Members of the House have been studying this Bill since the last stage. It involves very intricate questions and we have heard all kinds of suggestions as to what the Minister's ideas are on certain matters. There is a belief that the Minister was likely to put down agreed amendments and I was hoping that we would have a day or two to discuss these matters. I myself hoped that we would get another week so that, when we did start on the Committee Stage, we would know what we had to argue about. Here we are now, however, taking up the Committee Stage when none of us expected it. We were told up to last night that we were going to discuss the Road Traffic Bill first and it was not until 12 o'clock to-day, when there was not a chance of considering the matter, that we heard we were to take the Railways Bill first. I doubt very much if any of us is in a position seriously to debate and consider the position. I believe that we would deal more satisfactorily with the Railways Bill if we had a few days more to consider the situation or even a day in which to consider it. Instead, it is thrown at us this morning when none of us expected it. We asked yesterday whether the Road Traffic Bill would take the whole day or whether we should be prepared for the Railways Bill and we were told that the belief was that the Road Traffic Bill would take the whole day and that we need not expect to take up the Railways Bill to-day. None of us want to interfere with Ministers who have to go away but what we are considering now is the situation in regard to the discussion on the Railways Bill and I should like to know what the Minister's views on the subject are. He can guide us in this matter, but I doubt if we are prepared to discuss the Bill as it ought to be discussed.
Private Business. - Railways Bill, 1933—Committee Stage.
I have no comments to make at all on the questions raised by Senator Jameson relating to the order of business in this House to-day. I do not know on what grounds he was advised that the Railways Bill might not be considered here to-day. It was tabled for consideration to-day. Neither do I know from what source he secured the information as to amendments likely to be moved by me but I may say that I have considered certain amendments and have decided to keep them until the Report Stage of the Bill so that we will have an opportunity of reviewing them following whatever discussion might take place in Committee on some of the matters likely to be affected by these amendments. I think that is the preferable course. Most of the points that are likely to be the subject of controversy in relation to this Bill are covered by amendments on the Order Paper in the name of various Senators. In certain cases, amendments affecting the same points may, and probably will, be moved by me on Report Stage, but, before doing so, I should like to have the matters discussed here in Committee because the possible nature of the amendments might be modified as a result of that discussion.
The only thing I want to raise, arising out of what the Minister says, is whether he is likely to be able to tell us, when the discussion ends on any amendment, what his views are and whether he would let the House know in Committee what his views are with regard to the amendments he would introduce on the Report Stage.
I am quite prepared to indicate the nature of the amendments we are contemplating, possibly subject to some minor modifications, if points necessitating such minor modifications emerge out of the Committee Stage discussion.
Cathaoirleach
No other amendments could have been tabled to the Bill than those we have before us.
I am not asking for any time to put in further amendments.
Cathaoirleach
We will take the Committee Stage of the Bill.
I move amendment 1:—
Section 2. To add at the end of the section a new sub-section as follows:—
(2) Notwithstanding anything contained in Section 63 of the Principal Act or in the Ninth Schedule thereof, the annual sum of £47,288 shall after the year 1934 continue to be paid by the Minister to the company.
As the House, perhaps, is aware, under the Railways Amalgamation Act, 1924, the Great Southern Railways Company was compelled to take over certain baronially guaranteed lines. Those lines have been a burden ever since on the railway company. They have in no sense been an earning asset. Up to the passing of that Act, the holders of the baronially guaranteed stock had perfectly good security. They had the security of the local authorities. Under that Act, they were forced to take a substituted security, in the form of preference stock of the amalgamated railways, and, in recompense or partial recompense, for the taking over of these lines, the Government agreed to pay to the railway company, for a period of ten years, a sum of £47,000 odd which represented interest on the new preference stock so created. That sum was not earmarked in favour of the special category of preference holders. It was pooled, and, last year, those original holders of the baronially guaranteed stock, or their successors, got no interest by reason of the default of the railway company to pay on any of their preference stock. The object of this amendment is to compel the Government to continue the payment of this £47,000 after next year when the ten year period, over which payment was undertaken, expires. It would appear that that is a reasonable request. Although those baronially guaranteed stockholders are no longer identified, they are included in the general pool of preference stockholders. The continuance of that payment to the company would obviously hasten the day when payment on the preference stocks could be resumed. I do ask the House to take the view that there is a moral obligation on the Government to assist the company to resume payment of dividend on these preference stocks. The continuance of this payment after 1934 will discharge that moral obligation. It seems to me grossly unfair and almost a case of misrepresentation not to do that. When the Act of 1924 was being passed, these shareholders were led to believe that, by amalgamation, economies would be effected which would ensure for all time the payment of dividends on their new stock. They gave up practically a trustee stock for a preference stock and now that preference stock is of little value. I feel that it is only common fairness for the Government to accept the amendment on the Paper.
I support the amendment. I think that if there was any reason why the Government should pay this £47,000 during the past nine years, there is still greater reason why they should pay it this year and succeeding years. Everybody knows that the position of the railway company is infinitely worse now than it was during those years. That has been brought about by circumstances over which they have no control. I think it is only right and proper that the Government should come to the assistance of the company and continue to pay this sum.
The railway company, as such, had no obligation to the holders of this baronially-guaranteed stock. These stockholders were not led to believe under the 1924 Act that there was such an obligation. They were never led to believe that a dividend would always be paid on this preference stock. I am against subsidising the railways because that, in effect, means nationalisation. The objection to nationalisation is that the ratepayers or taxpayers will have to make up the losses of the railway company. When you give £47,000 to the railway company, it has the same result as if you were nationalising the railways. I would agree with Senator Sir John Keane if this £47,000 a year were to be earmarked for the shareholders who took this particular stock. There would be a reasonable case in equity for that but I see no reason for subsidising the general fund. If the Minister agrees to earmark this particular payment as I have indicated, I shall support him, but I do not agree that a payment of this kind should go to people other than those who were originally entitled to the payment.
I can understand the attitude of Senator Moran, who says: "Continue this payment to the railway company because they need money." In other words, "give them a subsidy because they are passing through a difficult period and require assistance." That attitude is quite logical. We might inquire why the subsidy should be fixed at £47,288 instead of some other figure and we would have to consider all the reactions on the railway position and the Government's position in relation to the railway company which such a subsidy would involve. Some of these reactions Senator Wilson seems to have had in mind. But I cannot understand Senator Sir John Keane's viewpoint at all. The Senator argued that the payment of this sum is a moral obligation on the Government having regard to the position of persons who were formerly owners of stock in the baronially-guaranteed lines. That argument is completely faulty. When the baronially-guaranteed lines were amalgamated in the general railway system and owners of stock in those lines were given preference stock in the Great Southern Railways, that ended the matter. The sum of £47,288 was not calculated on the basis that it was sufficient to pay a return of 4 per cent. on the new stock created. It had nothing whatever to do with it. Any injustice done to the owners of stock in these baronially-guaranteed lines was done in 1924 and has persisted since then. This sum has nothing whatever to do with it. The continuance of this payment to the Great Southern Railways would not improve the position of these stockholders except to the same extent that a Government subsidy to the Great Southern Railways might improve the position of all its stockholders.
