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Dáil Éireann debate -
Tuesday, 19 Sep 1944

Vol. 94 No. 9

Private Deputies' Business. - Transport (No. 2) Bill, 1944—Committee Stage (Resumed).

Question proposed: "That Section 8 stand part of the Bill."

My object in attempting to amend this section was to secure that the company to be formed would not be owned by persons who are common stockholders of the Great Southern Railways on the establishment date, or whatever other date is arranged. The only satisfactory way, in my opinion, in which the transport situation could be dealt with here is the way which apparently the present managing director and the Minister thought up to about September, 1943, that is, that the company would be bought over, that the stockholders would be compensated in whatever was a reasonable manner for their interest in the company at the particular time and that some form of public organisation or machinery would take it over and run it either on the basis of the Electricity Supply Board or as a State business. When we are asked, with the limited information at our disposal, to pass this section, the House is entitled to know what were the circumstances which caused the change of mind on the part of the Minister.

The Minister considers that I misinterpret some of the statements published in the Press. I submitted, when speaking on the Money Resolution, that, up to September, 1943, the Minister was of opinion that the Great Southern Railways shareholders should be bought out and that a company of £10,000,000 should be formed to buy them out; that it was a Civil Service idea that the company should be a £20,000,000 company and, instead of a buying out, there should be a conversion, which would leave the company in the possession of the present stockholders, and that the Government, when they considered the matter, would take no more responsibility in a positive way for it except to say that they had no objection to the proposal.

First and foremost, I think it is up to the Minister to deny that what is implied here with regard to the original idea of a £10,000,000 company is correct. If he does not deny it, it is certainly due to the House, considering the importance of the measure, that he should explain why he changed his mind. In the report of the Minister's evidence before the tribunal into Great Southern Railways stock transactions in the Independent of 14th March, 1944, the Minister is reported as saying:—

"At the earlier stages, the reorganisation contemplated was a company with a capital of £10,000,000 to acquire compulsorily the Great Southern Railways."

In his evidence, as reported in the Irish Press of 22nd February, 1944, Mr. Reynolds was somewhat more explicit. He is reported as saying:—

"He suggested the adoption of a seven-year plan and the formation of a new statutory company with a capital of £10,000,000, this company to buy out the Great Southern Railways. He pointed out that during the period of reconstruction the new company would not be able to earn enough to pay interest on its stock and that the Government should be prepared to guarantee interest for a number of years."

That was the outlook with regard to the £10,000,000 company. In reply to the chairman of the tribunal, who said, by way of question: "And that there should be a statutory company with a capital of £10,000,000?" the Minister replied:—

"That was the tentative idea about the time. He received the memorandum from ...."

and then follows the name of an official who was the Assistance Secretary of the Department—

"....on September 6th, and the confidential file on September 8th. The change in the plan came about this time, and the new proposals were more favourable to the shareholders."

The Secretary of the Department is somewhat more explicit with regard to the change. In the Irish Press of 22nd February, 1944, the Secretary of the Department is reported as having stated that

"On 20th September, he had a protracted conversation with ...."

a named official

"....who proposed a conversion scheme as a basis of discussion. As a result of this Mr. Reynolds handed over to...."

the named official

"....a draft letter and circular, the circular being a circular to shareholders containing an outline of the proposed proceedings. After a discussion, the letter was revised and the circular and letter were given to...."

the named official.

Again, the Minister is reported in the Independent of 14th March as having said:—

"The file remained in his office from July 14th, until early in August, 1943, when it was given to the Assistant Secretary of the Department, after a consultation with the Secretary and himself, and the Assistant Secretary was instructed to arrange a meeting with Mr. Reynolds. The Assistant Secretary added a minute in September suggesting a company with a capital of £20,000,000 in redeemable bonds. There were further consultations with the Secretary and the Assistant Secretary on September 7th and September 23rd in which the question of reorganisation was discussed, and he indicated his views, which were conveyed to Mr. Reynolds.

"On October 8th, the Department brought to him a letter from Mr. Reynolds and a draft circular which Mr. Reynolds proposed to submit to shareholders. The Secretary and the Assistant Secretary retained the confidential file as far as he could recollect, and finally Mr. Reynolds's draft circular and a draft memorandum to the Government were approved by him (the Minister) and he issued a certificate on October 12th to enable it to be brought before the Government. It was considered at meetings of the Government on October 15 and 19, and the Government authorised him to say that they had no objection to the proposals."

"...to the proposals"—p-r-o-p-o-s-a-l-s. It is on these reports which have reached the public through the Press of evidence given before the tribunal that I say that our information, so far as it goes, is that until it was proposed from the Civil Service, in September, 1943, that there should be a £20,000,000 company which would convert the stock of the Great Southern Railways and apparently leave possession of the company in the holders of the ordinary stock, both the managing director of the railways and the Minister were apparently working with the conviction in their minds that the best thing to do was to buy out the Great Southern Railways and to buy it out for £10,000,000.

I think we are entitled to ask here what were the considerations that brought about that particular change. Again, we are entitled, I think, to be entirely against this section when we go further into the matter and see what kind is the company to which possession of the present assets and all this new capital are to be given. In the Irish Independent of Saturday, 22nd February, 1941, a letter appeared arising out of some discussions that had taken place here, initiated by Deputy Davin, on the non-publication of the tribunal report of 1939, and some comments made editorially by the Irish Independent on the previous day. The then Minister for Industry and Commerce (Mr. MacEntee) discussed the attitude of the Irish Independent, which at that time considered that because of the misfortunes that had befallen the railways, some of which, in their opinion, were attributable to the Government, the Government should assist the railways. The then Minister for Industry and Commerce wrote this:—

"But the real gravamen in this matter is the attempt which is being made by your journal to push on to the shoulders of the tax-paying community in general what is mainly the responsibility of those immediately associated with the Great Southern Railways Company. The problem in that regard is stated quite baldly in the following excerpt from the last report of the Great Southern Railways."

There are then given the revenue receipts and expenditure, and certain other figures for 1940, winding up with:—

"The loss on working for the year 1940 was £44,761."

The then Minister for Industry and Commerce continued:—

"Those immediately responsible for this situation are not the Government, nor the tax-payers, but the directors, shareholders and staff of the railways. These are the parties upon whom the primary and immediate responsibility rests for setting things right. As I have no doubt your newspaper has a great deal of influence with them, why not advise them to get together and try to do that without delay?"

According to the Minister for Industry and Commerce for the time being in February, 1944, the people responsible for the condition in which the Great Southern Railways was were the directors, the shareholders and the staff of the company. But their handiwork, reflected on in that particular way by the Minister, was not confined entirely to the losses in the year 1940. The Minister said the loss on working was £44,761. The report issued by the Tribunal of Inquiry into Public Transport in 1939 publishes a statement of the receipts and expenditure of the Great Southern Railways Company— the whole undertaking—for the years 1925 to 1938. These figures have been analysed by the Council of the Cork Chamber of Commerce which, in a brochure just issued, has directed attention to the general position of the Great Southern Railways Company in the past, and the present proposal.

Based on the figures contained in the report, the brochure issued by the Cork Chamber of Commerce shows that between 1925 and 1931, inclusive, the net profits—that is, the net operating result of the Great Southern Railways Company—were £1,471,000 and that the dividends paid in these years totalled £3,013,000. That means that the Great Southern Railways Company, between 1925 and 1931, had paid out in dividends £1,542,000 more than they had made by way of net profit. When we take the years 1932 to 1939, inclusive, the situation is that the total amount of net profits made in any year during those eight years was £64,000—there was only one year in which there was a net profit, and that was in 1938—but at the same time during those years the net losses were £1,164,000.

