Dáil Éireann debate -
Thursday, 21 Sep 1944

Vol. 94 No. 11

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

Mr. McGilligan

At the adjournment I was speaking on the group of amendments on the Order Paper in my name. I had indicated my view that it would be better to have some reasonable valuation set upon the holdings of the stockholders in these two companies before the House committed itself to giving the amounts that are set out in the Bill. I had indicated that the courts are quite capable of discharging this function of assessing a value on this type of property. They do it frequently and in all sorts of more extraordinary circumstances than they would be faced with in this case. I had also indicated that, as far as one could see, the directors of the two boards not merely felt that the amount offered was much more than they had expected, but had also indicated their view, in precise terms so far as the Dublin United Transport Company is concerned, and in a rather vague phrase so far as the Great Southern Railways Company is concerned, that they were getting much more than any arbitrator could be expected to give them. I had said that I thought we should act on the basis of being fair to these people, but should not, of course, levy on the public purse or on the industrial user or the ordinary passenger, afterwards, in order to make up for the extravagant suggestions that are made in the Bill.

I indicated that, while an answer might be made to me that if you leave all the past years behind and simply contemplate the last years, you might say that the Great Southern Railways Company was in a much better position and that, consequently, the terms offered were not so very extravagant as might appear from an examination of the earlier years. On that, I had discussed this matter of the charges in so far as they affected a couple of things in the country. I took two in a selective way. I do not think they are unfair commodities to take. I said that the Chairman of the Irish Sugar Company had indicated at their meeting that they had made a trading loss, that the amount they had withdrawn from general reserve to cover that trading loss, which was £65,000, included a subsidy for freight of £70,000. In other words, if the particular subsidy had not been paid, they would have been able to pay interest on their debenture stock. I had referred, further, to the amazing statement made by the representative of the Ministry of Finance at that meeting when he talked of the heavy increase in freight charges on beet. He said: "The increase, especially in the case of a comparatively low-grade article like sugar beet, is certainly very distressing to notice and, as the chairman says, it may strike a blow at the heart of the industry unless some method is found to reduce the freight costs which, on the figures given in the statement, amount to nearly £650,000 in the year to which the accounts relate." I quoted from an Irish Independent editorial of August 1st to give a better picture. It showed that the charge for transport of sugar beet to the factories amounted to 24 per cent. of the price paid to the producers and that, taking it as a levy on the acreage under beet, the freight charges represented £8 per acre.

The amazing thing in respect to that is that the Great Southern Railways Company issued a statement to the Press, the day after that editorial appeared, in which they said—why they confined themselves to road haulage I do not know-that road haulage of beet by the company involved a loss of over £6,000. So that the Sugar Beet Company find this levy put upon them of 24 per cent. of what is paid to the grower, representing £8 an acre, so far as acreage is concerned; the freight subsidy of £70,000 involved the company in what was called a trading loss for the year under review and yet, on the whole, when the Great Southern Railways Company issued their statement counter to the Irish Independent editorial, the main thing was that they lost £6,000.

The second thing I called attention to was the objection taken by Fuel Importers (Eire) Limited against increases in the charge for turf and timber by the Great Southern Railways Company. That has reference to the present year. The case was opened on the 13th April this year. A short report of the statement of the case on behalf of Fuel Importers (Eire) Limited appeared the next day. It was claimed that the effect of the new rates had been to increase the average freight for turf from 13/5 per ton to 15/9, and for firewood, from 17/3 to 19/8. Take turf alone. The freight is going up by 2/4 on 13/5. According to the agricultural returns, turf is counted as an agricultural output, and it is supposed to bring in a return to the producer of about £2 per ton. In Dublin we know the price ruling for a long time was 63/-, and it was asserted that there had to be a Government subsidy of, I think, 25/-.

Mr. Norton

28/10.

Mr. McGilligan

That makes the price 91/-. Turf which is sold here at 63/- requires 28/- subsidy, although it is produced at the bogs at £2 a ton, and I understand from people who know more about this than I do that that £2 a ton is a fictitious figure, that the return is much less than that. Notwithstanding all that, the Great Southern Railways Company propose to increase the freight charges by 2/4 a ton, and we are supposed to regard that as something normal and on which to assess the basis of the return to these people for the last couple of years.

In amendment No. 26, I have asked that, in considering the case, the High Court.

"shall pay attention to all the circumstances of the dissolved railway company,"

—that is a phrase taken from the 1924 Railway Act which, of course, dealt with a situation in which there were entirely different matters to be reviewed with regard to the companies that were to be absorbed or amalgamated. Still the phrase does quite well for this purpose—

"the dissolved transport company and the Company and in particular the value on a net revenue earning basis on the 1st day of March, 1943, of the dissolved railway company and of the dissolved transport company and the estimated value on a net revenue earning basis of the Company under the provisions of this Act, the depreciation as on the 1st day of March, 1943, in the wasting assets of the dissolved railway company and of the dissolved transport company not provided for by reserves, the amount of capital required to make good such depreciation and the aggregate amount of such dividends if any, paid to stockholders of the dissolved railway company and of the dissolved transport company as were drawn from reserves, subventions, or other non-recurrent sources and were not paid out of what I may call ordinary trading revenue."

I put that in in order to cover the ground that the Minister had covered in his statement of May of this year.

"That statement of May this year was only in line with the statement made by the chairman of the Great Southern Railways Company previously and the statement made by the Minister on the two occasions I have referred to—the May and June statements of 1943."

In that connection I want to call attention to the Royal Mail Steam Packet Company case. In that case the allegation against the chairman of the board who issued a prospectus was that he misled the public, that he issued in the prospectus a statement which was false in some material particular and in that way got new money under what amounted to false pretences. What he did was, having certain subsidiary companies which were earning moneys, and seeing that these moneys were not going to be earned much longer, and where he got an adjustment in his tax charges and where he had certain other secret reserves, he drew on these and put them into a balance sheet, as it was alleged, to show a trading profit where in fact there was a trading loss. The whole case was analysed from the point of view as to what should be shown in the accounts. It was alleged that the accounts showed trading profits which were not earned, that there were certain things drawn from reserves and what were called adjusted profits. A phrase used by one of the counsel in the case is, I think, particularly appropriate, with a little difference, to the situation of the Great Southern Railways Company. One of the counsel said: "The trouble in this case was that this old gentleman's business was not making money, that the old gentleman was living on the savings of his prudent middle age." That might have been said for the Royal Mail Steam Packet Company.

It is not so for the Great Southern Railways Company, at least, if we consider that its middle age had been reached and passed by, say, the year 1924, because from the year 1924 on, if one looks at the tables given in the report of the tribunal of 1939—I think it is at page 139—one will see that this company was for years paying dividends when, for a number of years it was not making as much profit as it paid out in dividends and, from 1931 onwards was paying dividends when, instead of making profits it was making losses. Of course, what it was digging into was (1) the money which was handed over by the British Government at the end of the last war for renewal of track, rolling stock, permanent-way and everything like that, and (2) the money they got, of a non-recurrent type, under the 1924 Act, the moneys that were in subvention to them in respect of the baronially guaranteed railways. They had certain obligations to meet in connection with the same matter. For the rest of the period, from 1931 onward, what they were doing, as was confessed afterwards, was letting that renewals item go. The official who was present at the 1939 tribunal said that they were satisfied that not enough money was being put into renewals at all, and that they estimated that £600,000 on each of two sets of estimates was the amount required, and they estimated the amount set up by the two tribunals should be based on that.