The history of this business is not as was stated at all. There were a number of railway lines built on baronial guarantee. The persons living in certain baronies to be served by these railway lines undertook to meet either the losses on working or the interest upon the money invested in them. If payments on foot of the guarantees had to be made, the Government came in to the extent that it paid half of the amount involved, subject to the amount not exceeding 2 per cent. of the dividends upon the stock. In 1913—the best year the railways had—on foot of these guarantees payments amounting to about £47,000 were made. When the Amalgamation Act of 1924 was introduced the position had changed very considerably. The cost of working the lines had increased. The receipts from the lines had decreased and very substantial losses, indeed, were being recorded, involving a very heavy burden upon the people in the guaranteeing districts—so much so, that there were in that year, as most Senators are, no doubt, aware, local agitations for the closing down of these lines so that the baronial guarantee payments would not have to be continued. In 1924, the Amalgamation Act was passed. The policy behind that Act is easily understandable. The decisions we may have to take to-day arising out of that policy have nothing whatever to do with the portion of that Act which provided that the former owners of baronially-guaranteed stock were to get preference stock in the Great Southern Railways. That was done then and it cannot be undone to-day. Nothing arises in that connection to-day. The situation we have to deal with, having regard to the Act of 1924, brings in a number of other considerations. That Act was passed upon the assumption that by the amalgamation of all these lines into a single system, administrative costs would be reduced very considerably and that the savings effected would permit of more economical working and would permit of the railway company earning net receipts in each year sufficient to pay a return upon all the capital of the new undertaking. To ensure that, this system of standard charges and standard revenue was devised. The general assumption was that the new, amalgamated company would be able to reduce expenditure, on the one hand, and on the other hand, secure revenue, sufficient to remunerate the capital invested in all the amalgamated systems. That, however, was not the result, as Senators are aware. Other factors arose and the railway company instead of earning revenue capable of ensuring the payment of fair dividends upon all the capital, never got near the point of earning that revenue. On the contrary, the company is getting year after year further and further from that point. The fact is, however, that administrative economies were effected. The total cost of administration for all these systems was reduced from £4,345,000 in 1924 to £2,635,000 in 1932. Some part of that reduction is, undoubtedly, due to loss of traffic and to lower standard of maintenance but a substantial part of it is due to the amalgamation. In so far as the losses on working of these baronial systems were to be offset by economies produced by amalgamation, these economies were achieved. It was felt that the railway company should get a period in which to work out these economies and to reap the benefit of them. A period of ten years was fixed. That was quite a reasonable period. It was decided that during that period there would be paid by the authorities in the local guaranteeing areas a fixed sum to the Government, to which the Government would add the amount it would have paid on foot of the guarantees under the previous arrangement and pay that sum over to the railway company each year. The sum was modified in 1929, due to the fact that the guarantee in respect of one of the lines expired in that year. £47,288 was fixed for the period after 1929. That sum was to be payable until 1934. It ceases to be payable next year. To continue the payment after that year is merely to give a subsidy to the railway company. Let us face it as such and not try to link it up with questions affecting the old baronially-guaranteed lines, because it has nothing whatever to do with them. These lines have long since been merged in the general system. All the economies resulting from that merger have been achieved and any losses now arising are due entirely to different causes from those to which the previous losses were attributable. They arise from the fact that road transport has developed and that its development has occasioned losses not merely upon the lines that were formerly baronially-guaranteed but upon all other lines as well. The effect of this proposal is not merely to give a subsidy to the Great Southern Railways Company but to increase the charge upon the State in that respect. At present, the State is recovering from the guaranteeing areas a substantial part of the amount paid out to the railway company. That payment to the Exchequer also ceases next year and there is no provision in the amendment for continuing it. The situation that would exist under the amendment would be that the State would be paying this sum to the railway company and that there would be no reason to assume that any part of this amount would be paid out to the persons who are now preference stockholders in the Great Southern Railways but who formerly owned shares in the baronially-guaranteed lines.
There is, however, another reason why payments should cease. I mentioned that the payments would have ceased next year in any event, because of the fact that the principle accepted by the Oireachtas in 1924 was that the economies to be effected by amalgamation would have been achieved by that year, and consequently there was no longer a necessity to maintain payments on foot of the original guarantees. The losses resulting since are due, not by reason of amalgamation, but by the development of road transport, and must be regarded as a separate problem. At present, under this Bill we are taking additional measures. Let us assume that some branch line baronially-guaranteed is still working at a loss, and that the economies effected by amalgamation have not been sufficient to offset the loss, or that there is a decline in traffic. We are providing for the closing of that line and wiping out the loss. Under Section 8 any branch line working at a loss, which is obviously unsuitable to present circumstances, can be replaced by a road service. It will be shut down and a road service created to replace it. In addition to all the other considerations I have mentioned, that consideration makes it utterly unreasonable that the State should continue payments in respect of these lines. I have made it clear that payments cannot be continued in respect of anything, expect there is to be a general subsidy to the Great Southern Railways. That might be justified on certain grounds. I do not think it should be done. Senator Moran who takes the view that the payments should be given, because of the peculiar financial position of the company, is on logical ground, but when he argues that they should be continued on any other ground he is completely illogical. I repeat that the payments cease in 1934, because the ten years envisaged in 1924 was the period during which economies might result, as the effect of the Amalgamation Act of that year. These economies were effected. If there are still losses on the working of branch lines they arise from causes other than the failure to make economies. They arise from the general change in the transport system which took place, and, in so far as that change resulted in a loss in respect of these lines, and is likely to continue to result in a loss, we can close down these lines altogether, in which case the company cannot argue that it should be subsidised in respect of these lines. With all these considerations it seems to me that this amendment could not be accepted.
The Minister seems to admit that the company have a claim if there is a loss on the working of the baronially guaranteed railways, and that otherwise the remedy of the company is to close down these lines. If I was on the Board of the Great Southern Railways Company, after listening to what has been said, it would seem to me that the Board have it in their power now to close every baronially-guaranteed line on which there is a loss, because the Government will not meet the losses. I think the Minister will admit that it would take a little time to consider that. At least the railway company would be told that if they could prove that the working of any baronially guaranteed line meant a loss of money—no matter what the cause of the loss—and if they were to be continued, or if the company was not allowed to shut them down, the State should pay for the loss on any baronially guaranteed railway after 1934. Even the Minister admits that these lines were forced on the Great Southern Railways Company, and that it was known they were not an economic proposition when taken over. The Government of the day would have met the situation by giving a grant. These railways are still working and losing money. We can see a situation when the Government may force them to be worked, probably for the good of the community. If that is the case, and if there is a loss, the Minister might have accepted the amendment, as the State should, at least, make good the loss where it compelled the company to keep the lines open.
