value these stocks have in the markets would disappear entirely if there was any general movement to realise. In that connection I would like Deputies to realise that a very large number of the debenture holders and of the other classes of shareholders bought their holdings on the market at prices substantially less than the nominal values to which these stocks are reduced by the Bill. I have mentioned the matter of the minor stocks. The priority of the charge on the Great Southern Railways for the City of Dublin Junction Guaranteed Stock is one point on which we are seeking additional information which has not been supplied by the railway company. In that connection, and in connection with the other stocks mentioned, I agree that a case could be made for an amendment of the Bill, but a decision on that will not be possible until we get the information which is required and which was asked for. Those were the main points raised. It seems to me, however, that Deputies have got to be prepared to consider the proposals in these two Bills as a whole. It has got to be realised first of all that it is not possible to make distinctions and say "because this condition confers a benefit on the railway companies we are prepared to accept it, but because this one imposes some restriction we will reject it." The thing has to stand as a whole. It has to be borne in mind that the essential condition must be the bringing into existence in this country of a transport organisation not overburdened with capital liabilities to such an extent that proper provision cannot be made for maintenance and improvement of the services. If the railway company were to continue in existence with a nominal £26,000,000 capital it is undoubtedly correct that the natural inclination would be to secure from receipts the payment of dividends upon all classes of that capital before making any proper provision for maintenance or renewals. That is the position.

I am quite satisfied that in all the circumstances we are not doing any injustice to anybody. It is true that the debenture holders are suffering a comparatively small reduction in their interest payments, but their position is being improved in so far as the possibility of that interest continuing into the future is greatly strengthened. If there were any sound prospect of the 4 per cent. interest being payable for any number of years ahead those debenture stocks would not be quoted at 35 on the market. It is because the commercial community does not think there is any real prospect of the 4 per cent. being paid for any length of time that that value is put on the stock. The reduction of the interest payment and the reduction in the nominal value of the stock will somewhat diminish the yearly return, but the real value of the stock will be increased and the period over which the interest will be payable will be very considerably prolonged. In respect of the other classes of stock, the position is the same. The nominal value will be reduced, but the real value will be increased. In addition, we are going to get a transport organisation that will be economically sound, and consequently, can be conducted on an economic basis. That is why this section of the Bill is essential.

Mr. Dillon

I recognise the enormous burden under which the Minister for Industry and Commerce has been labouring during the last fortnight, and what a terrific strain it must have been to handle those Bills, but he cannot imagine that the reply he has made to this debate is in any way conclusive or adequate. What I would suggest is that the Report Stage of this Bill be postponed until after the Recess, in order that the Minister may have an opportunity of considering the very grave issues he is handling at the present time. I do not intend to be offensive or sarcastic. I recognise that the Minister has been acting under a terrific burden, but his reply has not met the points raised. All I am asking is that he will consider the desirability of postponing the Report Stage until after the Recess, so that he can give a considered judgment on the issues.

Mr. Lemass

I accept the Deputy's assurance that he did not intend to be offensive.

Question—"That Section 3, as amended, stand part of the Bill"— put.

The Committee divided:— Tá: 66; Níl: 42.