Accordingly, it would appear that up to 1931 the company, for a long time, was making some profit and paying, out of that profit, certain dividends, and that from 1932 to 1938 they were making, in the main, losses. They made a small profit in one or two years, on an adjusted account, but in the main they were making losses, which amounted to well over £500,000. From 1932 to 1938 they paid for renewals, having made a deficit of £639,000, and in those years they paid a dividend amounting to almost £1,500,000. The situation in the previous years was not too good. They had a net profit amounting to £815,000, and paid out dividends amounting to over £2,000,000. That, of course, was from reserves resulting from the terminating Railways Act of 1924, but taking the years from 1938 onwards, on the whole, they paid out in dividends far more than they had got in profits, and the way that that was done was by letting the wasting assets waste, with the result that they arrived at the stage that the Minister described, when introducing the original Transport Bill last May, when he said, as reported in column 1793 of the Official Report:

"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. The railway equipment which Córas lompair 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..."

There was the situation, and now we are asked to pay these people—to give them, in return for the stocks they hold in the two companies—I am dealing with the Great Southern Railways Company at the moment—the amount that they put in. I want this thing to be dealt with from 1924, dividing it up in whatever way you like. I say that something more than a bare calculation on that sum should be given to these people. I say that for this reason: that, in my opinion, up to 1931 there was a net profit, although it was very small, but that from 1931 onwards there was nothing but losses, and it must be remembered that the losses were accrued to them, as the tribunal pointed out, mainly on account of the economic war. That economic war was not their business, and I do not think it is right to saddle them with the unfortunate consequences of it. I think that an examination of the accounts will show that an amazing amount was paid out when it was not earned. It was not resulting from the savings of the old gentlemen or the middle-aged gentlemen. They had no savings, whether they were young, middle-aged or old. Whatever came to them was as a result of subventions of various kinds, and the result was the shocking situation in which the company found itself. When you add to the deplorable situation in which the company found themselves, the fact that Mr. MacMahon said that when he heard of the proposals he was delighted and received them with enthusiasm, and when you also take into account that Mr. Wylie and Mr. Tweedy said that for £14 10s., they were to get £10 I think there is a case to be made for an examination into the whole matter, and the Stockholders' Protection Association have asked for it.

The last point that I wish to deal with is this. I have dealt with stockholders all together, but there are different classes of stockholders in the companies, and the various proposals are known to the House. There is a proposal that there shall be two classes of stock: one the redeemable stocks, and the other the ordinary stocks; but it seems to me that the day after this Bill is passed the Minister can pay off all these debentures in one "go", and establish new conditions of repayment.

However, I hope that at a later stage we shall get an explanation as to the actual proposal in this: whether it is to put a value upon the numerous classes in the two companies, to divide them and give certain equivalent holdings of other debenture stock or common stock in the two companies. During the course of the tribunal hearings, some witnesses were asked whether they could put a value on the stocks of the railway company, as such. As far as I remember, two of them said that the scrap value of the railway would not bring in, or might just bring in, the value of the debenture stock last year. The sum of £4,000,000 was mentioned as being the then value of the debentures. One witness said that he thought they might be more, and a gentleman engaged in the buying of scrap said that, as scrap, it might be worth slightly more than £4,000,000. At any rate, nobody put a higher valuation on it, and yet we have this position now. I ask that it be determined what value is to be put, not merely on the present holdings of the stockholders but then to go on and equate that to what is the corresponding amount they should get in the new company, and I would give the new company power to determine whether they will give that debenture or common stock, mainly because, when this matter was under discussion in the courts nobody suggested that the Great Southern Railways' property, either rail or road, had any value to anybody other than the debenture stockholders, and that if these debentures were paid, nobody else would have any claim to anything. The debentures must be first paid and, if they were paid, there would be nothing left for anybody else. Under the old Acts, if they could not work except for the scrap value, then when people realised that the property was going to scrap, the value put upon it would be very much less than the value put upon it by the courts.

The suggestion in the measure is that we should come to the assistance of the debenture holders and get rid of them after a period—get rid of them at least by 1960. When that is finished, what are we going to do? We are going to hand over this refurbished company to the common stockholders. They are people who, if maintenance and renewals had been properly attended to, would be far down the line for any dividend at all. With the exception of the last few years, it is many years since they saw a dividend. If maintenance and renewals, according to the report of the Transport Tribunal, had been attended to, the interest on the debentures could not be paid up to 1938 and it is doubtful if it could be paid with ordinary charges since. Yet it is proposed that we should clear out the debentures with the aid of the taxpayer's money or by piling on costs to the railway users. When it is all finished we are going to make these other people, who were never believed to have any real profit-earning assets, owners and proprietors of the new transport system. There will be transferred to them at that time the assets of the old railway company and some good assets of the Dublin United Transport Company. There are no transfers of shares from the Dublin United Transport Company to the common stock of the new company. They are going into the debentures. I think that has been already stated. I wonder if an option were given to some of these shareholders, particularly with the version of the new company as now paraded by the Minister, would they choose to become common stockholders or would they go into the debenture class subject to redemption? I think these are matters that should be left to a judicial determination, where everything can be examined, all sorts of witnesses called and calculations can be put before people well skilled in valuing these things.

It may be said that to do that would hold up the Bill. It would not; this measure and the reorganisation can go through. We have been told in the circular of the 26th October that new capital was required but no new capital was got since up to this month. Yet we are told a remarkable transformation has taken place. It is learned from the reading of the report that the old certificate of the engineer that the line was unsafe has been changed to a new certificate that the line has been made safe without any new capital. This is certainly a miraculous transformation, the full implications of which are not yet clear to the people. In any event that is the situation. I do not know how long it will be until the new material required for the replacement of rolling-stock and for the carrying out of necessary repairs can be procured but it will obviously take some time. The suggestion in the Bill is that by changing the name of the Great Southern Railways Company and the Dublin United Transport Company to Córas Iompair Eireann we are going to get immediately a magnificent development and that new capital will be provided by what is proposed in the section. The new capital will be got later but I should imagine that it will be some time before that capital will be required, in the sense that it will be a long time before that capital can be expended. The scheme of reorganisation can meanwhile go on but there should be a judicial determination on this matter which would leave people satisfied. A lot of them are asking for it and as far as the rest are concerned they have indicated that they are doing very well at the public expense. Eventually it is at the expense of the taxpaying public or the railway users——

Mr. Davin

Or the workers.