I would like to ask the Senator does he apply that only to lines worked formerly under baronial guarantees or in respect to all the others?
I am only speaking of the baronially guaranteed lines.
Why? I would like the Senator to state a case for the Government meeting the losses on these lines, and not upon other lines.
These lines were forced on the railway company. Surely the origin of the Bill must be considered. The people who originally gave the money gave it on getting a guarantee of 2 per cent. from the Government of the country—the British Government— and a guarantee of 2 per cent. from the barony, as a result of which a large amount of money was put into railways as a perfectly sound investment. As the Minister stated, the people who paid are not here now, but that is not a reason why their successors should be treated in this way. Surely we ought to have some regard for State guarantees.
It cannot be undone now.
There is undoubtedly some liability on the Free State for the working of these railways for the benefit to the people concerned. Surely it is a liability on the Free State in some way to recognise the pledges made by its predecessors. Supposing the railway company decided, because they are losing money on these lines, and because they must effect economies to shut them down, or to ask the Government to make good the losses, what would happen? The Minister does not hold out any hope that the State is going to make good the loss. I suggest it is only fair that the State, if they are going to make the railways work baronially guaranteed lines, which were forced upon them, should recognise its responsibilities, and make good the losses to the company if they insist on keeping them open. I think the Government could reasonably be asked to meet the railway company's losses in that respect.
I am sure Senator Jameson desires to be fair, but this amendment is very one-sided. It provides for the continuance of the payment of £47,288 a year after 1934, but it does not provide that the baronial lines are to continue to be worked. On the contrary, the Bill provides and contemplates that baronially guaranteed lines shall be closed in all cases. In order to understand the meaning of this amendment, and the actual position of these guaranteed lines, it is necessary to go back to the Principal Act. By the Principal Act of 1924 the railways were allowed a sum of £48,000 a year in respect of the running of lines they were compelled to take over. But the various county councils were obliged to make contributions. There are seven counties concerned—the principal one being County Clare—which were required for the period of ten years from 1924 to pay each year the sum of £4,320.
Did the Deputy say Clare was the principal county?
It is the county that pays most. In other respects also it is the principal county.
Cork pays most.
But there are two lines in Cork. In 1924 the Government compelled the Free State system of railways to take over these guaranteed lines, and in common fairness decreed that the Great Southern Railways Company should get the sum of £48,000 annually for ten years. I think the Minister has given a very fair explanation of the reasons for that. But the respective counties were required to pay a sum equal to £26,700 by way of contribution to the Government. Of course, that contribution will cease at the end of ten years. It is contemplated that the Government contribution to the railway company shall cease at the end of ten years. Senator Sir John Keane and Senator Moran wish the Seanad to enact that the contribution to the railways of £48,000 yearly shall continue indefinitely. Why do they not accept the other side of the proposition, namely, that these baronially guaranteed lines shall continue to be worked? Many of us in the South and West of Ireland have a considerable interest in the working of the guaranteed lines. I would like an answer to the question the Minister asked in the course of Senator Jameson's speech. The question was: "If we subsidised these guaranteed lines I cannot see any reason why we should not subsidise the entire railways." There happens to be a reason for that. I am only suggesting it to the Minister. It is the reason which was put forward when these guaranteed lines were constructed. It was contemplated that they would not be a paying proposition, so far as the carrying of passengers over sections of the lines was concerned. That was the reason the various baronies were required to guarantee the payments at a certain rate of interest. Here is the argument that was put up. It was said that these small lines going into remote parts of the country would be feeders for the main lines. If that argument was sound then—and it was considered sound enough for the construction of the light railways—I think it ought to be sound now. It is sound, and I would suggest to the Minister that he ought to consider very carefully the question whether or not he should close these light railways. Certainly if they are to be closed the contribution of £48,000 should not be paid to the Great Southern Railways. Therefore, this amendment is only half the truth; only half of what is right. If Senator Moran and Senator Sir John Keane will say that they wish to continue the working of these light railways, then the question that would arise for consideration is whether you ought to continue paying to the Great Southern Railways a subsidy of £48,000 a year. The amendment at present before the House ought not, I think, to be accepted, because it is not fair. If the Senators who proposed this amendment are prepared to come forward with an amendment providing for a Government guarantee of the entire system, allowing the railway directors to close any section of the railways that they like, that raises another question—a question of whether the railways are a benefit to the State or not. When that comes up we will have an opportunity of giving our judgement upon it, but I think we ought not to be asked to give such a judgement upon an amendment of this kind which would be one-sided in its operation.
I was not surprised —because my knowledge of this subject is not very profound—when the Minister told me that I was misinformed with regard to the calculation of this amount of £47,000; but I now hold in my hand a statement which shows that this sum is actually a definite calculation of interest at the rate of 4 per cent. on specific amounts of guaranteed stock. It is a definite amount of interest calculated on a certain amount of stock. The only thing that I have to say further is that if one looks at the whole history of this matter it is not very encouraging to people to invest their private savings in an enterprise which is likely to come under the regulation of the State. Cutting away altogether the question of whether certain railway lines should be closed or not, the fact remains that certain people did put their savings into railways on a definite security; the law swept away that security, and, through the process of legislation, that security is now valueless. That is the aspect of the matter which, I think, is so unfortunate and which will, all through this matter, deter people from investing capital in any enterprise which is at all likely to come under the control of legislation.
Arising out of the remarks of Senator Sir John Keane, I can understand that transferring guaranteed securities to preference shares in the Great Southern Railways is of very prime importance to him. How are these guaranteed bondholders going to benefit if the State hands over this sum of £47,000? We understand from the Senator that they are merged as preference shareholders and the people who never held these funds would get as much benefit; but yet it is a crime, according to the Senator, for the State to merge them. Apparently, it is no crime for a person who never held them to be handed over. I think that that is rather against Senator Sir John Keane.
Perhaps the Minister would see his way to allow this sum of £47,000 to run on until such time as the baronially guaranteed lines were cut out. The position of the railways is very serious and, as I say, that position was brought about through no fault of their own. In recent times they are losing thousands of pounds every week owing to this tariff war. That is not their fault, but no matter whose fault it is, the position is going from bad to worse. I think that if the Minister could get rid of this old man of the sea in the way of the baronially guaranteed lines it might get over the difficulties.
I think that what Senator Foran has said is the best answer to Senator Sir John Keane's argument. Whether it was right or wrong to give preference shares to the owners of baronially guaranteed stock in 1924, it cannot be remedied now. It is done. Any injustice that was done to the owners of the guaranteed stock cannot be altered now.