Tá

• Aiken, Frank.
• Bartley, Gerald.
• Beegan, Patrick.
• Blaney, Neal.
• Boland, Gerald.
• Bourke, Daniel.
• Brady, Brian.
• Breathnach, Cormac.
• Briscoe, Robert.
• Browne, William Frazer.
• Doherty, Joseph.
• Donnelly, Eamon.
• Dowdall, Thomas P.
• Flynn, John.
• Flynn, Stephen.
• Geoghegan, James.
• Gibbons, Seán.
• Goulding, John.
• Hales, Thomas.
• Harris, Thomas.
• Hayes, Seán.
• Houlihan, Patrick.
• Jordan, Stephen.
• Keely, Séamus P.
• Kehoe, Patrick.
• Kelly, James Patrick.
• Kelly, Thomas.
• Kennedy, Michael Joseph.
• Keyes, Michael.
• Killilea, Mark.
• Kilroy, Michael.
• Kissane, Eamonn.
• Lemass, Seán F.
• Carty, Frank.
• Concannon, Helena.
• Corish, Richard.
• Corkery, Daniel.
• Crowley, Fred Hugh.
• Crowley, Timothy.
• Daly, Denis.
• Derrig, Thomas.
• De Valera, Eamon.
• Doherty, Hugh.
• Little, Patrick John.
• Maguire, Conor Alexander.
• Moore, Séamus.
• Murphy, Patrick Stephen.
• Murphy, Timothy Joseph.
• Norton, William.
• O'Briain, Donnchadh.
• O'Grady, Seán.
• O'Kelly, Seán Thomas.
• O'Reilly, Matthew.
• Pattison, James P.
• Pearse, Margaret Mary.
• Rice, Edward.
• Ruttledge, Patrick Joseph.
• Ryan, James.
• Ryan, Martin.
• Ryan, Robert.
• Sheridan, Michael.
• Smith, Patrick.
• Traynor, Oscar.
• Victory, James.
• Walsh, Richard.
• Ward, Francis C. (Dr.)

Níl

• Alton, Ernest Henry.
• Beckett, James Walter.
• Belton, Patrick.
• Bennett, George Cecil.
• Bourke, Séamus.
• Broderick, William Joseph.
• Burke, Patrick.
• Byrne, Alfred.
• Costello, John Aloysius.
• Davis, Michael.
• Davitt, Robert Emmet.
• Dillon, James M.
• Dockrell, Henry Morgan.
• Doyle, Peadar S.
• Esmonde, Osmond Grattan.
• Finlay, John.
• Fitzgerald, Desmond.
• Fitzgerald-Kenney, James.
• Good, John.
• Holohan, Richard.
• Keating, John.
• McDonogh, Martin.
• MacEoin, Seán.
• McFadden, Michael Og.
• McGilligan, Patrick.
• McMenamin, Daniel.
• Minch, Sydney B.
• Morrisroe, James.
• Morrissey, Daniel.
• Mulcahy, Richard.
• Murphy, James Edward.
• O'Connor, Batt.
• O'Higgins, Thomas Francis.
• O'Leary, Daniel.
• O'Neill, Eamonn.
• O'Sullivan, John Marcus.
• Redmond, Bridget Mary.
• Reidy, James.
• Rice, Vincent.
• Roddy, Martin.
• Thrift, William Edward.
• Wall, Nicholas.

Tellers:—Tá: Deputies Little and Traynor; Níl: Deputies Doyle and Bennett.

Question declared carried.

Section 4 agreed to.

SECTION 5.

(1) As soon as conveniently may be after the passing of this Act, the Railway Tribunal shall reconsider the standard revenue (within the meaning of Section 53 of the Principal Act) of the company and, after hearing the Minister (if desirous of being heard) and all other parties desirous of being heard and appearing to the Railway Tribunal to be interested, the Railway Tribunal shall adjust and vary the said standard revenue to such extent (if any) and in such manner as appears to the Railway Tribunal to be just and equitable in consequence of the reconstruction of the capital of the company effected by this Act, and the Railway Tribunal shall fix the amount of the said standard revenue accordingly.

Mr. Lemass

I move amendment 13:—

In sub-section (1), line 52, after the word "accordingly" to add the words "and thereupon the standard revenue so fixed shall be the standard revenue of the company for the purposes of Section 53 of the Principal Act."

Section 5, as drafted, provided that a review of the standard charges might be made at the same time as the revision of the standard revenue consequent on the reduction of the capital. It is considered desirable, however, that some time should elapse to allow for a possible reconstruction of the Great Southern Railways system under Section 8 of the Bill. Amendments 13 and 14, therefore, provide for a postponement of the reviews of standard charges under Section 54 of the 1924 Act, and that in effect that it should commence to operate afresh under the new conditions created by this Bill and the Road Transport Bill, from the appointed day to be fixed by the Minister, which will, in all probability, be the day on which the capital reconstruction comes fully into operation.