In the eight years from 1932 to 1939, inclusive, there were net losses as a result of the operation of the Great Southern Railways Company to the extent of £1,100,000, and yet in that period they paid out dividends to the extent of £582,000. The people to whom we are asked to hand over the ownership of this new company, with all the vast accumulation of capital that is contemplated, and who are to have responsibility for all the machinery of the railway company which, according to that report, was completely broken down—the people who are to perform these miracles are the people who were capable of these financial results in the years 1935 to 1939. They are the people who, from the point of view of carrying on the transport of the country, left the situation that was so fully described in the report and by the Minister in very many of his remarks when he was dealing with this matter on the two occasions upon which the Second Reading of this Bill was taken. These are the people we are asked to set up here as the owners of the company, the people who will look after our transport in these very critical conditions.

I do not see any reason why same people, even with a very elaborate amount of explanation, could venture the country's interests in these matters in such a way. It was quite clear from the tribunal report that the five people who were set up to examine the railway situation and who reported in 1939—that is, Mr. Ingram, Mr. Beddy, Dr. Kennedy, Mr. O'Brien and Mr. Diarmuid O'Hegarty—accepted a certain situation in the conditions in which we were passing away from the bad effects of the economic war. They took certain representations from the company's officials at that time that, with certain assistance, and being provided with capital, they could make certain useful reorganisations and changes, but they were careful to say that it would require very careful scrutiny. They advised a national transport board of some kind to stand outside the operation of the company and urged that it would require careful scrutiny for a number of years to realise whether the people then in charge could make a success of it. In view of the facts, and in view of the astonishing shifting of ground and shifting of mind on the part of the Minister and the suggestions that we get in the evidence before the Stocks Tribunal, we would want a lot more information from the Minister with regard to his attitude. I doubt if anything that the Minister could say would be able to persuade reasonable people that this new company should be put into the hands of and be owned by the common stockholders of the Great Southern Railways.

I do not know what point Deputy Mulcahy is trying to make by these quotations from statements that were made in evidence before the Stocks Tribunal. In the case of this Bill the members of the House have an advantage which they do not usually possess in so far as they have been given—because of purely accidental circumstances—an insight into the process by which conclusions as to transport policy were reached. I am quite prepared to admit, if that is what Deputy Mulcahy wants, that on more than one occasion in the process of arriving at a decision as to the best transport policy for this country I changed my mind. I think that is the point the Deputy is trying to make.

If it is, I concede it straight away.

I am saying that the Minister changed his mind elaborately and substantially, and we have been given no reasons for it.

The reason why I changed my mind was that I thought of a better idea. I do not know any better reason why a person should change his mind, and the man who does not change his mind under certain circumstances is a fool. As long ago as 1938 it was obvious that new transport legislation could not be avoided. I told the Dáil so in 1938, and in December of that year I proposed a motion here for the establishment of the Transport Tribunal, from the report of which Deputy Mulcahy has been quoting. That tribunal reported. Everybody here has, I presume, read its report. I read it, and agreed with many of the observations, and disagreed with others. I came to the conclusion then that its proposals for dealing with our situation were completely inadequate, and that the ameliorative treatment they were proposing would not effect the permanent cure that I considered was possible. It was decided by the Government, when that report was received, that action would not be taken in the preparation of transport legislation during the war. The effects of the war upon the transport services of the company, the possible effects upon the finances of the company, were all so uncertain as to make it impossible, we thought, to consider at that stage the principles of legislation that we would be prepared to propose, apart from the fact that Ministers were preoccupied with far more urgent questions.

When the Government decided to take control, in the manner in which it did, of the operations of the Great Southern Railways, and appointed the chairman of that company with certain powers, we had in mind one of the recommendations of the Transport Tribunal. It is true that the decision to make that Order and appoint the chairman with those powers was prompted by the circumstances of the time, by the knowledge that the railway management had failed to cope with emergency problems, and that the Government could not escape its responsibility merely by blaming the railway management. The action that was taken then was primarily dictated by emergency conditions, but we had in mind the fact that the tribunal had recommended that, for a period of years, there should be Government representatives on the board of the company, who could advise the Government concerning its internal difficulties, and who could from the inside acquire the knowledge that would enable them to make proposals for reorganisation which we knew would at some time have to be formulated.

Subsequent to the appointment of Mr. Reynolds as chairman of the company, for the purpose of running the company during the emergency, and arising out of the various discussions which I had with him upon conditions as he found them in the company's organisation and as to the future possibilities of transport reorganisation, I came to the conclusion that it was undesirable to adhere to the original decision to postpone transport legislation until after the war; that, on the contrary, the national interests required that we should proceed to effect the change in organisation which we considered desirable during the war, so that the end of the war would see in existence the new organisation that we considered to be necessary. That change in policy was dictated by the acquisition of fresh knowledge as to the circumstances of the Great Southern Railways, and fresh ideas as to the potentialities of transport reorganisation.

At that stage we sat down to consider what form reorganisation should take. I made certain tentative decisions. They were expressed in a Minute which appears on a departmental file. Those decisions were submitted for the observations of my advisers. They were discussed with the Chairman of the Great Southern Railways, and arising out of all those discussions certain criticisms of portion of those decisions and certain suggestions for their improvement emerged. During the whole of the six months' incubation period my original ideas were being developed, and, finally, a stage was reached at which I was able to make up my mind that I had devised the best possible plan, the plan that I was prepared to recommend to the Government—not to the Dáil, because the decision rested with the Government in the first instance. In so far as those plans involved capital reorganisation of the Great Southern Railways I was of the opinion—an opinion born of the experience of 1933—that it was wiser, if possible, to effect that reorganisation with the consent of the shareholders of the company rather than by the methods which we adopted previously.

It was in that connection that the question of the issue of a circular to the shareholders by the board of the Great Southern Railways first arose. The question which came to the Government in the first instance was whether they had any objection to the issue of that circular by the company, in so far as the issue of the circular pledged the Government to consider the proposals contained in it. The Government's decision, which Deputy Mulcahy quoted, that they had no objection to the proposal related solely to the proposal to issue a circular to the shareholders of the Great Southern Railways, and did not commit the Government to the matters contained in the circular and certainly did not commit them to the whole scheme of organisation contained in the Bill.

At a subsequent stage, in accordance with normal Cabinet procedure, these proposals for legislation came to the Government and were fully considered. They were amended by the Government in certain important respects, and then the drafting of the Bill commenced. The Deputy knows that, because, as I have said, he has information concerning the processes by which conclusions are arrived at in the case of this Bill that he does not ordinarily possess. If his point is to establish that these proposals emerged finally in a different form to that in which they started, I am prepared to concede it. If he wants to make the point that my original ideas were substantially modified as a result of conversations with departmental officers or the Chairman of the Great Southern Railways, I am prepared to concede that. The proposals ultimately submitted to the Government represented my idea as to the best lines on which we should proceed, and that idea had been modified as a result of the discussions with the Government, so that the Bill which appeared would represent the considered proposals of the Government, and not of any individual Minister, for dealing with the transport problem in this country. The Government passed to nobody responsibility for any section; the Government takes full responsibility for every section of the Bill. It represents something which it has considered and decided in favour of.

I have told the Dáil before that I intended to make no defence of the management of the Great Southern Railways in the past. I do not know what figure the Deputy was quoting, or of what allowances he was making in arriving at his conclusions. The Great Southern Railways, so far as I know, have never failed to earn their debenture interest. It has never been the case that the revenue did not exceed the expenditure by more than enough to defray the debenture interest. It is quite true that for many years after the amalgamation of 1924, and in fact up to 1931, the payment of the dividend on the junior stocks was made possible only by the appropriation for that purpose of reserve funds, the principal of which was the fund created by the payment made to the railways by the British Government in respect of the period in the last war, when the British Government ran the railways here. When the railways were handed back to their owners, they were handed back with a payment in respect of the claims of the companies for the period of control, and that fund was used over a number of years to pay dividends on the junior stocks. That explains why it is that the amount paid out in dividends exceeded the amount which the company earned in that period. That fund dried up in, I think, 1931, and while there were some other reserve funds which were occasionally appropriated to dividend purposes, in fact the position has been that for a large number of years past there were no moneys available to pay dividends upon the ordinary stocks at all.