The arguments advanced by Senator Jameson were, I think, advanced on a misunderstanding. The losses on the working of these lines that were formerly baronially guaranteed have been wiped out by the economies effected. There are new losses which have been experienced, not merely in relation to these lines but in relation to other lines, arising from entirely new causes which did not exist in 1924 and which arose subsequently, the principal cause being the growth of road transport. We are endeavouring to deal with that cause in this legislation and we are trying to eliminate it in a number of ways; first, by regulating road transport and in other ways and also by permitting the shutting down of parts of the system where it is quite clear that they can never again be economic, and where it is clear that road transport can adequately serve all the transport requirements of the area concerned.
With regard to what Senator Comyn said, it is not correct to say that the baronially guaranteed lines always made a loss or that the guarantee was arranged because of that certainly of a loss. In the year 1913 these lines earned all their working expenses and any payments on foot of baronial guarantees were made in respect of dividends upon the stock. It was contemplated in 1924 that the operation of the Act of that year would put the companies into precisely the same position where the earnings would pay at least their expenses. The whole system was to be regarded as one with a certain capital liability and certain earning powers. We should not examine one part of it having regard to its previous history and segregate the accounts, so to speak, so as to find out whether the former Great Southern Railways was paying or the Midland Great Western was losing and so on. I think it is about time that we cease to think about the Great Southern and Western Railway Company having foisted on to it other lines. We want to make the Great Southern Railways Company, which is the sum total of all these other companies, an economic system in the sense that they will get from the charges made for transport services enough to pay all its working expenses and to afford a fair return to those who are holders of its stocks and shares.
My answer to Senator Moran is that the question of subsidising the railways is a separate one from this. If there is to be any question of subsidising the railways, it should not be mixed up with this question of the £47,000. That was a payment for a period of ten years and it ends at the end of that period. If there is to be a question of a subsidy it can be made at the end of that period and calculated in relation to the position of the company then. We have to take into account all the other circumstances when it comes to a question of a subsidy, but it has nothing to do with this particular question, and I think it is a mistake that any question of subsidising the railways should be mixed up with this.
Could not all these arguments have been raised when the matter of making the contribution for ten years was originally being raised? If they paid it at all, might they not as well have paid it for 20 years?
Cathaoirleach
The specific deal was made in 1924 and I think it is the Minister's case that that is over and done with.
I am in favour of Senator Bagwell's amendment rather than Senator Sir John Keane's amendment.
It strikes me that when the Government undertook to provide that sum to meet the dividends payable on the substituted capital ten years ago, the Government had in mind that the company would be in a position to pay this and that the position of these baronially guaranteed lines would improve. Apparently, instead of improving, the position has worsened. This Bill endeavours to meet the position by eliminating certain of the road transport competition and by enabling the company, on an order from the Minister, to close down these baronially guaranteed lines. The amendment means a subsidy to the railways. That is introducing an entirely new principle and if we are to introduce that principle we should be let know what we are doing and not introduce the principle of subsidy into a particular section of this Bill. I think it would be a mistake and I think we should consider the whole position of a subsidy on an entirely different basis. In my opinion the House should not accept this amendment.
I move amendment No. 2:—
New section. Before Section 3 to insert a new section as follows:—
3. Notwithstanding anything contained in Section 63 of the Principal Act or in the Ninth Schedule thereof, the annual sum of £47,288 shall after the year 1934 continue to be paid by the Minister to the company until the year 1944 and shall be expended by the company on the maintenance of railway property as the Minister may direct.
My amendment is not for a permanent subsidy as might appear from the text. I claim that this amendment is really in consonance with the tenor of this Bill and the Road Transport Bill. The purpose of all this legislation is to prevent those parts of the railway system of this country which are wanted, apart entirely from road transport and the parts which cannot be wholly dissociated from the railroads, from collapsing. This legislation recognises that the unwanted railways that are no longer necessary, and for which other provision can be made must go either to a greater or a less extent. I join issue with the Minister when he says that the present railway situation is not owing in any way to the Act of 1924. I do not agree with the Minister in that. Amalgamation did not, in my opinion, have good results as a whole. I am certain that the Act of 1924 did not help to serve this part of the railways which are really vitally necessary to the country. What it did not recognise was that there were large parts of the system costing more than they were worth, and it preserved those unwanted parts to the prejudice of the whole system. It depressed the whole railway system as a whole. If there had not been an Amalgamation Act in 1924 the situation would have settled itself and would not have involved so serious a State crisis as the present one. The unwanted railways would have dropped out by a natural process, simply by ceasing to work them, and the wanted parts would not have been impoverished by carrying them over a period of years. Another point of view to be advanced is that the Great Southern Railway system, which forms the great bulk of the railway system of the country, is generally in a very much weaker state to-day than it was in 1924 when this sum of £47,000 odd was fixed to be paid over a period of ten years. I do not say that the weak position of the railways is entirely due to the Act of 1924, but what I do say is that the Act of 1924 had a good deal to do with it. The problem is to save the wanted parts of the railway system. This Bill and the Transport Bill are introduced for that purpose.
The baronially guaranteed railways can be closed under Section 8, I think, of the Bill, but that will take time. Under the section the Minister will have to be satisfied that adequate provision is being made by way of road transport to take the place of the railway lines closed down. The raising of capital to do all that is not going to be at all easy. It will not be made easier by certain provisions of this Bill. A great deal of capital will have to be raised for the purpose of acquiring various small road concerns at present in existence and of providing road transport where none exists at present to take the place of the closed railways. All that will take time. Therefore, I think it is not unreasonable to ask that for a period of ten years the payment of this sum should be continued. It would tide the railways over a critical time. It is not proposed that the payment should go on for ever. I admit that the actual sum is open perhaps to a certain amount of criticism, but at the same time it is not to be a permanent subsidy. It is recognised by everyone that at the present time there is a crisis which has got to be overcome. The payment of this sum would help the railways to overcome that situation. The payment would be for a limited period. During that time there would be an opportunity to consider the question of ceasing to work these unwanted railways and of substituting road transport for them. As I have already said, all that will take time. Meanwhile, I think this subsidy might very well be continued in the national interests.
I desire to support Senator Bagwell's amendment. Up to this the Government have had to pay half this subsidy. If this payment ceases to be made they will be saved their portion of that sum. I think I am correct in stating that. In considering this we must go back and ask ourselves why this subsidy was given originally to the people who started these railways. They were started very often at the instance of the ratepayers in these baronies. The people in the baronies, for a very long time, cheerfully paid their share of the subsidy because they felt that the railways were serving them extremely well, even though they had to pay for that service in the rates. Now, it is obvious to everyone that the railways are in a very critical position. During the five months of this year that have almost ended, railway traffics are £125,000 down compared to what they were 12 months ago, and Senators will remember that last year was not by any means a fat year. I confess that I take a pessimistic view of the prospects of the railways. At the same time I think they are vitally necessary. Even where a railway ceases to run in a barony the people there still have an interest in the main lines of the country. If the House decides to earmark this sum to be spent, as Senator Bagwell says, on the maintenance of the railway lines I think, that at all events, it will give the railways the chance of a prolonged existence, I trust sincerely that the railways will continue long after our time, but looking at the situation as it is to-day the outlook is certainly serious for the railways. I think it would be wise not to pay a subsidy but to continue the payment that has been made up to this so as to provide that the main lines and the rolling stock of the main lines will be kept in proper condition, a thing that is very essential to the business community.