Amendment agreed to.

Mr. Lemass

I move amendment 14:—

To delete sub-section (2), and substitute the following sub-section:—

(2) On the passing of this Act Section 54 of the Principal Act shall cease to have effect, and on such day as the Minister shall by order appoint to be the appointed day for the purpose of this sub-section the said Section 54 shall come into operation again, but with and subject to the following modifications, that is to say:—

(a) the expression "the standard revenue of the company" shall mean the standard revenue as fixed by the Railway Tribunal under this section, and

(b) the expression "the appointed day" shall mean the day which is appointed by the Minister under this sub-section to be the appointed day for the purpose of this sub-section.

Amendment agreed to.

Question proposed: "That Section 5, as amended, stand part of the Bill."

Mr. McGilligan

On the section, I want to know what it means even in its amended form. The section provides that "as soon as conveniently may be after the passing of this Act, the Railway Tribunal shall reconsider the standard revenue (within the meaning of Section 53 of the Principal Act)," and after hearing various people "the Railway Tribunal shall adjust and vary the said standard revenue to such extent (if any) and in such manner as appears to the Railway Tribunal to be just and equitable in consequence of the reconstruction of the capital of the company effected by this Act." What has the reconstruction of the capital of the company got to do with standard revenue? The Minister refers this to the Tribunal and refers to them standard revenue within the meaning of Section 53 of the Principal Act. But standard revenue, as reviewed by the Tribunal, was never a question of the distribution of the moneys. It is a question of the receipts that were to be earned, not the purpose of them. The terms of reference laid down for the Tribunal was that the standard charges were to be such as would "so far as practicable yield, with efficient and economical working and management, an annual net revenue (hereinafter referred to as the standard revenue) equivalent to the average annual aggregate net revenue for the three years of account ended next before the 1st day of January, 1914." That is not changed. Therefore, if the standard revenue remains the same as before, what is the idea of referring this in relation to the reconstruction of the capital? The reconstruction of the capital only affects the distribution of the receipts. The standard revenue has to be fixed without any relation to distribution at all.

Mr. Lemass

That is not quite correct. As the Deputy is aware, standard revenue has never been earned and there appears to be no prospect of its being earned. In fact, the railway holds that no system of charges which can be devised could meet the case. We think that the reconstruction of capital is a suitable opportunity of having the standard revenue reduced so that a new standard revenue will be fixed which will be within the company's ability to earn and which will have, of course, some definite relation to the prior charges and the total capital commitments of the company.

Mr. McGilligan

Does the Minister say that the Railway Tribunal will fix it?

Mr. Lemass

What we say is that, in consequence of the reconstruction of capital, the Railway Tribunal shall reconsider the standard revenue and adjust it accordingly.

Mr. McGilligan

But you have defined what standard revenue is. It really means something over £1,000,000. That amount was not determined in relation to so much for debenture, so much for preference and so much for ordinary shareholders. It simply was how much was earned— what was the net aggregate income earned in three years, and the railway said "take that as a fixed standard." You do not say that another standard should be taken.

Mr. Dillon

In Section 5, sub-section (2) (a).

Mr. McGilligan

That is wiped out by a new amendment. I do not think that the amendment changes it.

Mr. Lemass

The standard revenue which was fixed had relation to the revenue of the company in the years to which the Deputy referred. In these years a certain proportion of the revenue of the Company was paid in dividends to the shareholders. It was the amount required for various charges and to pay dividends. In view of the fact that the capital has been reconstructed we think there should be a review of the standard revenue. We tell them to review the standard revenue in whatever manner they think to be just and equitable in consequence of this reconstruction of the capital. That is the intention. It is possible that the drafting is defective, but if it is defective we can have it examined. However, the intention is to vary the revenue in such a manner as would appear just and equitable.