The Deputy asked me why we are adopting this proposal of having the directors elected by the ordinary stockholders. It seems to me that the only difference between what is in his mind and the proposal in the Bill is that under one system we would have the directors nominated by the Government and under this system they would be elected by the stockholders. I am in favour of election by the stockholders. I think that in relation to this company it is the better system, and I speak out of the fullness of my experience over 12 years in the management of State companies of one kind and another involving, as it does, the nomination of persons to be directors of companies. I think, in the long run, it is much more likely to produce an effective system if you can provide some other electoral machinery than a Minister of State in order to procure the directors of companies carrying on commercial enterprises. I think we have to take powers to ensure that the company is operated in accordance with Government policy, that in no way does its day-to-day management conflict with what we consider the best interests of the country; but nevertheless I think it is possible to do that without at the same time taking on the obligation of appointing the directors.

There are defects which that system has, and I pointed out those defects in the course of the Second Reading debate. The directors who are appointed by the Government to the boards of companies operating commercial concerns have themselves no personal interest in the financial success of the enterprise. They are dependent for appointment and reappointment on the good will of the Minister. No matter who may be chosen for these posts, they cannot but fail to be influenced by those two considerations. I think it is much better to have a board of people who have got responsibility for the financial success of the enterprise. These shareholders' directors will be responsible to those who elected them, namely, the shareholders, for the financial outcome of the company's operations. If the company is not a financial success, there cannot be a dividend to the shareholders and, therefore, they have that responsibility clearly before them. They will not be in any sense beholden to the Government for their appointment or reappointment. They can, therefore, in relation to the Government, adopt an attitude of independence, which might not be possible in other circumstances. I think this is a better system than one which involves the appointment of directors by the Government. I am not, therefore, apologising for the system; I am advocating it and I think it is better for the carrying on of an enterprise of this kind. I would definitely resist any amendment proposed here which would involve that, instead of having these directors elected by the stockholders, they should be appointed by the Government or by any member of the Government.

Will the Minister say how the directors of the company who are elected by the shareholders can be held responsible for the financial success of the company by the shareholders, if the chairman has the dictatorial powers that the Minister proposes to give him in the Bill?

I do not admit that the chairman has dictatorial powers, but we can discuss that point when we come to it.

Does the Minister admit that the chairman can make decisions over the other six members of the board?

No, and if the Deputy will read the section he will see that it means that the other members cannot make decisions over his head.

That is democracy!

This company is not intended to be a democratic institution. It is not a legislative body: it is a commercial organisation.

But the organisation to be set up is described by the Minister as one in which the board will be responsible for seeing that the company will be a financial success. In order to show that they are responsible people they must have certain powers. What powers have the directors representing the shareholders, according to the legislative measure before us? No meeting is a meeting unless the chairman is present.

I submit it would be much more desirable to discuss that on the proper section.

I am sorry the Minister did not think of that some five minutes ago, when he decided to discuss it on this section.

I think the Deputy is going much further.

The Minister has a scheme under which no meeting is a meeting unless the chairman is present; the chairman can call a meeting without anybody else; and lest, between these two claws of the pincer, he has not covered every point, no decision is binding on the company unless the chairman approves of it. In these circumstances, it is rather hard to see how the shareholders can feel that it is their representatives who will make or mar the financial success of the company.

There are other things tending towards the financial success of the company that are appropriate to this point. The Minister is proposing under this section that the substituted shareholders—that is, the debenture shareholders or common stock shareholders —will be paid certain sums of money, and he is going to have that ranking as being worth a certain amount. That is being done in connection with a certain concern whose capital he himself has said must be regarded as a dead loss. He has said that the assets of the railway system were, if not obsolete, at least obsolescent, and would have to be completely renewed before the system could be made any good. Yet this company, where the Minister made a drastic cutting in what he called the dead capital some years ago, this company which has left what are usually called some physical assets, which are described by the Minister as either completely dead and wasted or on the high road to becoming so is now to have these wasted assets taken over by the new company, which will have to make three times the revenue of the old company in order to find it possible to make it a success.

The impression left on the public by the evidence before the Stocks Inquiry was that the first thought of any reorganisation was of a £10,000,000 scheme, and the background of that £10,000,000 scheme was that somewhere or other the Government would find that money and would replace the existing shareholders. Then suddenly a new scheme boils up, a £20,000,000 scheme; but what value is to be given to the countrywide transport is yet to be determined. There is to be adequate transport of an exhaustive type, at a cheap rate, and yet operated on wasted physical assets, the purchase price for which is being paid as if the assets were good. Under those circumstances, we have to consider this from the angle of the shareholders and their representatives first of all, and also from the angle of the country. The country needs cheap, efficient transport services—which it certainly never had.

The Minister has said that there was not a year in which the company failed to make enough money to pay the debenture interest, that is to say, it you take merely what are called the receipts and deduct from them what are called the working expenses. From the working expenses, however, there is omitted anything real in the nature of repairs and renewals or depreciation. The tribunal which sat at the start of this war reported, through one of its members, that if any proper provision had been made for depreciation or proper renewals, the company would have found it impossible to pay the debenture interest in one year. I think he says it is doubtful if it would have found it possible to pay it in one year. Notwithstanding that background and the fact that, whatever burdens that company had, the Minister is certainly not decreasing them by this measure, and considering the fact that the Minister some years ago wrote down the capital of the railway by saying that whatever he was cutting out in the way of capital represented dead money because the assets that originally represented that were dead also, and now after a small number of years is again telling us that the physical property has wasted, notwithstanding all that, the Minister tells us we are going to have cheap and efficient transport. The Minister adds insult to injury to the people who have to run this concern by saying the shareholders' directors, who cannot take a decision without the chairman being present but without whose presence the chairman can take any and every decision, are going to bear the responsibility of making this concern a financial success.

It seems to me the Minister in replying to Deputy Mulcahy has missed what is probably the most important point. That is, did the Minister change his mind or are the reorganisation proposals so far as the company is concerned the most efficient that can be evolved at the present time. What is involved in the section now under discussion is who are to be the owners of the company. That is the point about which I personally am still in the dark, although I have listened to the Minister on a number of occasions explaining his viewpoint and the Government's viewpoint. A picture has been drawn, not only by Deputy Mulcahy and Deputy McGilligan, but by the Minister, of the gross and manifest inefficiency displayed in the administration of the railway company over a considerable period, of the gross selfishness displayed in the fact that moneys paid to the company for the specific purpose of helping it to overcome the wear and tear imposed upon it by the British Government were utilised to pay out dividends and interest to private owners, and that over a period it was manifestly impossible for it to pay its way.

Having regard to that picture, if we are to have a new transport company with elaborate proposals to secure that the public interest will be represented on the board of directors in the person of the chairman, why is it that the basic ownership of the company must remain in the hands of those persons who have shown themselves incompetent as a collective body over a period of years? The Minister, in explaining the functions of the directors to be elected by the shareholders and in defending his viewpoint in that matter, takes it for granted and a priori that the existence of shareholders is self-justified and that, therefore, because we have shareholders the directors they will elect to the board will be the most competent people to ensure the smooth financial running of the concern. But if those common shareholders have shown themselves, as they have, incompetent to elect directors in the past how are they going to elect them in future or what guarantee have we? Will there be individuals of different mentality and greater ability from whom to select in future? Taking it for granted that these directors will be allowed to exercise certain functions by the chairman —and that is taking a lot for granted— even taking it for granted that they are able to do what the Minister envisages, namely, to give attention to the efficient and economic running of the system, in order to secure the payment of dividends on the common stock, in the interests of the common stockholders, if all that is possible within this framework of organisation and the constitution of the board in relation to the powers of the chairman, where are these men to be found among the common shareholders seeing that the shareholders have proved themselves incapable of finding such men in the past 15 or 20 years? Why should we expect a change? If this collective body that have been in essence the owners of this railway system have shown themselves incompetent over such a long period to manage their own affairs, even with continuous legislative assistance from different Governments, why do we expect this miraculous change now and, above all, why do we expect it seeing that we are going to place the shareholders' directors on a board where, so far as the Bill now stands, they will be completely helpless vis-a-vis the chairman?