One would think that it was the 1924 Act that put the railways in their present position. Now, it was not. One of the things that put the railways, or helped to put the railways in their present position was the system of administration adopted immediately after the 1924 Act was passed—the promotion of men to very important and responsible positions for other reasons than efficiency. So much was this a scandal that I went to Sir William Goulding and protested against it. I also went to Mr. McGilligan, who was the Minister at the time. With regard to the taking over of the baronially guaranteed railways, I remember very well an amendment that was introduced into the 1924 Bill during the Committee Stage in the Dáil. Senator Linehan, supported by me, challenged a division on that in the Seanad. It had to deal with the baronially guaranteed line running from Dunmanway to Bantry. There was a bargain by which the ratepayers of that district paid £2,000 a year to the railway company for thirty-five years. As an actual fact, on the basis of that agreement and the figures available, the railway company made a profit and continued to make a profit, after the period laid down. The Cork County Council, on behalf of the ratepayers who paid the baronial guarantors, brought a Chancery action and won. The railway company appealed to the House of Lords and was again beaten. The result was that, notwithstanding these two legal decisions, the railway company under the 1924 Act pocketed £60,000 belonging to the ratepayers of that particular area.
When that question was raised in the Seanad on the 1924 Bill I challenged a division on it, and to their credit I must say Senator Sir John Keane and Senator Moran supported the case put forward by Senator Linehan and myself. I am sorry to say that we were in a very small minority. It is idle to say that the 1924 Act has been responsible for the present condition of the railways. What is really responsible for their condition is a totally new form of transport. That, of course, is unfortunate for railway shareholders of whom I am one myself. But this new form of transport has won on its merits. Like Senator Crosbie, I am very doubtful if the railways will be able to continue permanently notwithstanding the passing of this Bill and the Road Transport Bill. I have very grave doubts on that. If it is thought worth while to subsidise the railways, then let us have that question decided as one of major policy and not by means of a piecemeal proposal such as this against which I will be compelled to vote.
There is a very great difference between this amendment and the one which the House rejected a short time ago. A Senator said that this £47,288 is to be handed over to the railway company to do practically what they like with it. But under Senator Bagwell's amendment that sum of money is to be given to the company to be used for the maintenance of the railway line and for the keeping of the rolling stock in proper condition. All that is to be done on the instructions of the Minister. For that reason I am going to support the amendment because I am more concerned to see the railways kept going than the railway shareholders getting dividends. Senator O'Hanlon and Senator Dowdall have stated that, if a subsidy is to be paid to the railways, it ought to be put forward as a separate proposal.
I do no wish it to be inferred that I am in favour of a subsidy, but if it is thought desirably to give a subsidy then that question should be considered quite apart from the Bill now before the House. A proposal of that kind would merit very serious consideration.
This sum of £47,000 odd will continue to be paid up to 1934. I think that, for the reasons stated by Senator Bagwell, the payment should continue for another ten years.
I oppose the amendment. If it is considered good national policy to subsidise the railways, then let that question be introduced separately in a Bill. Because this sum of money is being paid at the present time to the railway company is no reason, as far as I can see, why it should be continued for another ten years. So far as I can find out, the railways are not losing very much on those baronially-guaranteed lines. They are not paying any dividend on the capital. If we are to have subsidisation of the railways, then let that question be considered separately. I am totally opposed to having it brought in on an amendment of this kind.
I think Senator Wilson is making a mistake in thinking that the railways can be saved by the method that he suggests. This is the only opportunity the House will have of considering whether or not it is going to save these baronially-guaranteed railways. If something is not done about them now they will probably have ceased to exist before Senator Wilson gets a chance of bringing in his Bill.
The people do not use them and do not want them.
That may be so. I am old enough to remember when these baronially-guaranteed lines were made.
So am I, and I put some money into them.
Senator Dowdall referred to the baronially-guaranteed line running between Dunmanway and Bantry. I know that district well, and I can imagine it would be a very serious loss to the people there, no matter what amount of road transport is provided, if that line were closed. Senator Wilson, I am afraid, forgets that that may be done, and probably will be done if the railway company are losing money on it.
I hope they will give back to the ratepayers in the area the £60,000 that I spoke of.
Senator Wilson's idea seems to be that you could possibly get a Bill through the Oireachtas to keep these lines going by means of a subsidy. I think if the Bill we are now considering is let go through unamended that the one the Senator speaks of will not carry much weight because arrangements are made in this Bill for the shutting down of these railways and they will be shut down long before any Bill will come into this House to subsidise them. I do not quite see a Ministry, which is rejecting this amendment or the giving of any grant at the present time, volunteering to bring in a Bill to subsidise lines which they have agreed should be shut down but I do think that one of the weaknesses of this amendment is that it fixes a certain sum. I can see the argument for causing the subsidy in regard to a particular railway to cease after the Minister has examined its whole case and has come to the conclusion that the traffic can properly be diverted on to the road and that it is a good proposition to shut it down, and, therefore, I think that there might be added to the amendment a provision that, as each of these baronially-guaranteed lines is shut down by agreement with the Minister, the subsidy should cease.
I think that this amendment raises the same question I dealt with before in regard to the impossibility of finding a scheme for relieving the railway company of the loss on working these railways. I believe that the people in the districts through which the railways are run will put up a case in an effort to persuade the Government to keep the railways running and I am inclined to believe that it is in the interests of the State that they should be run, and, if that is so, I do not think that the burden of running them should be placed on the railway company. You need not deal with the whole railway question. It is a very big question and involves nationalisation and other things but we have light railways in the Free State that were built for the benefit of poor districts. It was recognised from the first that it was very doubtful if they would ever pay dividends or pay for their working. We now know that they do not pay for their working or pay dividends and we are dealing now with the question as to whether they should be let go, as they will go under this Bill, unless you make some alteration.
I think the Minister should give serious consideration to an amendment that where he comes to the conclusion that it is for the good of the State that a railway should be continued, he should give some special grant—leaving aside altogether the £47,000. If you pass the Bill as it stands, the railway goes and I think that on Report Stage at least an amendment of that type should be put in. I hope the Minister will give it his consideration with a view to overcoming the difficulty and not to make it practically certain that every one of these light railways will be shut down. They will be shut down under this Bill as it stands if some arrangement of that sort, to relieve the railway company of the expense of running them, is not made.