Mr. McGilligan

That may be the intention, but, if so, I think the intention is not carried out. Originally, it was given one test only. Section 53 of the Principal Act says that what is called revenue is "the equivalent to the average annual aggregate net revenue for the three years of account ended next before the first day of January, 1914." That is, in fact, a sum of about £1,000,000. They are the terms of reference of the Railway Tribunal. Standard revenue is £1,000,000. You do not say because they have to pay X, Y and Z £1,000,000, as if it was tightly tied up. You say "within the meaning of Section 53 of the Principal Act"; and then you say the only standard for adjudication is what was earned in three years irrespective of what it was equivalent to, and anybody would say that that same sum can still be your standard. The standard revenue still stands. At least, the criterion by which it was arrived at still stands.

Mr. Lemass

I do not think so. The Railway Tribunal fixed £1,000,000, or whatever the sum may be. Having determined to reconsider the standard revenue "the Railway Tribunal shall adjust and vary the said standard revenue to such extent (if any) and in such manner as appears to the Railway Tribunal to be just and equitable in consequence of the reconstruction of the capital." I think the meaning would be clear if the words "in consequence of the reconstruction of the capital" went in after the word "tribunal," so that it should read "the Railway Tribunal in consequence of the reconstruction of the capital shall adjust and vary the said standard revenue to such extent (if any) and in such manner as appears to the Railway Tribunal to be just and equitable." But I think it is quite clear that they shall adjust the standard revenue which was previously fixed at £1,100,000.

Mr. McGilligan

And which had no relation to commitments.

Mr. Lemass

No; we are asking them now to vary the standard revenue in consequence of this reorganisation of the capital.

Mr. Dillon

Does that entitle me as a merchant or trader to ask the Railway Tribunal to fix rates at a level based on this calculation? The standard revenue on the old capital was £1,100,000 when the capital stood at £25,000,000. You have reduced the capital now to, say, £10,000,000. Am I entitled to say that the Railway Tribunal should fix the standard rate accordingly?

Mr. Lemass

No. The Railway Tribunal may decide to make no change. The Railway Tribunal, which is a court, will adjust and vary the standard revenue in a manner which appears just and equitable to the Tribunal.

Mr. Dillon

Surely that is a function of the Railway Tribunal, and the merchant or customer has rights before that Tribunal. They can go in and argue before the Tribunal?

Mr. Lemass

But that has no relation to rates.

Mr. Dillon

I take it that rates are arrived at in consideration of the standard revenue.

Mr. Lemass

Rates are fixed so as to produce the standard revenue.

Mr. Dillon

Say that heretofore you were entitled to grant the Railway Company a rate on this class of merchandise to raise a revenue of £1,100,000. Now, correlate the new capital with standard revenue and standard revenue should be no more than £450,000. Therefore, we submit that the customer is entitled to a benefit under that and to expect a proportionately lower rate. Can the customer say that?

Mr. McGilligan

I do not think he can say anything about the standard revenue. It is still fixed by the old criterion.

Mr. Dillon

But here it can only mean that the Dáil has in mind to establish some kind of relation between the sum of £1,100,000 and the sum of the capital. I say, as a customer of the Railway Company, can I go and say "in view of this reduction, you ought to reduce my rates." I thought that a customer had a right to go to the Railway Tribunal on a matter of rates.

Mr. McGilligan

That is, if they think that your appearance is relevant at all to the subject.

Mr. Dillon

I am only arguing that if you look at it in the light of capital reduction which is suggested by the legislature, that when they reduce the capital the legislature expects them to reduce the rates.

Mr. Lemass

There is no obligation on the Railway Tribunal to accept, the argument.

Mr. Dillon

How is the Minister satisfied that there is no obligation?

Mr. Lemass

The Railway Tribunal shall reconsider the standard revenue after hearing the Minister and all other parties desirous of being heard and shall adjust and vary the standard revenue in whatever manner appears to the Tribunal just and equitable in consequence of the reconstruction of the capital.