It is quite clear that if there is a conflict of views, if the shareholders' directors put forward certain proposals which in their view will make for economy and assist in earning dividends, and they are opposed by the chairman, the conflict can be resolved only by the chairman. The alternative is a state of stalemate or the intervention of the Government. Therefore, where is the justification for all this elaborate structure except in one passing reference made by the Minister on the Second Reading, namely, that out of a deep sense of sympathy with these shareholders we should not take anything from them that has been left to them so far by legislation. Our hearts are overflowing with concern for the poor common shareholders who, in 1933, had 90 per cent. of their property in this company wiped out and who have been patient over a long period and are now entitled to some return on their investments in this company and for the patience they have displayed. That is a very nice sentiment. That sentiment will be expressed first of all in the form of a guarantee in regard to debenture interest and, secondly, in the form of a guarantee to this collective body of a virtual monopoly of public transport—to the very people who by their incompetence have brought it to its present position.

If the picture that has been drawn, not only by Deputies but by the Minister, is a correct picture of the position and if it is clear that this collective body has been incompetent, then we fall back on the final argument in favour of the present form of ownership, namely, a sense of sympathy and, as I think the Minister expressed it, of fair dealing for the common shareholders. I wonder why it is that that sense of sympathy and fair dealing seems to be exclusively confined to these particular shareholders. One will not find the Government coming to the rescue of shareholders in any other private company. Certainly in the replies to questions we received only to-day they do not seem to express consideration for other sections of the community who are finding it much harder to live than are railway shareholders.

I suggest that if the structure of organisation the Minister has laid down is such as to give the possibility of a new lease of life to the transport system in this country, that system of organisation could operate on the basis of having the ownership constituted in the State or the citizens of this country rather than in this collective body that have lost all claim to a continuance of their ownership of this particular transport monopoly. The only argument the Minister has made against that is that it involves subsidies. We have argued that point already on Second Reading and there is little purpose in pursuing it, because I think it is quite clear that the Minister has failed to convince anybody that there is any essential difference between his form of subsidy and the form of subsidy he envisages under a national form of ownership. So far as the independence of the directors that would constitute such a board is concerned, and the scheme he has outlined in trying to secure their independence, surely his own argument against directors being appointed by Ministers of the Government is a complete argument against every form of Government direction and interference in ordinary commercial and industrial life. It is even an argument against the matter that was being debated here a little while ago, namely, the appointment of county managers by the Minister. If you cannot get men with sufficient independence and competency to run a borough and a unit of population of the size of the City and County of Dublin because, presumably, they are going to be appointed by a Minister, then naturally you will have the same difficulty on a railway board of management. But, if the Government does find it possible to appoint men to very responsible positions in the State, not only in industry and commerce but in local and national government, and are able to place those men in such a position that they do exercise independence of view, there is no reason and no argument against the same thing being carried out in a railway undertaking. Certainly, if the only argument for continuing ownership in this collective body of the elected directors of the common shareholders is to secure the independence of these persons from the intrusion of the Minister, then I personally feel that it would be better to have them dependent on that Minister so long as the Minister was carrying out a policy that we were clearly satisfied was in the interest of the citizens of this State as a whole, and not as I feel it is at the moment, in the interests mainly of this collective body of shareholders and the holders of debenture stock in the present company.

I have only to say this arising out of the remarks that have been made, that it is quite true that the Government stressed the fact that the shareholders of the Great Southern Railways Company should get a fair deal, and we are concerned to see that they do get a fair deal. Whatever Deputy Larkin may think about these shareholders as a class, I think we should be particularly careful to see that we should not be unfair to them, any more than to any other class of persons. I am sure he will agree that we should be particularly careful not to be unfair to any particular class of people, but in the consideration of legislation of this kind, it has to be remembered that we must have reference to the legislation which preceded it. We must recognise that these shareholders represent very substantial sums of money which were put into the development of the railways, a large amount of which money has been lost. Not all, however, has been lost, and in fact there are grounds for contending that the transport system, as now organised, is capable of earning a revenue sufficient to remunerate the capital liabilities attaching to that system.

Deputy McGilligan referred to that organisation as being obsolescent, and said, in effect, that the capital represented by these shareholders is being wasted. He misrepresented the terms of the Bill as involving a proposal to pay these shareholders on a basis of the nominal value of their assets, even though we recognised that they were obsolescent. That is not so. We are not proposing to pay them anything. In so far as the shareholders of the Great Southern Railways Company have shares, we are proposing to give them, in proportion to the value of these shares, other shares. That is all. For every £100 of such shares they are getting £100 nominal value of new scrip, on which dividends cannot be paid unless the company earns more money in the future than it has earned in the past.

I have defended the system of transport organisation that we have proposed here. We have proposed here, I think, a system preferable to the compromise system suggested by Deputy Mulcahy. We did not establish this system previously, mainly because the opportunity for doing so previously did not exist. I have already said that experience has shown that in connection with other companies established under statute, the directors of which were nominated by the Government, or by members of the Government because of statutory obligations, or because the majority of the shares were owned by the Minister for Finance, the appointment of directors has raised problems. In the case of transport, there is an opportunity because of existing circumstances of adopting a different system. I will admit that the directors of this transport organisation in the past did not avail of the opportunities that were available to them, and it is necessary, therefore, to superimpose on them a chairman to represent the public mind in regard to this matter of transport. That is what is being set up here—a board of independent directors, set up by the shareholders, but subject to the overriding authority of the Government, exercised through a chairman who can be removed by the Government if he should cease to represent Government policy.

The Minister, in reply to Deputy Larkin, has said that it is necessary to make sure that the shareholders of this company should be safeguarded. Who would imagine that this is the same Minister who, in 1933, wrote down the capital of that company from £27,000,000 to £10,000,000— that this is the same Minister who reduced the capital by that amount?

Which was quite fair.

In other words, it is quite fair for the Minister for Industry and Commerce to write down the stock from £100 to £10, without consultation with the shareholders, or without the fortification of the findings of a tribunal, but if anybody suggests that the Minister is now writing it up at a much higher price than that at which it stands to-day, then the Minister talks about being fair to various people.

What section of the Bill writes up the value of the stock?

Let us look back at the whole financial structure of the Bill. Look at the stock exchange quotations.

We are talking about the nominal value of the shares. The market value is determined by the earning power of the company.

It is determined by what dividends are received on that stock.

And you are making that stock extremely valuable by reason of the fact that you are now going to put into the pockets of the shareholders of that company dividends which the company is incapable of earning.

Where is that in the Bill?

Let the Minister restrain himself. The Minister is putting into this Bill——

Not a penny.

——a provision by which the company are going to earn the right to a dividend of 3 per cent. on the £16,000,000 of capital——

——and the Minister will not attempt to deny that this company can lose money every year, and yet certain shareholders will be paid dividends.

The Deputy is talking about certain stockholders. How does the protection of the debenture holders put money into the pockets of the ordinary stockholders?

Perhaps the Minister might keep quiet for a moment, and let us try to tell the public how they are being "spoofed" under this Bill. He started off by saying that it is quite resonable to write down the assets from £100 of stock to £10, and to write down other stocks as well. Taking the stock exchange values on the 31st March last, the purchase price was approximately £10,600,000, or, if you take the average value on the stock exchange of these two companies, for the ten years from 1933 to 1943, you will find that the value of the shares of the company was approximately £8,100,000.

What does the Deputy mean by the value of them?

Now we have the situation that the capital under this scheme will amount to £13,100,000.

The nominal value.

Yes, but the nominal value in the case of the £13,100,000 becomes the actual value so far as the redeemable debenture stock is concerned, to the extent of £9,800,000, on which interest is guaranteed at the rate of 3 per cent. per annum, whether the company makes a profit or not. Deputy McGilligan has pointed out that the members of the Transport Tribunal in their report presented in 1939 set about examining the assets of the company, and if you take note of the fact that the company made no provision for depreciation, made no adequate provision for repairs and renewals, and permitted instead the company's assets to depreciate until they merely amounted to what the Minister described later as dead timber, then you will find that this particular company whose assets are now stated to be worth approximately £13,500,000, was in the position in 1939 and for many years previously, whereby they could not pay any dividend even on debenture stock if they had made provision for depreciation and adequate provisions for renewals and repairs. That is the basis of the finance envisaged by the Government in this Bill.