Mr. McGilligan

The chairman indicated some time ago that a number of workers might have to walk the plank. That statement has since been modified to some extent. That means that the sacrifices that are going to be imposed on the workers will be postponed and that discharges will be subject to the compensation clauses that will be embodied in the scheme as amended. Unless we are going to contemplate the continuance of charges, which incidentally the chairman states he considers are too high, with such adverse results on the carriage of such things as beet and turf then the result will be that either the taxpayer or the travelling section of the community will have to pay. I suggest that before we impose these burdens on them we ought to be satisfied and the public ought to know how the valuation is to be arrived at. Let them know what is to be brought into consideration. Let them be satisfied that what has been done is fair on the whole to the shareholders while being fair to the future transport users and passengers of the company. There is nothing that can be objected to in that scheme. There is no question of any imputation brought into this thing. This an attempt to get a determination, and the Minister has not given us the basis of his calculation. He has told us certain things, but he does not indicate how it is possible to have this determination arrived at. I look with suspicion on this determination, welcomed as it was by the representatives of the shareholders.

Mr. Lemass

The absorption and the amalgamation of companies are not unusual, but it is true to say that they far more frequently occur on the basis of agreed terms than on terms determined by arbitration. In this case we are proposing to effect the amalgamation of two companies to constitute the new corporation. The State comes in as the instrument by which amalgamation is effected. We are proposing to proceed on the basis of an agreement with the two existing companies. Deputy McGilligan says that we should not proceed on the basis of an agreement but on the basis of arbitration.

In the case of the amalgamation of two private companies, joined together because the owners or directors of these companies consider that amalgamation is desirable in both their interests, even if they are unable to agree on terms and decide to resort to arbitration, they usually endeavour to get agreement on the terms of arbitration. Deputy McGilligan proposes that we should not proceed to get agreement on the terms of arbitration, but that we should endeavour to get the basis and the terms decided by the Dáil, the terms recommended by him and set out in his amendment. These terms are obviously designed by him to secure that the shareholders of the Great Southern Railways Company will get the least possible compensation for their existing stocks.

Let me say at this stage that Deputy McGilligan's remarks concerning the failure of the Great Southern Railways Company to provide adequately for maintenance and renewals appeared to me to be entirely beside the point. Whatever assets there are at the moment as security for the debentures held by the Great Southern Railways Company debenture holders will still be the assets of the new company on which the debentures of the new company will be secured. They will have the additional security of a Government guarantee, in consideration of which the debenture holders have agreed to surrender 1 per cent. in interest. Whatever the earning power of the old company, in other words, whatever the value of the ordinary stock, will still be the earning power of the new company, subject to the extent to which, as a result of amalgamation and better management, the earning power may be increased.

It seems to me, if it is true, that there has been default on the part of the company to the extent mentioned in maintaining its equipment and permanent way, and if that default has to be made good by new capital expenditure in the future, that is a factor which vitally affects the value of the shares which we are proposing to give to the shareholders of the existing company, because if there has to be new capital expenditure financed out of new borrowing it means more interest and, consequently, a diminution of the company's ability to pay a dividend on the ordinary stock. The proposal, therefore, to give stock in the new company—£1 per £1—in return for stock in the old company is a fair one, and avoids the difficulty of determining whether the company has made adequate provision for maintenance and renewal, or the extent to which there has been default in such maintenance, as default there undoubtedly has been.

Deputy McGilligan says that we will not seek agreement. So far as the Government is concerned, we are determined to proceed on the basis of agreement. The proposals, that are contained in the Bill were put before the shareholders of the Great Southern Railways Company and before the shareholders of the Dublin United Transport Company, and were accepted by a majority in each case, and the Government is bound to go through with the contract that is implied in that procedure. But Deputy McGilligan says that we will not proceed on the basis of agreement at all, but on the basis of arbitration, on arbitration designed to secure that these shareholders will get the lowest possible amount that we can arrange. In order to do that, he says, he proposes the arbitrator shall be instructed to value the undertaking, not upon its basis to-day, not upon its basis before the war but on the basis of the worst point in the company's history. Why should we do that? Why pick the 1st March, 1943, and determine the value of the undertaking on that date? On that particular date the Company was in the worst period in its history. The full effects of the war had not been felt on its revenues, the benefits resulting from better management had not yet begun to accrue.

Mr. Norton

Take 1939.

Mr. Lemass

What is the case for 1939?

Mr. McGilligan

What date did the Minister take?

Mr. Lemass

I say that we did not take any date. We proceeded on a different basis entirely. If you try to determine the compensation by arbitration you will run into all these difficulties: of trying to lay down the terms of reference for the arbitrator. Mind you, we could lay down terms of reference for an arbitrator which would enable us to say in advance what the compensation was going to be. If an arbitrator were instructed to proceed on the basis of net revenue-earning capacity only and ten years' purchase, any mathematician could work out in half an hour what the compensation would be. If you proceed on the basis of the fixed assets——

Mr. Davin

What is their value?

Mr. Lemass

Someone has said that the railways have a scrap value of £4,000,000. I doubt that very much. What is the scrap value of the permanent-way from Dublin to Cork if it is not carrying railway tracks? It has none. It is an obstruction. The building of that permanent-way cost a great deal of money, but unless it is carrying railway tracks it is worth nothing. Why, even to put it back into grazing land would involve capital expenditure far beyond what the land would be worth as grazing land. But, as a permanent-way carrying a railway, it is worth something unless we can do without railways altogether. If that permanent-way were not there we would have to built it. If we had, how much would it cost? Far more than it is valued at in the company's books. The same applies to stations, stores, and to great deal of the fixed equipment. When we talk about obsolete stock, we refer mainly to rolling stock. It is true that many of the stations are ill-designed for modern traffic and would have to be reconstructed. A great many of the assets of the company were not earning revenue but are earning revenue now, so that if we were to proceed on the basis of their replacement value, we would find ourselves paying the shareholders of the company far more than we propose in the Bill. If you were to proceed on the basis of arbitration you would run into all these difficulties. Is it not much better, therefore, to proceed on the basis of agreement?

If Deputies want to know what the case is for proceeding on the basis of agreement instead of arbitrarily determining ourselves the value that we put on the stock of the company, they should read the speeches delivered by the members of the Fine Gael Party on the 1933 Act. On that occasion I did not proceed by way of agreement. I decided myself that it was obvious that a large part of the capital which had been invested in the railways of the country was lost and should be written-off in a completely arbitrary manner. We determined the extent to which the nominal values of the different classes of stock should be written-down, and we legislated to write them down. We did not consult the shareholders of the railway company, and certainly did not get their consent. The members of the Fine Gael Party strongly objected to that procedure and urged that we should proceed by way of agreement. I think experience has shown that agreement, if possible, is the preferable method. I think that the difficulty which the Great Southern Railways Company had in raising new capital when it required it, and when there was no Government guarantee, was due to the impression created by the 1933 Act. But we had to proceed in 1933 as we did because neither the directors nor the shareholders of the Great Southern Railways Company had at that time awakened to a realisation of their position, and there was no hope of getting agreement on any reasonable basis of valuation of their capital.