Mr. McGilligan

That means in consequence of something that never entered into their heads before when they were fixing standard revenue. I do not see how the argument can even be heard by the Railway Tribunal. Deputy Dillon is going into an extreme case. I do not deny his locus standi as a man to argue before the Tribunal, but I doubt if that argument is relevant. Supposing we said that they should vary it because we want the money to go on a prolonged spree for a number of years. They would refuse that because they would say that that was never any part of their calculations when they were putting up standard revenue. The revenue is still £1,000,000 a year. It is a complete matter of irrelevance if you say to the Tribunal: "Remember, we are not having so much of that £1,000,000 spent in commitments to shareholders." The Tribunal would be right to say: "We never considered that before and we do not think we are bound to consider it now." All we were bound to consider was what did the railway earn in the three named years. Their earnings are changed. We are on another foot now as to how the earnings are going to be distributed.

Mr. Moore

I think it is more reasonable to take the implied interpretation of Deputy Dillon that that £1,000,000 a year was decided upon because of the demands of the company; they had to meet the debenture interest and so on.

Mr. McGilligan

It was not.

Mr. Moore

It would be extraordinary if a purely arbitrary figure of £1,000,000 was taken.

Mr. McGilligan

The Deputy has not read Section 53 of the Act of 1924. There are to be charges called the standard charges and it was provided:

The standard charges to be fixed in the first instance for the amalgamated company shall be such as will, together with the other sources of revenue, in the opinion of the Railway Tribunal, so far as practicable yield, with efficient and economical working and management, an annual net revenue (hereinafter referred to as the standard revenue) equivalent to the average annual aggregate net revenue for the three years of account ended next before the 1st day of January, 1914...

And they considered what that was. They did not bother their heads how it was to be distributed. They concerned themselves with what was the net revenue.

Mr. Dillon

What are the standard charges referred to in paragraph (b), Section 5 of the Bill?

Mr. Lemass

The charges fixed by the Railway Tribunal for the different classes of goods having regard to standard revenue.

Mr. Dillon

If I come in, can I appeal against the railway company on the ground that the charges that they were entitled to make for the carriage of Indian meal were higher than the rate of the standard revenue?

Must the Railway Tribunal then fix the charge? The section begins by stating that the Railway Tribunal may reconsider the standard revenue of the company and the Tribunal shall adjust and vary the said standard revenue to such an extent as appears to be just and equitable, in consequence of the reconstruction of the capital of the company. We all know how the standard revenue was arrived at, by taking the three years' average, and now it is £1,000,000; they go on to say that the standard revenue will be the revenue for the purposes of Sections 53 and 54 of the Act of 1924. Will paragraph (b) of sub-section (2) of the Bill apply? It says: "The Railway Tribunal may, concurrently with the reconsideration of the said standard revenue of the company in pursuance of this section review the standard charges and exceptional charges... and make such (if any) modification of such charges or any of them as the Railway Tribunal shall consider to be proper..."?

Mr. Lemass

No.

Mr. Dillon

That is gone then.

Mr. McGilligan

Amendment 14 comes in and replaces sub-section (2) of the Bill.

Mr. Dillon

The whole of that is gone then? Paragraph (b) of sub-section (2) brings in a reference to charges and seems to invite the Railway Tribunal to vary the charges. There is no other section dealing with this.

Mr. Lemass

There is a provision for an annual or periodical review of the charges. We say that there is no need for a review — until the reorganisation has taken place.

Mr. Dillon

Then what appears in paragraph (b) that the Railway Tribunal may review the standard charges and exceptional charges is not reproduced anywhere else and that gives me the right to come in.

Mr. Lemass

There will be a review of the charges under Section 54 of the Railways Act of 1924.

Mr. McGilligan

There will be a review and the Deputy would be entitled to appear as a trader.