I remember sitting in this House in 1933 listening to the Minister making the same promises about an efficient transport service, and a cheap transport service, and promising the public a much better service than they had previously had when the provisions of the 1933 Act were fully implemented. The Minister told us then that if that scheme envisaged in 1933 did not give the public a cheap and efficient transport service, then there was nothing for it but nationalisation. Eleven years afterwards we find the Minister still tinkering with a scheme of railway organisation based very largely on methods which, according to him, produced such dismal results in the past. He must realise that the Great Southern Railways Company, operated by private enterprise, permitted the assets to waste to such a point as to earn from the Minister the description of dead timber. Yet, that is the type of railway organisation which the Minister is endeavouring to buttress up to-day. The Minister tells us he believes in a scheme under which the shareholders will elect directors and they are supposed to be responsible for the management of the company. If these directors are as bad as the Minister said they were, they should be hounded from every railway premises in the country, not allowed even to board a train, because the Minister has indicated that they are quite worthless people who have allowed such a valuable national asset to waste to such an extent that the Legislature has again to come in to help to maintain the system by guaranteeing a dividend of 3 per cent. on £16,000,000 worth of stock.

The Minister is going to permit the shareholders to re-elect six of those people, to re-elect half a dozen of those who have been associated with the incompetent management of the railways during the past 20 years. These people will continue to operate the railway system, with this difference, that on this occasion they are going to have a chairman appointed by the Government, and the six directors, on whom the Minister is apparently going to rely in some mysterious way for the wise direction of the company's future, are going to have no power whatever against the decision of the Government-appointed chairman of the company. You have, therefore, this kind of situation which is supposed to be an efficient railway organisation: six directors responsible to the shareholders but with no powers once the Government-appointed director says: "You must do this or you must do that."

I put it to the Minister that the obvious thing he ought to have done in circumstances such as these confronting us in respect to the railway system was to recognise frankly that the railways under private management had failed hopelessly to give the community an efficient transport system and that it was therefore essential that the State should operate the railways in such a manner as to give the community an efficient and a cheap transport system. At present the community is getting neither an efficient transport system nor a cheap transport system, and the Legislature is being confronted in cycles of five and ten years with the necessity of introducing fresh legislation to buttress up the entire railway system. I think even now the Minister ought to recognise that the kind of directorate which he envisages and the type of finance which he is employing for the purpose of endeavouring to stimulate the railway organisation will be quite ineffective for the efficient management of the railway.

The obvious remedy is that the State should buy out at a fair valuation whatever assets are left in this company of notoriously wasting assets, that the State should issue the necessary State credits to the shareholders who are so bought out, and that in future the State, with directors appointed by the State, should operate a railway system calculated to bring us in future a more efficient and cheaper railway service and transport service generally than we have had in the past. There is no difficulty in operating a system of that kind. The State's credit is pledged here for a most inefficient scheme of railway control. It is pledged for a scheme of control which is probably likely to give us the same dismal results as we have had from the railways for the past 20 years. Instead of buttressing up the railways in the manner contemplated in this Bill, the Minister should recognise that public ownership and public control of the railways are the only two factors by which we are likely to get a cheap transport system. Unless he does so, I prophesy here this evening that in ten years' time the Minister will be making the same kind of speech about railway management operated under this Bill as he made in 1933, and as he made before this Bill as the reason for the introduction of the Bill.

On the first point I raised, the Minister has not met the House in any way. Nobody objects to any responsible person reviewing a situation changing his mind, but when a person in a responsible position dealing with a matter of vital importance to the country changes his mind so fundamentally as the Minister did some little time before September, 1943, and shortly after September, 1943, then Parliament is entitled to some information as to the matters which made the Minister change his mind. Before September, 1943, the Minister thought that the best course was to buy out the company in such a way that the debenture holders would get fully compensated, and that the holders of stock other than debenture holders would get approximately 67 per cent. of the nominal value of their holdings, an amount that was substantially generous when compared with the market quotations of the stock. The market quotations of the 4 per cent. guaranteed stock in June, 1939, was 30; of the 4 per cent. preference, 13¼, and of the ordinary stock, 9¼. That was the Minister's pre-September, 1943, idea, but he changed it definitely. He was going to clear away the ownership of the railways and was going to compensate people in that particular way.

As far as we can understand from the Minister, the ultimate virtue in his new proposals is that he will have a body to nominate directly. Who are the body? Deputy Larkin asked that question, and I tried to ask it. I endeavoured to put down a question which the Ceann Comhairle considered was entirely out of order. Therefore, it did not appear on the Order Paper. I asked for the names and addresses of the holders of common stock in the Great Southern Railways Company to-day, and for dates previous to that on which the Minister interfered with the company by wiping out the board and appointing a general manager. I did not get the information because I was told that, from the point of view of the general order of this House, it was none of our business. I appreciate that from the point of view of the Ceann Comhairle, but I do not appreciate it from the point of view of a Minister who puts a Bill of this importance before us, and gives us no information as to who these owners are. As far as the past is concerned, I have given figures with regard to dividends paid although profits were not earned. The profits were net profits after paying the debentures and such prior charges as the railway company was liable to meet. Between 1925 and 1931 the sum of £3,013,000 was paid although the net profits during that period were only £1,141,000. That sum was paid to the holders of other than debenture stock. Between 1932 and 1939 there was a net loss over these eight years of £1,100,000. During that period certain stockholders got £582,000—stock-holders other than debenture holders. Those people have not changed in the meantime, and are practically the holders of the stock referred to in this Bill. They got this money simply because, as the Minister indicated, up to 1931 there were certain wind-falls which came to the company in the way of back payments from the British Government. The point is that since 1932 they got that money, while in the same period the losses mentioned occurred. These losses led to a deterioration in the railway system, to the position indicated in the statement made by the present managing director before the Stocks Tribunal. He is reported in the Irish Press of the 22nd February, 1944, to have said that:

"... the reconstruction of the new company would not be able to earn enough to pay interest on its stock and that the Government should be prepared to guarantee interest for a number of years.

What is the future of the people who are being made owners in this new company? As far as the Great Southern holders are concerned, over £8,500,000 is to be repaid in one way or another by 1960, as well as interest. If one is to take the earnings of the company in the past and the outlook of the managing director, there will be nothing to provide that money for the debenture holders but this: to squeeze unnecessarily high costs out of those who use the railways or roads of the country, and out of those who travel by tram and by bus from Crumlin to Drumcondra or from Kimmage to the centre of the city. Despite all the squeezing that can be done by the profit makers in that way it does not seem to me to offer any great prospect of income for the ordinary stockholders in this company for some years to come. The Minister is basing his foundation to provide the ordinary directors for the new company on a group of people that simply in the past got things that they did not deserve, and are not going to get in the future except they squeeze them out of the users of transport throughout the country. The common stock, except in so far as it cannot be held to be accountable, will be held only by people who are prepared to gamble on what is likely to be the position in 15 years' time, if and when the company lasts till then, and if, having paid off this stock by squeezing the transport users of to-day, they are able to make a bit on their income from the railway of to-morrow. I do not see how the holders of the stock to-day could be so described as to make the Minister boast that they are the right kind or class upon which to base the directors that are going to be elected. We have no information about the extent to which the common stock of the company is held by non-nationals or the extent to which it may fall into the hands of non-nationals in the future. The main fact that we ought to have before us is why the Minister changed so fundamentally and radically in his outlook between, say, August, 1943, and October, 1943, on what should be done to finance the railways, what should be done to control them and what should be done in regard to the owners.