I wish to support Senator Jameson's statement in connection with the subsidising of railways, especially as I know and come from a district where railways are run unprofitably and are likely to continue so. Great loss and hardship will result from the proposal now being passed, and, if the small railways in poor districts on which store cattle in particular have to be carried long distances, are shut down, it will ruin the trade of the country and will constitute one of the greatest drawbacks to the prosperity of the country, the promotion of which I am sure the Government are anxious to bring about. It would show a great lack of common sense if this closing down of light railways were allowed to take place, and, in my opinion, prevention is the method to be adopted from the point of view of helping the country in a general way. From other aspects, I am opposed to subsidies and such assistance. I am opposed to what they call spoon feeding or anything in the nature of an industry that is unable to stand on its own feet, but the case of the railways is different because so much depends on their success and on their being kept alive. We have heard of the threatened closing down of certain lines because they are not paying their way, but it would be a great mistake to allow that to take place without an effort to avert it. I think it is the duty of the Government not to allow the industry of the people who have to live by the accommodation provided by the railways and, especially, in the remote districts in the country, to be injured. It would be a generous act on their part to arrange for these lines to be kept running and so to keep industry going.
I have been trying to relate the speeches delivered by the Senators to the amendment on the Order Paper and I have not succeeded. This amendment says nothing whatever about baronially-guaranteed lines or branch lines. It proposes that a sum of £47,000 shall be given, in each of ten years, by the Government to the Great Southern Railways Company and expended on the maintenance of railway property as the Minister may direct. There is nothing here about baronially-guaranteed lines. It is a subsidy and the proposal is that the subsidy should be given to the Great Southern Railways Company subject to this, that it shall be expended on the maintenance of the railway's property in such a manner as the Minister shall direct. I remember when, during the discussion in the Dáil, members of the Labour Party pressed that the Government should nationalise the railways, I advanced, as one of the arguments against the introduction of a Bill for the purpose, that it might be held up in this House for 18 months and I envisaged the anomalous circumstances that would exist if we had a nationalisation bill in cold storage for 18 months and coming automatically into operation at the end of that period, but, if I go back with an amendment like this, I will have no answer for the Labour Party at all. The Senator is asking me not merely to subsidise the railways, but also, apparently, to manage them, or certainly to select the manner in which the money should be spent on the maintenance of the railways' property.
Accept it and go a little bit further.
Senator Johnson, I think, could undoubtedly argue that this amendment should be accepted because it goes a long way towards the achievement of what the members of his Party desire in relation to railway matters, but, if we are to subsidise the railways to the tune of £47,288, might I ask on what basis that figure is arrived at? Why should we give them £47,288? I am not quite sure what percentage of the total amount paid in wages by the railway company that figure is. It is certainly a smaller percentage than that by which wages were reduced recently. I should like some serious argument in favour of this amendment. Knowing the situation as well as I know it or as anybody who has been studying the developments of the past few months must know it, I should like to be told exactly how much the railway company would lose in hard cash if they were offered a subsidy of £47,000.
The next point I want to put is this: The Railways Act of 1924 may or may not have been a success. I do not feel on myself any obligation to defend those who were responsible for it. There are certain historical facts, however, which cannot be ignored. Following the passage of that Act and the amalgamation of these companies into the Great Southern Railways system, the working expenses decreased considerably. In fact, as I pointed out on the Second Reading of this Bill, from 1925 to 1929, the net receipts of the railway company continously increased but they increased because expenses fell more rapidly than gross receipts. It is reasonable to assume, therefore, that if gross receipts had not diminished, if the economies in administration, the reduction in working expenses, had been effected without any diminution in gross receipts, the railway company would have got themselves into quite a prosperous position long before this. They did not do it because gross receipts fell and they did not fall because of anything in the 1924 Act or because of any provision relating to baronially-guaranteed lines or anything else. They fell because the motor-car came on the road and the traffic formerly available for the railways was going to the motor-cars. That is the sole reason, and that reason for the decline in receipts has nothing whatever to do with the Act of 1924 and nothing whatever to do with this sum of £47,000. It is, however, the main reason for this Bill.
The Act of 1924 envisaged a position being created in which the baronially-guaranteed lines would not be worked at a loss because administrative costs would be cut by amalgamation and a system of standard charges was introduced which would enable the railway company to levy such charges as, having regard to the volume of traffic likely to be offered, would yield a sum sufficient to meet all their working expenses and yield an adequate return on their capital. That system of standard charges broke down. From the day on which it was introduced, the railway company have been coming continuously to the Railway Tribunal seeking sanction for exceptional rates, that is, rates which are more than 40 per cent. below the standard charges fixed in respect of any commodity. They have been cutting their standard charges to fritters in order to secure traffic at all in competition with road services. What we are proposing to do is to create a position in which standard charges can become effective again. I want Senators, in examining these proposals, to have regard to Section 5 of the Bill. If we give the railway company, as we propose, control of the road services, it will be able to eliminate uneconomic competition and make the standard charges effective. These standard charges will be fixed by the Railway Tribunal on this basis, that, having regard to the Railway Tribunal's estimate of the amount of traffic that will be available, the standard charges will yield, not merely all the working expenses, but sufficient to pay such return on capital as, in the opinion of the Railway Tribunal, is just and equitable.
Under these circumstances, it is not necessary to subsidise the railways. It may be said that the railways are, in fact, being subsidised, but they are being subsidised in an indirect manner and, until it is demonstrated that indirect assistance in the form of the elimination of its competitors is inadequate to preserve them, the question of direct subsidy need not be considered. My own view is that, if we find that, in consequence of the operation of this Act and the Road Transport Bill, the railway company cannot be preserved, the question for us will be in what manner can we take up the railway lines and substitute roads for them, because, under these circumstances, the railways would clearly be shown to have no longer any useful economic life in front of them.
I do not think we have got to that point. I believe that the operation of these Acts will permit the railway companies to demonstrate that they are of economic value to the country. If the Acts fail to do that, we will be in a position in which we shall have to conclude that no system of legislation can preserve them and that the sooner they are terminated the better.
There is very little in what the Minister has said to which I take exception, but I am afraid that we are at cross purposes in this matter. The Minister would not, I think, take exception to my stating that there will be still some baronially-guaranteed railways being worked at a loss—railways which have not been closed down and in respect of which alternative road transport has not been provided under Section 8 of this Act—by the end of 1934. Therefore, at the end of 1934, these lines will continue to be worked by the company without any assistance at all. I should be prepared to bring up on Report Stage an amendment similar to this amendment, but providing that the sum of £47,288 should be reduced step by step with the closing of the baronially-guaranteed lines to which that sum refers. If I thought that the Minister would be favourably disposed to an amendment on those lines, I should be prepared to withdraw this amendment.
The Senator has not grasped the fact that the working expenses of the railway will be calculated on the basis of the whole railway and not on part of it—that standard charges will be fixed by the Tribunal at such a level as will bring in the whole of the working expenses, plus an amount to yield a return upon the capital. There will be no division of expenses or receipts as between one part of the line with another. The Railway Tribunal will have regard to the whole system and will have to fix these charges and calculate the standard revenue for the whole system.
Tá
- Bagwell, John.