It is true that the directors of both companies recommended the terms of this Bill to their shareholders. It may be that these directors were relieved to find that we were proposing to proceed by way of agreement on this occasion instead of following the method pursued in 1933. It may be also that the terms were slightly more favourable than could possibly have been secured, and that the agreement of the shareholders was due to that fact. I do not know. In any event, the terms, on the face of them, are fair. We are giving to the shareholders of the Great Southern Railways Company new stock of the same nominal value as they have at present.

Mr. Norton

Suppose the directors had rejected agreement the alternative was the threat of arbitration?

Mr. Lemass

In the case of the Dublin United Transport Company, yes. I was very pleased that we got agreement, and I suggest that the Dáil should be pleased, too.

Mr. Davin

The Minister threatened them.

Mr. Lemass

I told the companies that the Government regarded the amalgamation of both companies as an essential part of its transport reorganisation plans, that we wanted to get that amalgamation by way of agreement, and offered them these terms which we were prepared to defend in the Dáil, and indicated that if they were not accepted we would have to get them by——

Mr. Norton

Arbitration.

Mr. Lemass

Yes. I say that we are proceeding in a much better and fairer manner. We do not have to wrangle about the basis of the value of the concern. We do not have to decide whether its failure to earn sufficient revenue in the past was due to circumstances outside its control. Deputy McGilligan has suggested that it cannot in the future hope to earn more substantial revenue than in the past. In any event we are giving to each shareholder the same nominal value in stock. The debenture holders are going to get 1 per cent. less in interest, but in consideration of that we will give them the certainty, instead of the probability, of getting their interest. To the ordinary stockholders we guarantee no interest at all. Their interest will depend entirely on the earning power of the company. It is clear that the capacity to earn a profit sufficient to secure the payment of a dividend on the ordinary stock is improved by reason of the amalgamation and particularly by reason of the reduction in the interest payable on the debentures.

In the case of the Dublin United Transport Company, it was in a different position because, while, on the one hand, there was a general recognition that something had to be done, that a reorganisation of some kind had to be carried out, on the other hand you had a company which was not merely earning substantial revenues but that obviously was capable of earning substantial revenues in the future. In their case, the offer took account of the revenue-earning capacity of the company, making due allowance for the fact that the interest on the new stock would be Government guaranteed.

Mr. McGilligan

You did not take the easy method of saying "£ for £" in that case?

Mr. Lemass

No, because, obviously, an offer of £ for £ would be unfair to the shareholders.

Mr. McGilligan

But it was fair to say "£ for £" to the Great Southern Railways shareholders?

Mr. Lemass

Yes.

Mr. McGilligan

It was the easier way, and that was the reason it was done?

Mr. Lemass

This was the fairest way.

Mr. McGilligan

Why was it fair?

Mr. Lemass

Because it left those shareholders with the same property as they had in the past—that was the case so far as the debenture holders were concerned at any rate.

Mr. McGilligan

What has the Minister said?

Mr. Lemass

The Deputy has been confusing this issue by his references to the past history of the Great Southern Railways Company. Whatever the undertaking is worth, whether from the point of view of its fixed assets or its revenue-earning capacity, it is being transferred as a unit to the new organisation. We are transferring with that unit the same capital liability as attaches to it at present.

Mr. McGilligan

Are you stopping there?

Mr. Lemass

Yes.

Mr. McGilligan

Is that all you are doing?

Mr. Lemass

I think that it is a fair arrangement.

Mr. McGilligan

Are you not guaranteeing 3 per cent., no matter what they earn?

Mr. Lemass

We guarantee the debenture holders 3 per cent. on their investment. In consideration of that guarantee, they are surrendering 1 per cent. interest. We are giving that assistance to the company to enable it to effect a reduction in its interest charges and to facilitate the reorganisation and development which we believe to be possible. This device of utilising State credit to get money more cheaply for the company than we think it could get it itself is justifiable in relation to such an important matter as transport, while it might not be justifiable in relation to other economic activities, even activities in which the Government would be interested. The Minister for Finance is, naturally, perturbed at the increase in the contingent liabilities of the State and various provisions were inserted in this Bill to ensure that the contingent liabilities undertaken by the State would be limited in time and extent. But we do come here to defend the proposal that State credit should be made available in order to reduce the interest which the company has to pay on its loan capital. Is that clear to the Deputy? The Deputy got himself involved in a discussion on existing freight charges. Let me start off by saying that the present freight charges of the Great Southern Railways Company are in no case, so far as I know, above the standard charges fixed by the Railway Tribunal in 1929.

Mr. McGilligan

And never operated.

Mr. Lemass

In so far as the Railway Tribunal in 1929 determined reasonable charges for transport, those charges have not been exceeded, despite increased costs since the emergency.

Mr. McGilligan

The new rates fixed after the cutting down of the stocks in 1933 have never been applied either.

Mr. Lemass

It is true that the company was not able to make those 1929 charges effective, by reason of the competition which developed on the roads, which competition forced the company to cut its charges in order to get business. The matter to which the Deputy referred—the failure of the company to make profits in that period and its inability to make proper provision for maintenance and renewals— was due to the fact that, owing to the development of this competition, they were unable to make effective the standard charges of 1929. Those standard charges are in force now. It was contemplated by the 1924 Act that a transport service would be provided which would be capable of operating on a remunerative basis, but it was also contemplated that that transport organisation would have rates for traffic no lower than those now in operation.

Deputy McGilligan spoke at some length on the subject of the transport charges to the sugar company. He misinterpreted the figure given by the chairman of the sugar company at the annual meeting but I may say this for him—he finds himself in what he may regard as good company. The writer of the leading article in the Irish Independent and the Secretary of the Department of Finance also, obviously, misunderstood the figure given. The £600,000, odd, which the sugar company paid for transport was not paid for the transport of beet only. That figure represented all the transport charges incurred by the company in that year—the charges for the transport of beet, beet pulp, sugar, which is now sold carriage-paid in all parts of the country, coal, machinery, spare parts, limestone and all the other raw materials of the sugar industry. Some part of the money was paid to the Great Northern Railway Company and a very large part of it was paid to private licensed hauliers. Not much more than half of the sum was paid to the Great Southern Railways Company. Deputy McGilligan referred to the high proportion of the total cost of beet represented by freight charges. In fact, freight charges are a much smaller part of the price of beet now than they were before the war, due entirely to the increase in the price of beet, which has been far more substantial than the increase in the cost of transport. In the 1943-44 campaign, the Great Southern Railways Company lost a sum of, approximately, £7,000 on the transportation of beet by road.

Mr. McGilligan

They say £6,000.

Mr. Lemass

The Deputy also misunderstands the significance of the freight subsidy. The freight subsidy has nothing to do with the cost of freight. It represents the decision by the sugar company to pay the entire cost of freight over 8/- per ton.

Mr. Davin

Is it included in the £600,000 figure?

Mr. Lemass

Clearly, the amount of subsidy payable by the company under that arrangement depends on the number of growers of beet who are at a considerable distance from the factories. During the war, the company encouraged the production of beet in all areas of the country, whereas, in ordinary circumstances, they would have endeavoured to secure the full supply from the areas nearest to the factories. The amount of that subsidy is no indication of whether freight charges are reasonable or unreasonable.