The Minister wants to be fair to the stockholders. In the future there will be two classes, those holding the substituted new debenture stock and the common stock-holders. In the course of the discussion on the Bill, the Minister said that people were misrepresenting the situation as between these two classes or, at least, were not distinguishing between them. The debenture interest, he said, was always earned. We know how it was earned. The minority report shows that. The officials of the company will attended before the tribunal complained that the allocation of moneys for permanent way renewals and so on was completely insufficient: that they would require an annual expenditure of £600,000 a year. A similar sum was said to be required for the renewal of rolling stock, so that both items give a total of £1,200,000. The minority report shows that was a smaller provision than the Great Northern Company was making for rolling stock, permanent way, etc. If provision had been made in the way in which the company's officials thought it should have been made for these purposes since 1931, would the balance be adequate to meet the debenture interest? If it is said now that the debenture interest was earned, it was earned only at the expense of the permanent way and the rolling stock according to the contention of the company's own officials who gave evidence. We are asked to put those people into a particular position. What is the position? The stock exchange quotation on the 30th June, 1939, as was pointed out by Deputy Mulcahy, was noted by this tribunal. If a calculation is made of the value of the railway company, as evidenced by certain stock exchange quotations, it would emerge that the value would then be about £4,500,000. The debentures do not represent all of that but they represent the best part of it. We propose, in face of those stock exchange quotations, to make a payment of £8,000,000 odd in respect of those stocks. We are going to pay that sum because the debenture interest has been earned by allowing the permanent way and the rolling stock to become completely obsolete. Lest it should be thought that the report of the tribunal set up in 1939 is out of date, here is what the Minister said on the 2nd May of this year:—

"The provision of cheap and efficient transport facilities in our circumstances involves, so far as railway transport is concerned, at any rate, over the greater part of the State, an almost complete scrapping of existing transport equipment."

We are going to pay £8,000,000 for it.

"The railway equipment which Coras Iompair Eireann—the corporation which it is proposed to establish under this Bill—will acquire from the Great Southern Railways Company is very largely obsolete. Not merely is it largely obsolete, but it is, to an entirely uneconomic extent, unstandardised. It will be necessary, at the earliest moment, for whatever organisation we set up to take over the responsibility of transport operation, to replace the existing equipment with new equipment, designed to meet modern requirements, standardised to secure economy in maintenance and adequate to meet all demands upon it."

There is the picture—an almost complete scrapping of existing transport equipment over the greater part of the State, so far as the railways are concerned, equipment largely obsolete, and, to an entirely uneconomic extent, unstandardised, such equipment to be replaced by new equipment. That is the position the railway company was brought to, because it did not provide for the maintenance of its permanent way, rolling stock or other fixed matters.

These debenture stocks are not redeemable at the moment. I suggest to the Minister that there is only one way of finding out their value. That is to find out what people who were able to purchase them freely and openly would pay for them. On the 30th June, 1939, their value was about £4,500,000, and the Minister thinks he ought to be fair to those people and pay them £8,000,000. He says that they are in no better position than they were before. A value has been put upon their property which investors never put on it before. Speculators put a higher price on it now, because they know that the shareholders never expected to get what is offered now. The stock exchange quotation is one of the fairest ways of finding out what the value of the property is. Why does the Minister propose to double the amount which people buying in the ordinary market were prepared to give? That was in June, 1939—before the Minister told them that the whole equipment required to be scrapped. Why does the Minister propose to double the value of the property at that time? He does more than that— because it is proposed to redeem inside some period of years about £16,000,000 worth of stock.

We are, certainly, going to redeem £13,000,000 worth of stock by 1960 and, inside whatever period the redemption still proceeds, we are going to pay the guaranteed interest. There is no such position for those people at the moment. When all that is done, when the transport user, as Deputy Mulcahy has said, has had this sum squeezed out of him by excessive charges or the taxpayer is made to bleed so that the sum be paid—when all that is over, what is to happen the railway system? It goes back into the hands of the holders of the common stock— £3,500,000 worth. They will get the railway system clear of all those prior charges. They, according to the Minister and his predecessor, were the people responsible for not making their representatives on the board see that the railway did good railway business. There never was in this country before—I do not know if there ever was anywhere else—a case in which people held up to public odium and scorn for the way in which they ran their concern were put into the position in which they are being put here—debenture stockholders to be paid off and the owners of the common stock, to the amount of £3,500,000, to remain still proprietors of the railway. In the meantime, not merely is there the guarantee of this 3 per cent., and redemption by half-yearly instalments of £13,000,000 or, possibly, £16,000,000 worth of debenure stock, but there is a provision that the railway company can pay 6 per cent. to the common stockholders.

Deputies should try to approach this matter in a more serious manner than their speeches would indicate they are doing. I do not know if the speeches we have heard from Deputy McGilligan and Deputy Norton are to be taken seriously or whether they are to be regarded merely as debating speeches for the purpose of raising political points. They did not seem to me to be speeches which would come from Deputies trying to contribute useful suggestions to the solution of our transport problems or towards the improvement of the Bill. What purpose does misrepresentation serve in this connection? I do not think that it can serve any purpose. When Deputies speak of the stock exchange value of the various stocks and shares of the Great Southern Railways and relate that to the whole of the shares issued by that company, they are obviously trying to mislead somebody. A very small fraction of the debenture stock or of the ordinary shares of the Great Southern Railways Company comes on the market at all.

There were periods in the past when people, anxious to get money in a hurry to meet some family need, had considerable difficulty in selling their shares in this company—particularly their ordinary shares—and they had to take any price offered for them. To say that that price represented the price at which you could get all the shares is just nonsense. If you are to determine the fair price for the shares of this company or any other company, you must proceed not only on the basis of a willing buyer but of a willing seller. You must assume that all the shareholders of the Great Southern Railways are willing to sell at the current stock exchange quotation. That is nonsense and Deputies know it is nonsense. If you are to proceed on the basis of stock market quotations at all, the actual price which you will have to pay to get into your hand all the stock issued by a company, or held by stockholders in a company, will be substantially higher at any particular time than the current market price. We are not proposing to give stock market prices at all.

Deputies are hypnotised by this idea of stock exchange prices. Stock market prices have nothing to do with this Bill. We are not proposing to give to Great Southern Railways shareholders, as Deputy McGilligan contended, double the value of their shares. We are proposing to give debenture holders for every £100 4 per cent. debenture which they have now, £100 3 per cent. debenture. That is to say, instead of the probability of 4 per cent., as in the past, they will have the certainly of 3 per cent. in the future. That is the difference. Whatever security there was for the payment of that dividend still exists but, in addition, we are giving them the security of a Government guarantee. In return for that Government guarantee, we are taking from them 25 per cent. of the revenue they formerly got from their investment.

The same applies to the ordinary and preference shareholders. Their prospect of getting dividends depended upon the earning powers of the company. They are going to get for every £100 of stock a new stock of similar nominal value, but the prospect of dividends still depends on earning power. The stock market price has nothing whatever to do with it. We are dealing with nominal value, not with stock market price. Deputies who talked about one or the other are misleading themselves or trying to mislead others. It is, of course, wrong to assume that, because the equipment of the Great Southern Railways is obsolescent or obsolete, it cannot earn revenue. Of course, it can earn revenue.

If we are to ascertain the value of that equipment and to compensate the shareholders of the company on the basis of our assumption of its value we are going to do something which is fundamentally unfair. The Dublin Transport Company had obsolete equipment. In 1935, the same statement could be made about that company as is now made about the Great Southern Railways. It was inefficiently managed and it tried to maintain its position with obsolescent equipment. In that year, the company effected a reorganisation, and obsolete equipment is being replaced out of revenue. Is it seriously contended that we should acquire the Dublin Transport Company on the basis of its value in 1935 or on the stock market quotation of the shares in 1935? Surely, if it is fair to do it in one case, it is fair to do it in the other. Are we to take no account of the fact that the Dublin Transport Company, by more efficient management, succeeded in replacing obsolete equipment with fresh equipment, and, not merely repaid loans but reduced capital liability while, at the same time, giving cheaper fares to the public as well as substantially improving the conditions of employment of the workers?