- Bigger, Sir Edward Coey.
- Browne, Miss Kathleen.
- Counihan, John C.
- Crosbie, George.
- Douglas, James G.
- Fanning, Michael.
- Griffith, Sir John Purser.
- Jameson, Right Hon. Andrew.
- Keane, Sir John.
- Moran, James.
- O'Connor, Joseph.
Níl
- Chléirigh, Caitlín Bean Uí
- Comyn, K.C., Michael.
- Cummins, William.
- Dowdall, J.C.
- Farren, Thomas.
- O'Hanlon, M.F.
- O'Neill, L.
- O'Rourke, Brian.
- Quirke, William.
- Robinson, David L.
- Foran, Thomas.
- Garahan, Hugh.
- Johnson, Thomas.
- Milroy, Seán.
- Moore, Colonel.
- Robinson, Séumas.
- Ryan, Séumas.
- Staines, Michael.
- Toal, Thomas.
- Wilson, Richard.
Amendment 3 is consequential on amendment 4.
Cathaoirleach
We shall take the two amendments together.
Amendment 4 which I move seeks to embody in legal form a very important principle and one which should not be lightly disregarded. That is, that the State should not arbitrarily step in to reconstruct the capital of any corporation without obtaining the opinion of the various groups of shareholders. The reason for that is, I think, clear—that these shareholders have rights conferred upon them by law. They have invested their capital in the enterprise. They are, in fact, owners of the enterprise and it is to a large extent a domestic matter as to how, if reconstruction is necessary, that reconstruction should be effected. In the case of the Great Southern Railways Company, the grouping of stocks is more or less normal. There is, in the first place, the debenture stock, which carries certain definite rights—that is to say, in the event of failure to pay the interest, the debenture holders have the right to appoint a receiver and to appropriate the receipts in discharge of their interest. The debenture stock is, in fact, a debt and, as such, distinct from other classes of stocks which represent the legal ownership after the debt has been discharged. In the criticism which I have seen of this Bill, exception has been primarily taken to the action of the Government with regard to debenture stock and, perhaps, rightly. The debenture stock had these definite rights. It is not proposed to deprive the debenture holders of these rights now; it is proposed to write down their capital and leave the rights to them if default in the payment of interest on the reduced capital takes place. I would suggest to the House that it is necessary to be exceedingly careful in tampering with the rights of debenture holders. Whether we like it or not, and some of us do not like it, we are committed, as far as I can see, under our system of civilisation to a continuance of the system of financing industry by private enterprise until this blessed Utopia arrives when all our savings will be pooled and everyone will receive equal treatment, I will not say according to their reward, but according to the fact that they exist. We will have to keep on with this somewhat vicious system of capital, and we should be very careful not to jeopardise that system before we have something adequate and proved to put in its place. I apply that to the present Bill. If the railway company are to be saved by the amalgamation of all transport into a virtual monopoly, it will be necessary for the company to raise fresh capital. There seems to be no liquid source available by which they could buy out and compensate the competing road transport. How is that capital to be raised? Presumably in the ordinary way companies, when in difficulties, raised capital by the further issue of debentures. I ask, would any person with any prudence as an investor come forward and put fresh capital into a company, in the form of debenture stock, where this treatment has been meted out? That is an important and a very serious consideration. I do not say that the actual treatment is objected to. It is the method. The equities I am not dealing with. I can quite conceivably see these debenture holders agreeing to a reconstruction on these lines, but it would be a very different matter when they agreed to the State coming and arbitrarily forcing amalgamation upon them. Any new investors would say: "We do not feel happy whether we are to be allowed to deal with this matter according to our legal rights or not, as the sovereign power may step in. What are we to do? We will put our money elsewhere." I do not see how the railways are going to meet the new position unless they can raise fresh capital. Of course there is the saving method of a Government guarantee, which is only a subsidy. Except by that means I do not see where fresh capital is to come from. Incidentally when we speak of subsidies and how dangerous it is to apply them, I see subsidies in one form or another with a lavish hand going to far less essential services than railways.
Turning to the other class of shareholders I think there is a grave objection to the methods adopted. The other class of shareholders, preference and ordinary, are, of course, only entitled to the surplus. They stand in a different category to the debenture holders in that they have no legal power. I do not say it is unfair to write down capital to the present level, but I say it should be done by agreement. Having written down capital is it fair to stabilise the system whereby all the improvement goes to the lower denomination—to the ordinary shareholder? You start with the position where there are definitely prior rights to preferred shares. Originally the assets were taken over from the other companies. Their position was better than that of ordinary shareholders and they were deemed to be entitled to a better class of stock. I think that is why there are preferred shareholders, or else if original investors they were by law protected as trustee stocks, and are entitled to have that protection in some form continued. You write down the preference stock to a limit which, I do not say is unreasonable under the circumstances, but which is open to the same objection as debenture stock, dealing with it by law instead of by consent. What I say is unreasonable is that you deprive preference shareholders, who were always in a preferred position up to recently as trustee stock, of any benefits in the nature of improvement. All the benefit goes to the ordinary shareholders. No injustice is done to ordinary shareholders. It does not matter what you call their stock. They get the surplus and you are giving them any potential surplus of the future, at the expense of preference shareholders. I consider that manifestly unjust, and as great a violation of principle as that in the method of dealing with debenture stocks. That being so is it not reasonable that the Minister should try to satisfy—call it foolish or idle if you will—the apprehensions of these shareholders? That being so is it not only prudent in the interests of the State and also the necessity of bringing in money? No one knows better than the Minister does the difficulty of getting money for investment. Is it not prudent to take warning by that? It is only a matter of going through the form of consulting these various shareholders before arbitrarily disposing of or reorganising their holdings. This amendment has been drafted by counsel. I do not say that it will necessarily meet with the approval of the parliamentary draftsman. It is the principle involved I would like the Minister to consider. If the principle is considered, no doubt it will be easy to come to an agreement on the actual operation. I ask the House to accept the view that the principle involved in the amendment is vital, and if the Minister says that he will consider it before the Report Stage, that will do.
I agree with Senator Sir John Keane that this amendment has been drafted by some person who had a complete knowledge of company law, and of the statutes relating to these particular railways and their needs when the agreement was made. I wonder whether Senator Sir John Keane is really anxious that this railway system should be helped or not. What is the meaning of his amendment? It is that action should be delayed for three years. It means that a scheme would come before Parliament some time in the year 1936.
If it was put up.
If it was put forward. In the meantime are the railways to be allowed to go from bad to worse? Is there to be no attempt in the public interest to deal with the transport system, or are we to wait so as to satisfy the whim of Senator Sir John Keane? We did admit frankly in answer to Senator Jameson on the last occasion that these debenture holders were really losing money, and more or less were in the position of mortgagees, but only a special kind of mortgagees. Senator Sir John Keane is right in saying that they could put in a receiver if not paid their interest. But a receiver would have to run the railways. Where would a receiver be, where would the debenture holders be, and where would Senator Sir John Keane be, after the railways had been running for six months by a receiver? The thing is absurd.