Mr. Dillon

But not linked up with Section 5 of the new Bill. I am merely throwing out the suggestion for examination but I submit a strong case might be made that the Railway Tribunal must review the standard charges if it is to be just and equitable. They are further bound to review the standard charges and to fix them justly and equitably on a new basis. Am I entitled to say that the standard charges for Indian meal, for instance, are so and so and must be reduced in proportion to standard revenue?

Mr. Conor Maguire

Since the Act came into force the standard charges have never been earned, that is the standard charges under Section 53 of the Act of 1924.

Mr. McGilligan

They are all sufficient, but they were never charged. The standard charges would bring in the revenue.

Mr. Conor Maguire

That may be but the railway company never earned them.

Mr. McGilligan

That is quite right.

Mr. Maguire

I think Deputy McGilligan is wrong in saying that the Tribunal is tied up with regard to standard charges. There is no inconsistency in providing, as is done under the new Section 5, that having regard to a lesser sum, they would have to provide the interest on the new capital. The standard revenue would have to be reviewed by the Railway Tribunal and that, I take it, is the object of the new section. The Railway Tribunal are quite right to reduce the standard revenue by such an amount as would be necessary to provide dividends on the stock.

Mr. Dillon

Then am I entitled as a trader using the railway to come in and claim that the standard charges should be reduced?

Mr. Conor Maguire

If the Railway Company were earning the standard revenue, at the moment, and if the reduction contemplated by this section took place, then, I take it, the Railway Tribunal would hear such an application as the Deputy mentions, and he would be entitled to have a review of the charges as to bringing down the railway company again to the standard revenue.

Mr. Dillon

What happened here is that the standard revenue was fixed, and the Tribunal had to keep the standard revenue in mind in fixing the charges. In fact, the standard charges were never realised. It gives me the right to throw my merchandise upon the railway and insist upon having it carried. I am suggesting that, in the new dispensation, I can go to the Railway Tribunal, and get them to bring down the standard charges to a level that will correspond with the new revenue and force the railway company to carry my merchandise at the reduced rates.

Mr. McGilligan

The Deputy can try. He can argue that before the Railway Tribunal.

Mr. Dillon

The section does not put any obligation upon the Railway Tribunal to do justice by me.

Mr. Lemass

They must take into account whether the charges are going to yield the standard revenue.

Mr. Dillon

What is going to be the standard revenue under the new conditions? We knew what it was before. It was a fixed sum.

Mr. McGilligan

And it will be known again. I still hold to my contention that there is a completely irrelevant matter being dragged before the Tribunal. They were to find out the particular sum earned during the three years as standard revenue in order to fix the charges. It is a matter of considerable difficulty to fix charges, of course, because of the variation up and down between classes of merchandise. Still it was done. Now we are getting in a new consideration. The Railway Tribunal is entitled to say: "We had not this before us in the first instance. If we are to get in the new consideration, we have to readjust the whole thing on the footing of that consideration." What does that mean? If they take this at all, which I still doubt, they will have to have before their minds as an order from the Oireachtas that the first purpose of the standard revenue is to pay dividends. What did the £1,100,000 pay? It certainly paid full dividends on the debentures and the guaranteed stock down to the ordinary stockholders. What did it pay to them? Considerable dividends. Are they now to say: "Very good, the ordinary stock is reduced to one-tenth; divide that by ten." The old amount used to go before to the provision of certain dividend to them and similarly all along the line with the other ones. That is Deputy Dillon's point. We must make up our minds to stand somewhere or another. Previously we did give the Railway Tribunal something fixed to go by — to find out what was earned in certain years and by that measure fix the standard charges. Now it is like mixing two completely distinct elements. They are to remember the old standard revenue and remember something that they never took into consideration before and that was not before them when they fixed the standard revenue — the distribution of the standard revenue. We have to say: "Stand entirely on that foot for the future; think of how near to 100 per cent. payments the £1,100,000 allowed to all the guaranteed shareholders and find out what additional it allowed, in fact, to be paid to the ordinary shareholders, and revalue that according to the reconstruction of the capital." If that is the case the Minister's statement that standard revenue is going to be more real and mean charges being put up I do not think will be borne out.