Mr. McGilligan

I am also in good company in that case—in the company of the chairman of the sugar company, who relates that to the charge for hauling beet to the factory.

Mr. Lemass

The cost of hauling sugar beet to the factory depends far more on the cost of hired lorries from licensed hauliers than on the railway company's charges. One of the considerations put up when the question of increase in the freight charges arose this year as between the railway company and the sugar company was that they could not guarantee to get transport to haul the beet unless they could offer increased rate charges to the licensed hauliers.

In circumstances such as exist, when licensed hauliers can get far more business than they can undertake, it is difficult to ensure that their full services will be available for the transportation of beet when required, unless they get what they regard as reasonable remuneration. That factor more than anything else determines the cost of bringing freight to the factory. The figure Deputy McGilligan quoted includes not merely the cost of bringing beet, but coal, limestone, spare parts as well as taking sugar manufactured in the factory and delivering it in all parts of the country. The company has incurred increased cost in that regard, because, in order to make it possible to have a national fixed maximum price for sugar, the company was required by the Minister for Supplies to depart from the usual practice and to sell sugar on a carriage prepaid basis in Eire.

The same consideration arises in the case of turf. It is not correct to refer to the turf rate as something that is normal which, I think, was the expression used by Deputy McGilligan. Clearly it is an entirely abnormal feature of the company's activities. Not merely is turf required to be carried to a far greater extent than ever before, not merely is suitable equipment difficult to get for that, but the company is required by Government Order to carry turf in priority to other traffic. If the company could accept or reject traffic as it thought fit, or what was best suited to its commercial interests, it could obtain a great deal of traffic that would be far more remunerative than turf. It is required by Government Order to carry turf in priority to other traffic which would be more remunerative to it.

Mr. Davin

Is that the position at present?

Mr. Lemass

That is the position. The company is operating under a Priority Order, and is required to give definite preference to turf over any other commodity. If turf is offered the company must carry it, even though other traffic is available.

Mr. McGilligan

Is turf classified under "minerals" in railway charges?

Mr. Lemass

Turf would be under "other minerals".

Mr. McGilligan

I notice that the rate has gone up from 5/8 pre-war to 10/5. That is nearly double.

Mr. Lemass

The special rates which were in operation in 1943 have been increased. They were not increased by a uniform amount. There was an all over increase of 20 per cent. In no case did that bring the amount over the standard rates fixed. I should point out that the length of the haul has increased immensely, as well as the amount of other minerals dealt with.

Mr. Davin

Is it not a fact that hundreds of turf wagons have been withdrawn from the haulage of turf?

Mr. Lemass

Certainly. Not only turf but grain and beet had also to be dealt with. We cannot continue the delivery of turf only. I ask the Dáil to reject the amendment, not merely because of the date mentioned, but because I think it is unfair to the shareholders of the Great Southern Railways that we, at this stage, should say that we are going to take their property and give them new stock determined in accordance with the proposals in the amendment. This amendment was designed to ensure that they would get the worst possible terms. I think that would be unjustifiable. I recommend the Dáil that, instead of determining by arbitration what the exchange of stock terms should be, the process adopted by the Government, that of proceeding by way of agreement, is one that should be upheld by the House.

Mr. Norton

I cannot understand why the Minister is so opposed to arbitration in a matter of this kind, particularly when we have regard to his original scheme of securing some kind of agreement or scheme of valuation of the Dublin United Transport Company. In that case the Minister offered the shareholders of the company approximately £145 for every £100 of stock in the tramways company. He said to the shareholders: "If you do not like £145 for every £100 of stock, then we will go to arbitration."

Mr. Lemass

No, I did not offer £145 of stock.

Mr. Norton

Is it not obvious that that is what was in the Minister's mind?

Mr. Lemass

No.

Mr. Norton

In the long run that is what they are to get.

Mr. Lemass

They are to get stock in the new company to the nominal value of £145 bearing interest at 3 per cent.

Mr. Norton

For £100 of stock in the old company they are to get £145 worth of 3 per cent. redeemable stock in the new company. If the shareholders of the Dublin United Transport Company had taken the view that that was an unfair offer on the part of the Minister or that his proposals were not equitable, they could have said "All right, we will not take your proposals; we do not think them fair," and in that case the Minister would have to go to arbitration to ascertain the value of the shares in the Dublin United Transport Company. Apparently the Minister was not terribly upset at the prospect of going to arbitration, because that was the alternative to acceptance of his proposal by the shareholders. If he had to go to arbitration it is obvious that terms of arbitration would have to be agreed upon. If terms of arbitration could be devised to ascertain the value of stock in the transport company, is there any insuperable difficulty in devising terms of arbitration to ascertain the value of stock in the Great Southern Railways?

Mr. Lemass

It was to avoid difficulty in having to devise terms of arbitration.

Mr. McGilligan

Had the Minister no terms of reference when deciding?

Mr. Norton

From what the Minister says and from the point of view of his sense of financial tidiness a catastrophe was avoided only because the directors recommended the shareholders to take his good offer. If the directors had taken the other line and said to the shareholders: "Look here, lads, hold out, and you will get more by arbitration," the Minister would be forced to adopt other methods if the shareholders were irascibly minded on the matter.

Of course, the shareholders, knowing a good thing when they saw it, said it was "O.K." If there were no terms, the chairman could say to the shareholders: "Look here, boys, there is as much jam on this bread as we are going to get. This is the best thing that is going this year. Take it while it is going. We will never get a better offer as the Minister threatens arbitration if we do not take it." Supposing the directors said: "Hold out, as the Minister is committed to the principle of reorganisation, he may be willing to ladle out more jam. If he is not, we will go to arbitration." If the directors had done that, the Minister would have had to go to arbitration, and if so, he would have fixed terms of reference to ascertain the value of the shares. What is the difficulty in doing the same thing in respect of the rather amazing financial vicissitudes that the Great Southern Railways have passed through in the last 15 years?

I think Deputy McGilligan's amendment is a reasonable one, because it says in respect of certain stock that there is some doubt as to the value of the shares, and, having regard to all the circumstances, suggests that a body like the High Court should have jurisdiction to determine the amount of substituted stock to be allowed to each stockholder. It also suggests that, when valuing the amount of stock to be allocated, the court should take into consideration all the circumstances of the dissolved railway company, and bear in mind the atmosphere in which it operated. The amount might be increased, having regard to the difficulties under which the company operated in that period.

Mr. Lemass

That is not what is there. Let the Deputy read on. It continues: "and in particular..."

Mr. Norton

"In particular," yes; in other words, the value on a net revenue earning basis on that date. But surely it did not exclude taking into consideration all the circumstances of the dissolved railway company. Obviously, you must have some regard to what the value of the assets was, but you were not tied down to the value of the assets. You had a right to take into consideration, too, all the circumstances of the dissolved railway company. The amendment, therefore, does not tie the High Court down to valuing the shares on a purely accountancy basis, but enables the High Court to take into consideration certain other circumstances which might induce them to increase the normal value of the shares on the particular valuation date. I cannot see why the Minister will not permit a body such as the High Court to express an opinion on the value of these shares, having regard to the rather chequered history of the finances of the Great Southern Railways.