What was done in the case of the Dublin Transport Company can be done for transport as a whole in this country. That is what we believe, and it is because we believe that that is possible, we are assuming that it would be unfair to determine the compensation to be given, if we propose to acquire the property or the shares of the Great Southern Railways, either on the basis of the stock market quotation for the shares at any particular date or on our idea of the value of the fixed assets. I said before that a transport organisation has no assets as such, except goodwill, and that the value of its fixed assets is at no time an indication of its earning capacity. You cannot treat a transport organisation as other commercial enterprises, as Deputy McGilligan tried to do when he talked of depreciation.

I agree that the finances of the Great Southern Railways should be recast into much the same form as the finances of any other commercial enterprise, that depreciation should be recognised as a working cost, that out of revenue every year a sum should be set aside against depreciation, and that depreciation should be recognised as a first charge on revenue. But that has never been the practice in regard to railway finances in the past. A railway company did not set aside sums for depreciation. It did not pay taxation on that basis. There was an arrangement by which such companies appropriated certain sums for renewals and maintenance. It may be true that the Great Southern Railways did not appropriate sufficient for renewals and repairs in the past, but they had not got it, because, under their system of finance, the first charge on revenue was debenture interest. It had to continue paying debenture interest or the debenture holders could exercise their rights.

However, we propose to effect the reorganisation which we believe is possible here, not merely in relation to the equipment of the company, but also in relation to its system of working and finance. We believe that, by an improved system of working, and by more efficient management, it will not merely be possible to effect the reequipment of the company with up-to-date equipment, but to do so, while at the same time providing cheaper transport, as well as providing for the amortisation of those capital liabilities with which the new company will start off. It may be that we are trying to put too onerous a burden on the company. I do not think we are, but that is a matter we can discuss on the appropriate section. In any event, my view is that we should leave the provisions of the Bill as they stand. If, in ten or 12 years' time, we find that the company cannot live up to the very high standard we are setting for it, then the Dáil should have another opportunity of considering the matter. I would rather set our standard too high than too low. I believe this can be done and, if it can be done, it is going, not merely to ensure that we will have in the immediate future a better transport organisation, but there is the possibility of a very substantial improvement in the general transport position in the course of 15 years.

Is the Minister making preparations already to tell the House five years hence that the Act of 1933 did not produce results, that the Act of 1944 did not produce results, and that at no far distant date—a historical phrase—other methods will have to be tried; and that we must give another trial—at the public expense, of course —to a reorganisation of the railways? The Minister told us what the Government is doing in this matter is a matter for the shareholders—£100 3 per cent. guaranteed stock for every £100 of 4 per cent. debenture stock, with this difference, that, at present, they have a probability of 4 per cent. dividend on £100 of debenture stock but that in the future they are going to have a definite guarantee of 3 per cent. Does the Minister not know perfectly well that it is because of the unusual and highly unorthodox financial methods adopted by the company the shareholders have been able to get any benefit from their shares? If the Minister reads the report of the tribunal set up in 1939, he will find that one member of that tribunal said that it was only possible to pay interest on debenture stock by making no provision, generally speaking, for renewals and repairs, even in normal years.

Why ignore last year?

Has the Minister any idea of the charges last year?

I have every idea. It has been demonstrated that the greater part of the increased profit last year was due to economies and not to increased charges. The whole of the additional revenue the company got last year from increased charges was less than the provision made for depreciation. The additional profits were the result of economies and efficient management. Not merely did they pay interest on debentures but they paid a dividend on ordinary shares.

And the average passenger charges increased from 2/- to ?.

The Minister tells us that the increased earnings of the company were due to economies and efficient management. That happened at a time when the chairman of the company stated that the whole railway system was a complete wash-out as a financial enterprise. He has, as a matter of fact, made the statement that over 50 per cent. of the railway lines were earning no revenue whatever. Yet the Minister tells us that the year in which the chairman said that the rolling stock was obsolescent, that the railway lines were dangerous—and this was confirmed by the Minister in statements made in this House—that the rolling stock had not been renewed, and that 50 per cent. of the lines were earning no revenue whatever was the period which brought about phenomenal prosperity to the railway by efficient methods and management. There is nobody in the world believes it at all.

The shareholders of the company had every reason to believe it. They got their dividends.

The fact of the matter is that all that efficiency was reflected in the fact that one could have bought ordinary stock on the stock exchange in March of last year at £9. The chairman had then told the nation that the whole railway system was in a deplorable position—that they had no coal, no money to buy coal, and that the whole system had suffered from a serious want of attention. In that circumstance, one could buy ordinary stock of the Great Southern Railways for £9. Was it the painting of that pessimistic picture and the normal belief that there was a silver lining to the cloud which would rapidly show itself that induced the same ordinary stock to rise to £52 in March, 1944? Of course, it was not. If the stock exchange had been left alone in March, 1943, the value of the stocks would have deteriorated still further. What caused the stocks to jump between March, 1943, and March, 1944, was the fact that in the meantime certain folk were quite satisfied that there was to be a Government guarantee for these stocks which would give the stock a value which it never had before.

The Deputy is a sucker. Within half an hour, he will have the tribunal's report in his hands, and yet he has the foolishness to make a statement of that kind now. I invite any Deputy in an hour's time to go outside Leinster House and see Deputy Norton kicking himself round the Victoria Monument.

I make this assertion ——

I should not be surprised to find the Minister kicking himself hard when that report comes out.

The Deputy, if he has any decency, will announce his retirement from public life.

I heard the evidence of the stock exchange secretary and chairman, who said that statements you made in this House were falsehoods.

I will prove here that the Deputy made a statement before the tribunal which was perjury. I will prove it to the satisfaction of any Deputy.

It has nothing to do with this section.

It was a statement which could not have been true, to the knowledge of every Deputy in the House.

Would the Chair try to keep a little order between the Minister and the Deputy?

The Minister tells us that all he is doing in this Bill is giving the debenture stockholders 3 per cent. guaranteed debenture stock in exchange for 4 per cent. debenture stock. The 4 per cent. debenture stock of the Great Southern Railways has been able to earn dividends simply because the railway company utilised moneys, which it ought to have set aside for renewals and repairs, for the payment of dividends on the debenture stock. In the future, that will not happen. Apparently the company may be required to make adequate provision for renewals and repairs, and to that extent therefore there may be some doubt as to whether the company has money available to pay dividends on its debenture stock.

Quite clearly, the Minister realises that would be so, if not permanently, at least at the outset, because, in order to induce people to take up the debenture stock which may be issued in the future, the Minister is to give a Government guarantee of 3 per cent. on the stock. That is to be the inducement to buy the stock, and it is that fact, the Government guarantee, and not the assets of the railway company or its earning capacity under orthodox methods of finance, which will induce people to take up the debenture stock issued by the company. Does the Minister not know perfectly well that the railway company could not go on the market to-morrow and offer debenture stock at 4 per cent.? Would it be taken up? Does the Minister believe it would be taken up? If it would be taken up, the railway company could finance itself by the issue of debenture stock at 4 per cent. or debenture stock at 3 per cent., but the company know perfectly well that they could not get, on their methods of finance, on the assertions of the company or on the Minister's view of the directors who have been managing the company, any substantial quantity of debenture stock taken up at 3 per cent. or 4 per cent.

It is because these assets in the form of debenture stock are in fact being given a greater value by the Government's method of financing this Bill that there is complaint that so far as the value of the shares is concerned the community as a whole is paying a greater dividend on these shares than would normally be the case because of the value attaching to the shares under the Minister's methods of grading them for the purpose of ascertaining the debenture and common stock of the new company. If the Minister attempts to tell us it is possible for the railway company, on what we know from the report of the Transport Tribunal, from the chairman's speech, and from the Minister's own view of the railway company, to be able to earn a dividend and pay its way on these substantially inflated assets, assets inflated by positive Government action, he is painting a future for the railways which will not be at all justified, and after a period the Minister will have again to confess, as he confessed in 1933 and this year, that other methods will have to be adopted in order to put the railways on a much better basis than that on which they were then or are now.