Mr. Lemass

When I said the charges might be increased I meant that there would not be the same number of exceptional charges. At the present time, the standard charges are being departed from considerably and, in fact, the railway company are continually making application for leave to charge exceptional rates. The number of these exceptional rates is very great, and it is the fact that these rates are being charged that has cut the revenue down. With the new situation the necessity to quote exceptional rates in order to get traffic will not be there and, consequently, the standard charges will be a reality.

Mr. McGilligan

There is a change that can be made in either of two ways; either the standard charges will, in fact, become exceptional ones, or the exceptional ones will be raised to some point higher, so as to be nearer to the standard charges laid down by the Tribunal. The Minister indicated that there was going to be an increase in actual charges made to the public. Does he think there will? The new terms of reference to the Tribunal are to cut down that old £1,100,000, after thinking of what it supplied in the way of dividends, in relation to the new moneys which under this will be payable to the stockholders. Supposing there is only one element that is variable in this. All the classes scheduled here are named percentages with the exception of the ordinary stock — the North Wall Extension Line Stock; the City of Dublin Junction Railways Stocks. There is only one of these material — the ordinary stock. Supposing the £1,100,000 that was paid in the years of account ending 1st January, 1914, after meeting all the other stockholders in full, allowed a payment of four per cent. to the ordinary stockholder. Does that mean that the Railway Tribunal have now to go back and say: "Very good, the stock paid four per cent. in 1914. We will take, as one element in the calculation, what will give four per cent. on one-tenth of this stock, and so on up along the line with all the other stocks"? Is that what is meant or what is meant? Where are we between the two things?

Mr. Lemass

What is meant is that the Railway Tribunal is being asked, in view of this reorganisation of the capital, to reconsider the standard revenue, and, because of that reorganisation, fix whatever standard revenue appears to be just and equitable. It probably will mean the reduction of standard revenue, but the reduction need not be in exactly the same proportion as the reduction in the total capital. There are obviously a number of considerations to be taken into account by the Railway Tribunal in making the calculation.

Mr. McGilligan

Here is the four per cent. guaranteed preference stock reduced by 50 per cent. The Railway Tribunal are asked to reduce the standard revenue from what it was and remember when doing it the reduction in capital. They will look at this and say: "The Oireachtas, in their wisdom, have decided that the four per cent. guaranteed preference stockholders should only be paid as if every £100 was worth £50. £1,100,000 used to give four per cent. on the entire amount. We will give four per cent. on half the amount." Surely that is just and equitable from the point of view of the Railway Tribunal. Or are the Tribunal to say: "We think the Oireachtas were unduly harsh towards those people"? You have gone completely away from the three years of account ending 1st January, 1914. You are on some new footing, and the only thing you have added to that, reversing this, is what is to be just and equitable in view of the reconstruction. Surely they have to take the reconstruction as it comes from the Oireachtas — such and such a stock cut down 50 per cent., something reduced to one-tenth. I get back to my first point, and I should like the Minister to have a further look at this and see can the Railway Tribunal take this into consideration at all. Are they not tied to the old standard revenue fixed for the three years of account and after that, if you let in this idea of reconstruction of capital, how can you prevent the Railway Tribunal from considering as just and equitable a reduction corresponding to the reduction in the value of the capital stocks which we have degraded? Surely it is the obvious thing to do.

Mr. Good

May I point out to the Minister that the standard revenue was fixed as a revenue which was really to guide the Tribunal in fixing the rates. Owing to the conditions that prevailed the standard revenue was never reached and the whole thing became a farce. What was the report of the Tribunal as recently as July last? They stated that the net revenue for 1931 was £499,455, practically half a million below the standard. The standard net revenue had been fixed at £1,169,899. In other words, that the revenue in 1931 was only, in approximate figures, half the standard revenue. They go on to say that they are satisfied that

"No modification of the present rates and charges as fixed by the Tribunal would assist the company to a nearer approach to the standard revenue."