I do not know whether the Minister's endeavour to convince us that this whole scheme of substituted stock is so simple is not just a device on his part to cover up something which, in my opinion, is much more than simplicity. He says: "In the case of the railway company, what we did was to take £ for £. We gave the debenture holders in the Great Southern Railways £100 3 per cent. guaranteed redeemable stock in the new company for £100 stock in the other company. The only difference was that, in the new company, we reduced their prospect of a dividend from 4 per cent. to 3 per cent." But when it came to the tramway company, it was not £100 for £100, but £145 for £100.

Mr. Lemass

£145 of 3 per cent. stock for £100 of 6 per cent. stock.

Mr. Norton

£145 of State guaranteed 3 per cent. redeemable stock.

Mr. Lemass

For £100 of 6 per cent. stock which had never missed a dividend, in the case of the preference.

Mr. McGilligan

And the chairman said the shareholders would not be paid at par or anything like it, if it went to arbitration.

Mr. Lemass

Nevertheless, the amount the shareholders will get in interest and dividend is reduced by £20,000 per year.

Mr. McGilligan

Would it not be fair to give them a chance of showing that to a tribunal?

Mr. Lemass

On what basis of arbitration?

Mr. McGilligan

We can easily argue the basis of arbitration. The Minister must have had some basis in his mind when he gave these terms.

An Ceann Comhairle

Let us hear Deputy Norton.

Mr. Norton

My main complaint against this whole scheme of finance is that we are throwing the public credit in to buttress up a transport company on valuation terms which I think are extravagantly generous to certain shareholders. The Minister, in justification for throwing in the State credit to this private monopoly, said he did so because of the fact that he is reducing the interest on the redeemable stock from 4 per cent. to 3 per cent. That is his justification for throwing in the State credit. Would the Minister consider leaving the redeemable stock at 4 per cent. and taking away the State credit, because from the point of view of the State and of the community, it will pay less if that credit is withdrawn than it will have to pay if the company have to go out and raise capital on the basis of 4 per cent. redeemable stock?

My fear is that this transport company will not earn anything like a revenue capable of paying 3 per cent., and that, year after year, the transport company, through its debenture holders, will put its hand down into the public purse and the community will be taxed in order to pay the guaranteed 3 per cent. dividend to a private monopoly of this kind. The Minister knows perfectly well that this company could not get capital on the open market to-morrow at 3 per cent. or 4 per cent. The suggestion that the State credit is thrown in in justification for the reduction of the interest from 4 to 3 per cent. does not deceive me, or, I think, anybody else. The Minister knows perfectly well that the State guarantee is thrown in for two reasons, (1) to get this private monopoly money which it could not get itself, and (2) to buttress up and asphalt the road for the amalgamation of the two companies.

My complaint is that the public have to pay for this in the long run. They may have to pay later in the form of higher transport charges. Workers may have to pay in the form of lost employment or contenting themselves with rates of wages and conditions of employment which do not provide them with an adequate return for their services, and the travelling and trading public may be mulcted in order to maintain this private monopoly, overvalued as I believe it is to-day, and even when all these people have made sacrifices of a kind, the community in taxation through the Minister for Finance may have to dole out annually a sum of money in order to pay the debenture holders the guaranteed interest which is provided for in the Bill.

I do not think the Minister has made any case why the High Court should not be permitted to adjudicate on the value of stock and the value of substituted stock as from the date suggested in the amendment. The High Court is an eminently reasonable body. It is capable of administering arbitration proceedings on as equitable a basis as the Minister could ever have contemplated when he had in mind the application of the principle of arbitration to the value of the shares of the Dublin United Transport Company, and even now the Minister ought to say to the public: "If you are to foot the bill for this private monopoly by providing 3 per cent. interest for them, whether they make a profit or not, you are at least entitled to know what the High Court thinks of the value of the shares you are being asked to guarantee."

General Mulcahy

The Minister has rather emphasised the point that the amendment proposed in Deputy McGilligan's name would mean that the stockholders of the company would get the least possible value in substituted stock; in other words, that a definite injustice would be planned for them. That is the Minister's exaggerated way of putting it. The suggestion in the amendment is that they would get reasonable justice, but there is another side of this justice aspect to be taken into consideration, that is, justice to the people of the country as a whole, the people who will have to depend upon proper transport services if they are to maintain their present economy, if they are to increase their production and if we are to deal with the cost of living, the maintenance of our people and the problem of competitive trading abroad.

On page 50 of the report, information is given that one particular buyer of stock, realising, when the charges were increased in July, that he had to pay in respect of his company a sum of £4,500, together with an additional £700, making in all £5,200 a year, because of the withdrawal of certain privileged rates from his company, thought it worth while to invest in £30,000 worth of stock, nominal value, on the ground that the Great Southern Railways had been given power by the Minister to squeeze more money in transport costs out of the people, even to the extent, in the case of this particular company alone, of taking £5,200 annually from them. The key to the whole change in the Minister's mind with regard to the financing of this company, and the main point to be borne in mind by the House in dealing not only with the stock proposals, but with the general proposals of the Bill, is that very much higher transport costs than should be taken from the people will be taken from them in the future. As I emphasised before, that will operate at a time when, in the general interests of the economy of the country, we should be reducing our transport costs to a minimum.

On the question of compensation—I will call it compensation, or I will take any other word the Minister would prefer to use—of the stockholders, on the 6th February, 1943, the chairman of the Great Southern Railways Company thought it would be reasonable to form a statutory company with a capital of not more than £10,000,000, bearing a low rate of interest, with which to buy out the existing stockholders. That was the proposal of the chairman of the Great Southern Railways Company who had been in his dictatorship position in the company for 12 months. According ing to him, a statutory company ought to be formed, with a capital of £10,000,000, that would buy out the existing stockholders. As I indicated, if you pay off the holders at their full valuation, it would leave about £65 per £100 for the other stockholders. That was the chairman's idea.

On the 27th February the Minister followed up that with the formation of an idea of his own. According to the Minister then, a statutory company with a capital of £10,000,000 should buy up not only the Great Southern Railways Company, but the Dublin Transport Company as well. That was the second estimate that we find of what might be done. Later on, on the 14th July, the Secretary of the Department of Industry and Commerce, according to a memorandum, or an addition to a memorandum, furnished by him at that time, having come to the conclusion that compulsory conversion was inevitable, pointed out the difficulty of deciding what would be fair and proper conversion terms and suggested that Mr. Reynolds should be asked to state his idea of a fair and proper basis for the scheme. The secretary annexed a number of calculations of the cost of conversion, based on market quotations, designed to bring the required new capital under or within the range of the £10,000,000 mentioned in the Minister's minute. As late as 14th July, 1943, the Minister and the Department were still thinking in terms of £10,000,000 that would buy up the two companies.