The Minister's latest contribution is the most amazing of many amazing speeches delivered by the Minister on the transport problem of the country. He has told us that he deprecates Deputy McGilligan, Deputy Mulcahy and Deputy Norton, referring to the stock exchange value of the stock and shares of the Great Southern Railways. These must be completely ignored as having nothing to do with the case. He further told us that dividends can be earned irrespective of whether the rolling stock is obsolescent or otherwise. Whether the stock is obsolescent or not does not matter. All you want is good competent management, and you can make dividends, even with obsolete rolling stock.

Why was this note not sounded by the Minister and by his echo, the chairman of the railway company, when they wrote down the value of the railway companies of the country in 1943 when we were told that the railways were completely obsolete and had no future, and when some of us who had given our lives to the railway service looked with despair on the future of the railways? This gentleman who was brought in to manage the company gave a picture to the shareholders, with the concurrence, I am sure, of the Minister, which showed that there was no future for the railways and that the country could not afford a system of transport which had to employ 15,000 people with engines half the time hauling nothing. Fifty per cent. of the mileage was being run for nothing, owing to the obsolete system of shunting. Sidings were out of place, stations wrongly built and plant complaint of the gentleman who is at the moment dictator and controller of the transport system.

We were told by the Minister at another time that he brought in this gentleman, who was skilled in running a fleet of city buses, to run the railway system because he thought it was better to bring in a man who had never been in railways. He would have had to go across the Channel to get a railway expert or get one from the railway service here, but he thought it best to bring in a man who had never been in railways. The moral of that is: if you want to make a success of any business, bring in a man who has never been in that business. We are told now that the success recently achieved by the company was due to expert management. The Minister knows well that one could not avoid being a success on the railways recently. There was too much traffic for the transport available and a porter from Kingsbridge could have run the railway system successfully in recent times. That is no criterion of what will happen in the future. The Minister knows enough about transport not to have to be told that.

I wonder why the voice in which he speaks to-night is so distinct from the voice in which he spoke 12 months ago when the value of the railway stocks was written down to zero? Both the Minister's voice and the chairman's voice were responsible for cutting the stocks and shares value down to the £9 spoken of by Deputy Norton. Then a wonderful transformation took place.

We are told we will get the report of the Great Southern Railways Stocks Tribunal within half-an-hour. That report is not so necessary. Anybody who listened to the Minister's speech could not but mark the insincerity of his remarks on a former occasion and now. I should like to hark back to the speech made by the Minister in 1933. He then said he would give a last chance to private industry and, if it did not succeed under the legislation then being enacted, the question of nationalisation could not be ruled out of consideration. We have advanced to the year 1944, but the Minister is still defending private control of the railways. He is not prepared, evidently, to go the whole distance towards the nationalisation of such an important industry. We are now going to have private control. Notwithstanding that we are guaranteeing public money for this company, it is still a private company, and the money that will be provided will not be under the control of this House. Every operation will be excluded from our control and Deputies will be unable to make inquiries here into how the whole organisation is being run.

Every opportunity is being taken to prevent public representatives from inquiring how our £16,000,000 will be spent. The Minister will probably tell us that a private concern should not be requested to disclose its affairs here, and we are told that there will be a safeguard by the establishment of a board. The position will be that there will be one individual in control and there will be a few cyphers appointed to a board, but they will have no voice in the running of the company.

The speech made by the Minister a few moments ago was one of the most amazing contributions on the transport problem to which I have listened during my period in this House. It would seem to me that the Minister has learned nothing and forgotten nothing. I do honestly wish that he would give expression to his own views on this matter. I feel that if he were to give honest expression to his views on the subject, he would be quite a different man from the man we know as the Minister for Industry and Commerce. I am sure that inwardly he feels, as I feel, that he is doing a wrong thing and, if he were free to do it, I am sure he would do everything possible to rescue the transport of the country from the oblivion into which he is now going to sink it.

He is putting into the hands of an absolutely unskilled man, a man who until now has had no interest in the railway business, the full control of this great organisation. Irrespective of what may be in the report of the Great Southern Railways Stock Tribunal, which will be issued in half-an-hour, the public will have their own views with regard to the present proposal and they will realise what justification there is for the Minister placing the whole transport organisation of this country in the hands of one individual.

Can the Minister give us any information with regard to the value of the property? There are certain tests, one being the Stock Exchange, but he discards that; the Stock Exchange quotations do not matter, whether they are low, as in June, 1939, and as representing the public view of whatever shares then came on the market, or what they are now, as representing the public view of the changed position brought about, not by what the Minister ascribes the position to be due to, but because of what Deputy Norton mentioned—that there is a Government guarantee and that the capital will be repaid, under the terms of this measure, before 1960. Therefore, we will not have that test.

Have we any other test? Is the property in which people are investing, and to which we are asked to devote a considerable amount of public money, to be guaranteed? Is that property earning money? Did it earn any money in the past, and had it enough to pay debenture interest? Are we paying for physical assets? Have I to read again what the Minister once told us, when he said that the property had to be largely scrapped and that the new organisation will have to replace the existing equipment? He said even more than that, and the chairman of the company told us that there was an Order which would substantially increase rates and fares. He added this: "This Order will enable us to do no more than make ends meet."

A few months later the Minister said: "The railways company is making a loss now and the anticipated revenue in the coming year will not meet its working costs." Later on, about one month later, he said: "The earnings on the Great Southern Railways were not sufficient to pay working expenses; even the increased rates will not cover the deficiency in full." In March, 1943, the chairman of the company said: "There is no reason to think that the railways company, no matter what you ask for the services rendered, can pay dividends on its existing capital."

That is why the shares went down.

I should imagine it should have some effect on people who were inclined to buy. "... no matter what you ask for the services rendered." That was followed up by the Minister's statement that there was a substantial increase in rates and fares, but it would not enable the railways company to cover the deficiency in its working expenses. The chairman of the company previously said he did not believe the Order would do more than enable them to make ends meet. That is the position of the property.

Take it by the test of the Stock Exchange in June, 1939, before there was any question of reorganisation. The value of the stock then was £4,500,000. We are paying £8,000,000 on it; people buy the new stocks because there is a certainty that the Government, the taxpayers, are going to back these stocks. The Minister says that we may find a considerable part of the equipment of a transport undertaking is obsolete, or obsolescent, but you can get revenue out of it. While it was becoming obsolete it did not earn the revenue that it is now required to earn. How is it going to earn it? The new organisation is going to start off with a capital of £13,500,000, and it can eventually have a capital of £20,000,000. The additional £6,500,000 is going to replace the existing equipment. That equipment at one time was valued at £25,000,000. The Minister reduced it by £12,000,000 or £13,000,000 and then, in 1944, he tells us that that will have to be regarded as obsolete and will have to be replaced.

At a time when all costs are going up, this is going to be bought by a company which has only an extra £6,500,000 with which to buy the new assets. What are we buying? Are we buying physical assets really there, or the proved capacity to earn? You are not buying either. So far as proved capacity to earn is concerned, that has been disproved. So far as the assets are concerned, the Minister gives us one picture, and the chairman of the company gives very nearly the same picture.

I do not understand the Minister's quibble as regards the references in my speeches to depreciation. I quoted from pages 147 and 148 of the report. There was a reference there to an annual expenditure of £600,000, as being essential for maintenance and renewals of the permanent way and works, and an equal sum for the maintenance and renewal of the rolling stock. On page 148 it is indicated that, if these amounts were provided, in no year would the balance be adequate to meet debenture interest, much less to provide dividends on the various stocks. In 1943 the chairman said: "I doubt if it would ever have been possible to pay dividends." We are going to put up pound for pound on these stocks and the State guarantees 3 per cent., and by 1960 the £13,000,000, and possibly £16,000,000 will be repaid; and when that is done the common stockholders will be the proprietors of a completely reorganised and modernised transport system. What is the justification for that?

I move to report progress.

Progress reported, the Committee to sit again to-morrow.
The Dáil adjourned at 9 p.m. until 3 p.m. on Wednesday, 20th September.
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