In other words, while trade is so depressed and while the volume of traffic is small, it is useless to try to fix or to get a nearer approach to the standard revenue. Now, let us look at the proposition of fixing in the near future, while those conditions still prevail, any standard revenue. The one was fixed so high that the revenue could not approach it and, if you are going to fix another standard revenue when conditions are very depressed, you will get to the other end and you will have some difficulty. I suggest to the Minister, in view of what the Tribunal has said, that it would be exceedingly unwise while these abnormal conditions prevail——

Mr. Lemass

The abnormal conditions will not enter into it.

Mr. Good

Why?

Mr. Lemass

The only two factors that enter into it are (1), the standard of revenue that was fixed under Section 53 of the Act and (2), the reconstruction of capital that is taking place. They have no relation whatever to the present abnormal conditions whatever they may be.

Mr. Good

Does the Minister not agree that the volume of traffic which produced the revenue is an important factor?

Mr. Lemass

Yes.

Mr. Good

Let the Minister carefully consider——

Mr. Lemass

That is something which will be taken into account in fixing the charges and not the revenue.

Mr. Good

The volume of traffic must be taken into account.

Mr. Lemass

In fixing the charges.

Mr. Good

Quite so, and in fixing the standard rate.

Mr. Lemass

No.

Mr. McGilligan

In fixing the rate, yes.

Mr. Lemass

Yes.

Mr. Good

The difficulty before was that the volume of trade had fallen and, consequently, the income was depressed. While those abnormal conditions prevail, what is the use of fixing standard charges?

Mr. Lemass

The question that is being raised is revenue. What I said before and what I repeat now is that, although the standard revenue may be reduced, in consequence of this reorganisation of the company's finances, it is not likely that the rates will be reduced because the rates, having regard to the volume of traffic, have not been able to yield the standard revenue, and, right from the beginning, the point of view was taken that the standard revenue could not be secured and rates were not, in fact, fixed for that purpose because of the point of view that was then held — that the volume of traffic offered was such that no system of rates could produce the standard revenue in so far as the increase that would appear necessary to get increased revenue would stop the traffic and thus defeat its own end.

The rates were fixed at the level that traffic could bear — the highest rate that could operate and still allow traffic to move — but no system of fixation on that basis was capable of yielding the standard revenue and that is why I say that, even though the standard revenue may be reduced, the rates are not likely to be reduced because the old rates, unable to yield the old revenue, may also be unable to yield the new revenue and, certainly, will not be able to yield more.

Mr. Dillon

Was there not a statutory obligation on the Railway Tribunal to fix standard rates?

Mr. McGilligan

There was the phrase "so far as practicable."

Mr. Lemass

And the Railway Tribunal reported that they could not do it.

Mr. Dillon

And it became a common practice to apply for exceptional rates and to drop below the standard rate?

Mr. Lemass

The railway company itself applied for liberty——

Mr. Dillon

Then, this saving phrase "so far as practicable" will become sterile because, if you reduce the standard revenue in proportion to the capital reduction, the standard rates will come into operation again and the Railway Tribunal will be constrained to fix a standard rate no higher than will produce the new standard revenue. That will be the standard. Is that not so? They would be constrained to fix the rates no higher than will produce the standard revenue and I, as a trader, can go in and insist on the standard rate being brought to a level which will reduce the standard revenue.

Mr. Lemass

The Deputy will bear in mind that the standard rate last year only produced the revenue that Deputy McGilligan has quoted.

Mr. Dillon

The cut rates which are operating produced it because, once you fix the standard rate below, I, as a merchant, can go in and take advantage of it.

Mr. McGilligan

It depends on what you mean by standard rate.

Progress reported.

Committee to sit again to-morrow.

The Dáil adjourned at 10.30 p.m. until 3 p.m. on Thursday, April 6th.