From 1st July the railway company had been given authority to increase the rates. It was not until the increase in the rates had been able to operate for a while that the bigger and wider and more generous ideas began to show themselves. On 2nd September we first come up against the idea that the chairman of the Great Southern Railways Company contemplated a fixed capital of £5,000,000 in common stock, with a Government guarantee of a dividend of not less than 2½ per cent. for seven years and his total capital would be brought up by redeemable bonds to £25,000,000. Finally, on the 7th October we get the present scheme; that is, we get the present scheme after three months had shown what could be squeezed out of the users of transport in the country.

I ask Deputies to examine their own minds on this particular matter and I ask what can be the explanation of the change, except that they saw what they were able to squeeze out of the transport users and they saw there were people in the country who were able to swallow an additional £5,200 a year being put on their transport costs without making any grumble about it. Under the emergency conditions they bludgeoned people's minds with regard to costs and expenditure of all kinds and this has been done in such a way as to give the Minister some hope that he can still continue to do with transport charges in the country after the emergency what he is doing now.

Mr. Lemass

He would be a foolish man who would try to decide on the basis of war-time experiences what should be a permanent policy.

General Mulcahy

The Minister is basing the Bill on this idea, that he will find the people as unresponsive to oppression in peace-time as under the conditions brought about by the emergency here, and that is where the Minister is wrong. That is where we see a danger in the future. We see people now being given a definite Government guaranteed interest in a particular company. The people will find themselves saddled by a Government guarantee and Government commitments at a time when they will be no longer able to bear them.

There is evidence through this report, too, that the chairman of the Great Southern Railways Company hopes to be able, in respect of the amalgamated company, to do what he has done in the City of Dublin, and that is by the charges he is able to put upon the people to pay off any substantial lump sums of the temporary capital provided in such a large volume here. The Minister is simply taking people, whose initiative and energy and vigour are impaired by emergency conditions, and he is prepared to squeeze £9,000,000 out of them, within the next few years, more than the transport system here should cost, and give all that in a newly built-up company to the people whom, in February, 1943, he was going to buy out for £10,000,000.

The key to the whole business is the high rates. Those who control the company have had a taste of the higher transport rates from July to September in 1943, and the change of mind that is indicated in this report and that is enshrined in this particular Bill is the result. The proposal that is before the country is based on the experience of the increased charges the Minister allowed the railway company to impose under emergency conditions since last July.

Mr. Cogan

I should like to support the amendments on the broad principle that where the State sets out to acquire property or bring about a compulsory conversion of property, as in this case, it is the duty of the State to acquire that property at a fair valuation and compensate the owners fairly. There are two fundamental ways in which the State may err in regard to compensation to owners of property. First they may pay an excessive rate for the property—they may give excessive compensation—and in the second place they may provide inadequate compensation. In order to avoid inflicting an injustice either upon the owners of property or upon the citizens of the State, the taxpayers and the travelling public, it is absolutely essential that there should be an impartial tribunal set up to decide what is adequate compensation. That is simply what this amendment seeks to provide. I confess that I did intend submitting an amendment somewhat on those lines, but I found it difficult to draft anything which would meet the situation fully. The proposal in this amendment to submit the case to the High Court appears to be a most equitable method of overcoming the difficulty. I feel that if the complicated issues raised in this transfer or compulsory conversion of stock are submitted to a judicial tribunal, the High Court in this case justice will be done first of all to the shareholders, large and small, and secondly to the general taxpayers in the country who have to foot the bill, and to the travelling public who must share in the cost.

No reasonable case has been put forward by the Minister in opposition to this amendment. A sound principle, which should obtain in all cases where the property of individual citizens is being interfered with by the State, is that an impartial tribunal should be set up to decide the value of the property. When the tribunal gives its decision, that decision should be accepted. To adopt any other line is to open the way to injustice; it is to open the way to pressure being brought to bear upon the Minister and his Department by the people who own property. If, for example, the Minister were to consider acquiring possession of my farm, I would feel very happy if the decision were to acquire that farm by agreement. In all probability, I would then be in a position to secure a price far in excess of its value. Having regard to the fact that in a matter of this kind the Minister is the custodian of the people's interests, the custodian of the people's money, I do not think the State has any right to approach the question in that way. The only fair and just method of settling the question is by submitting it to a tribunal which cannot be "pulled" or coerced in any way.

Mr. McGilligan

The Minister said that it was wrong to bring in matters like the obsolete plant or equipment of the railway, or anything like that. If that is wrong, why did he spend so much time on 2nd May telling us about the obsolete state of the railway? Why was his talk about the railway and its parlous condition based on the almost complete scrapping of the equipment? Why did the chairman, in his speech of March, 1943, go to such pains to remind the people that the rolling stock was obsolete, and that that obsolescence as well as the inordinate number of workers employed had brought the railway to its present position? Why did he say that the system of renewals which should have been adopted and was not adopted had brought the railways into the obsolescent state in which they find themselves to-day? Eventually, in October, when addressing the shareholders by circular and telling them about the condition of the railway, why did he spend so much of his time dealing with the new buildings, plant and machinery that would be needed, in dealing with the fact that the rolling stock was obsolete, and with the fact that reorganisation of the permanent way, the stations and yards would call for the expenditure of large sums of money? Why, having said that, did he add that the public would not subscribe a shilling to it? Those things must be of some account.

The Minister says that he finds it difficult to draft terms of reference. I can see points here and there in most terms of reference that are bad. In quite a gay manner, the Minister said to this House that he really had very simple proposals for the Great Southern Railways—pound for pound. It was not so simple to say "pound for pound" in regard to the transport company; he had to go into some calculation. Some calculation had to be made to obviate the adoption of the easy method of pound for pound. "Pound for pound" is a simple thing to say. Whether or not that is a fair basic calculation apparently does not enter into the Minister's mind. It is pound for pound in one case and £145 for £100 in the other. Why the distinction? There was some calculation made. It was a distinction between the two companies on their past revenue earnings. The position of the two companies is read from that angle. The Minister decided pound for pound in the one case. It was not as if he went into a room with some other person and said: "You think of a number and I will agree with it." The Minister went in charged with figures and, I am sure, full of arguments about the company, arguments about the position of its rolling stock, the fact that there had not been dividends earned at the time they were paid, the fact that renewals had not been kept up, and that the result of paying out dividends which were not earned was that the position of the company was deplorable. Now, the Minister wants to forget all this nonsense about calculations and evaluations and thinks that the simplest thing is to say "pound for pound". But it is not pound for pound; the £100 in any event used to bear 4 per cent. interest and it is being changed to 3 per cent.

In addition, there is the fact to which Deputy Norton has referred, but which apparently the Minister does not consider important, that whether the company earns a shilling or not the 3 per cent. debentures will have 3 per cent. paid on them; in some way or another there is to be a debenture fund built up; whether it is built up or not, in some way or other, under the provisions of the Bill, the company has to redeem £16,000,000 debentures by 1960. Of course, there is one way in which it can be done, and that is by leaning very heavily upon the shoulders of the taxpayers, or else by dividing the weight between the transport users and the taxpayers. We want to find out whether it is equitable to give them pound for pound, with the substitution of the 3 per cent. for 4 per cent., with the addition of the Government guarantee, and, in the case of the transport company, £145 for £100.

Again I want to stress the reference in this memorandum by the Railway Shareholders' Protection Association. They refer to the fact that the Hon. James MacMahon said he "embraced the proposal with enthusiasm", and add the comment: "Love at first sight". He took it at the first gulp.

Mr. Davin

He was not consulted by the managing director.

Mr. McGilligan

One would be suspicious of that type of offer which was accepted so readily. Take the other rather deliberate phrases used by the other two gentlemen: "Sure, shareholders would not be paid at par or anything like it," which was Mr. Wylie's observation, while Mr. Tweedy's is rather a little better—or a little worse—"At an average, each of the £10 shares would have to be written down to considerably below £10, and we are asked to give £14 10s. for them." They might easily have adopted the phrase of the other gentleman—that they "embraced this proposal with enthusiasm."

We ask, instead of that, that some consideration be shown for the future of the transport industry in this country. This is going to saddle the taxpayers or the users of transport with a very heavy burden. I do not know if the Minister has made a calculation as to what that burden will be. I asked a question regarding that, on the basis of redemption by annual instalments, and on the basis of the redemption money having to be found out of the taxed profits—profits provided out of taxes in the ordinary way —as to what it would come to. I got a figure which I could not understand, and I asked the Minister if it was without taking in taxation, and he said that it was not. If I take the figure of £16,000,000 and divide it over the period, there is something in the neighbourhood of £500,000 to be found each year, on an equal instalment basis. It is a rather rough calculation and I did not go into the smaller points. At 7/6 in the £1 interest, some figure has to be found which will reduce it by three-eighths. The 7/6 will show £500,000, so that figure is somewhere in the neighbourhood of £800,000.

It would, therefore, appear that to repay the debenture—I am taking the first year—and to pay interest on the taxed profits out of which that money must be found, it would require £800,000. The payment of the debentures themselves will take £250,000. That comes up to a total of £1,050,000. It may be that the value of some of the stock is wholy illusory, but if the company is going to earn all this and has to find the money for the debentures, they should be able to find the 6 per cent. for the stockholders. That is another £200,000. All told, it is somewhere in the region of £1,250,000. That has to be found, after providing for proper renewals. The sum that was suggested before the tribunal previously was £1,200,000. I take the amounts set out on page 139 of the Transport Tribunal Report. It only gives statistics up to 1938, but if I add on figures that I have elsewhere for the years 1939 to 1942, I do not think the railway company, after meeting its working expenses, has shown a net income for, distribution of anything higher than £400,000, on the average.

On the situation as I give it, therefore, they will have to make three times that. How is that going to be done? The easy way is to say: "Well, we can easily call on the taxpayers for part of that—the redemption money— and that will be a decreasing sum, because a certain amount will be wiped off each year." But take the year in which we have to start. Even in the years talked about here, the highest figure they ever reached, before they made higher charges, was 1929, when they made £879,000. That was the best year by far—the averages do not come at all to half that—and they made only £879,000. Yet, on these proposals, they will have to make something like £1,000,000 or £1,250,000. That figure was reached in 1942, on a scale of charges which the chairman said were too high.

I have shown the repercussion of these charges on the sugar company. Some point can be made that that £650,000 is not Great Southern Railways charges. The Great Southern Railways issued a statement the next day, after the Irish Independent editorial. The Great Southern Railways statement did not say the same things as the Minister is saying now— but it did say:

"Growers have the option of utilising the railway service of road haulage to railheads or using their own transport, or alternatively, utilising a direct road transport service"

and it adds:

"On the basis of last year's working, more than 70 per cent. of the growers will avail of the rail-road".

That last word may mean the rail and its subsidiary road services, but certainly does not mean that they are going to avail of outside services. Take 70 per cent. of £650,000. It is a very big sum. The chairman of the company said it ought to be brought more in relation to the value of the crop to the producer. The Minister for Finance said "it was striking a blow at the heart of the industry".

I do not know what excuse or justification can be made for the turf charges. All I know is that an article is sold here at 64/- a ton, requiring a subsidy that brings, according to the statement given to us, the economic cost up to 80/-; and yet the railway company decided to increase the freight this year by 2/4, from 13/5 to 15/9. I have compared the rates for this type of traffic in the years 1938 and 1939—the years in which it was only really proper to pay a dividend out of earnings, and I have taken the rates charged on certain goods, dividing the classes of goods carried as minerals into coal, coke, other minerals—and taking it that the "other minerals" includes turf. Probably the greatest increase is in turf. The amount rose from 300,000 tons to 1,000,000 tons. The average rates of the railway company rose from 5/8 to 10/5, and it is proposed to increase that, on the basis of these charges. People may say that it will probably be possible then to meet these debenture charges and interest charges, but that is not consistent with the promises the Minister gave here that we would have both efficient and cheap transport services.

I do suggest that we ought to look with very definite suspicion on the readiness with which these shareholders came to the conclusion to accept those terms. I personally had the feeling, when I saw the terms first, that the transport company people were not being treated properly; but when I saw the way it was recommended to them by these two gentlemen who spoke, I began to feel—they knew more about the inside workings than I did—that, if they were going to accept those terms, it was not for me to cavil about them. At the same time, if any member of the shareholders feels he may have got a bad deal out of the £145 for every £100, he should be able to make a case before a judicial tribunal. As far as the Great Southern Railways is concerned, I do not think anybody has any doubt that those in that company are being paid and overpaid, on the sheer merit of the proposal as a transport business. That is why I brought in this phrase about considering "all the circumstances of the dissolved railway company", to suggest that something more than bare justice might be done them, because of the way in which their concern has been thrown about in past years. They did not get exactly the best chance. It can be said, of course, that the shareholders were responsible for what the board did. But we know the way boards are run and the way in which proxies were used by the directors of the railway company to get a body of people put in power over many years.

It is hard to blame the unfortunate shareholders because they did not take a livelier interest in these later years. The shareholders probably did not know the background that has now been revealed. Otherwise, some of them might not have been content to receive a dividend, if they had information that that dividend was being paid out at the expense of the property of the company, which is what was happening. They did not know anything, except that their dividends were coming along to them, and it would take someone who could read the accounts—someone instructed in accountancy or methods of finance— to explain what was happening in the company or to make them realise it. That is why I mention "the circumstances of the case" and suggest they get consideration.

I think Deputy Norton was right in saying that the value of the revenue earning basis on 1st March, 1943, does not tie anybody to that date. If anybody looks into this matter they may possibly point a finger and say it was normal up to that date and if it is realised, as the Minister says, that it was the worst date, I wonder if he would say what was the best date. Would he say it was the end of the year 1943? Would it be the best date so far? I would be prepared —and will on a future occasion—put this amendment down again and change that date from the 1st March, 1943, to allow the Dáil to consider whether some judicial tribunal may back up the case on a one to ten year basis, and ask the Dáil to reject the section, or provide another amendment. I move to report progress.

Progress reported; Committee to sit again.

The Dáil adjourned at 9 p.m. until 3 p.m. on Tuesday, the 26th September, 1944.