Why does the Senator say I would be personally affected by the appointment of a receiver?
If Senator Sir John Keane objects I must withdraw. I understood that the Senator was speaking for the debenture holders. Of course, if he was not, my observation was wrong. I thought he was speaking for them because he wants to put himself up here as the solid representative of capital—the old capitalist system—and against any change. I think that pose is out of date. With his great ability the Senator would do much more service to the country if he would modify it somewhat in the circumstances of the present time. The reason I say that this amendment seeks to postpone the operation of beneficial legislation, is that he could speak for the railway company and in the interests of the railway company. The Senator seeks to postpone it for three years in order that the railway company my bring forward a scheme. I may be wrong, but I understand that this Bill is based on a scheme which has been put forward by the railway company. Can Senator Sir John Keane deny that?
If the scheme embodied in this Bill is bad, are we to wait three years for another bad one? I submit that for the consideration of Senator Sir John Keane. He did say, and I agree with him, that in the amendment he is strictly according to form, and in accordance with the law. By paragraph five of the amendment at a meeting of the ordinary or debenture shareholders section of the Companies' Acts should apply, but the Senator proposes to modify Section 76 which shows the Senator's bent. In 1845 people were so liberal minded that they were satisfied with the decision of a company meeting arrived at by majority rule. This amendment will not have an agreement by majority. Before you can have any scheme you must have a three-fourths majority. That is the reason the Senator wants the Act of 1845 modified.
A reconstruction scheme shall be deemed to be agreed to by the holders of any class of Guaranteed or Preference Stock where it is assented to by three-fourths in value of the holders of such class of Guaranteed or Preference Stock.
The Senator wants three years to prepare his scheme. He places the strongest possible impediment against agreement, because he is going back on the principle laid down 90 years ago. I think the Senator should go forward 90 years instead of going back. I would be satisfied if he would conform with the views of the present time. Is he in favour of getting railway transport on a reasonable footing? If he is, he ought to give hearty support to this measure, and he ought not to use the various clauses of the Bill and the various amendments he brings forward for the purpose of arguing principles not relative to this at all, but which might become relevant when some other measures, at some other time are brought before the House. I ask the Seanad not to accept the amendment.
I submit that the Senator who has just spoken has entirely missed the point of Senator Sir John Keane's amendment. The Senator said that Senator Sir John Keane's amendment would result in one thing and that is delaying the proposals embodied in these Bills for a period of practically three years and that, in the meantime, the railway system and services generally would go to pieces. If Senator Sir John Keane's amendment is carried it is likely, in the opinion of Senator Comyn, that the position will become worsened. I submit that that is not so at all. The proposals in these Bills are of a twofold character. One set of proposals is definitely likely to be beneficial to the company, the other set of proposals has regard to capital reconstruction. and Sir John Keane's amendment only has regard to capital reconstruction. The sections which confer benefits on the railways in the future are the sections which very definitely eliminate competition and which admit of the closing down of non-remunerative lines. There is nothing in Senator Sir John Keane's amendment which prevents the Minister from doing this and from getting those benefits that will result from such legislation. My sole concern is with what is going to be the Government attitude with regard to Senator Sir John Keane's amendment. I think I heard the Minister saying that he was making his proposals here, calculated to confer benefits upon the railways, dependent upon a scheme of capital reconstruction, and if he does not get that coincidently with the proposals that confer benefits I wonder what his attitude is going to be. I think that Senator Sir John Keane's method is the right method. I am concerned with the results which may be brought about if we pass the amendment, and that is entirely dependent upon the Governmental attitude and upon what the Minister will have to say in that connection. I think that in any scheme of capital reconstruction the agreement of the shareholders should be got and I think it is rather late in the day to bring about a situation where the shareholders are now to be considered. I am anxiously waiting to hear what the Minister has to say as to the Governmental attitude in regard to this and I think that Senator Comyn has missed the whole point.
Senator Sir John Keane talks about its being wrong in principle to interfere with capital arrangements and with the guaranteed money in this Bill, but he seems to forget that there are other things beyond principle. The facts are that the railways cannot pay the debentures. The debentures have sunk down to 35 now instead of 100, and the Bill offers them I think, 85.
Might I correct the Senator? It does not offer them 85.
The value of anything is what you can get for it. It is all very fine for a man to take a bullock into a fair and say he wants £100 for it, but if he can only get £20 or £30 for it that is the value of the animal. The value of anything is what you can get for it and no more. If the Government was proposing to take away from the debenture holders more money than the value of their stock now, I could quite understand this; but when they are giving a great deal more than the value of it now I think the proposers of this amendment are going on a scheme which is up in the air and on a principle which does not apply at all.
I should like to have a little light on this matter. I gathered, in the course of the discussion on this Bill, that there was a sharp distinction drawn between stockholders and debenture holders—that is between preference shareholders or ordinary shareholders and debenture stockholders. Whether I have correctly taken up the point or not I am not quite sure, but I gathered that one of the contentions was that the debenture holder was not bound hitherto by a majority of debenture holders in any action, that he was a unit and not part of a group, and that it is now proposed that a majority of three-fourths will bind a minority of one-fourth. I wonder is that a departure from practice? Is it something new that a majority of debenture holders shall decide or not? If that be so, it seems to me that it is a much less heinous offence for the Legislature to interfere with the rights of a minority of debenture holders than for a majority of three-fourths to interfere with their rights.
The proposals for the reconstruction of the finances of the Great Southern Railways Company, embodied in this Bill, can be regarded from one or two angles,—either as a practical measure associated with other measures for the improvement of the position of the railways and the whole transport problem generally or from a purely theoretical point of view. From a purely theoretical point of view something can be said against the proposals. I am told that we should have consulted the debenture holders and the other classes of shareholders before attempting to write down the nominal value of their holdings in the manner in which the Bill proposes. In so far as the various classes of shareholders other than the debenture holders are concerned, I consulted their representatives. I told them what my point of view was and what the Government considered to be an essential part of any reconstruction scheme. If, having told them that, they did not consult the people who elected them it is not my fault. They had ample time to do so. We discussed the periods in which meetings of the different classes of stockholders might be held. At one meeting there was a question of letting me see the circular to be issued by the company to the different shareholders and stockholders before it was issued, because there was a certain difference of opinion between myself and the directors of the company as to the manner in which the circular should be phrased. No meeting was held. When we decided to introduce the Bill in this form there did not appear to be any immediate prospect of a meeting being held. The Great Southern Company had got to the point of proposing that the question should be postponed. The Bill was introduced in February. There has been ample time between that date and this to get a meeting if the persons elected to represent the interests of the various classes of shareholders thought it necessary to hold a meeting, or if they thought it would serve any purpose. The railway company has no power to summon a meeting of the debenture holders. Neither have I that power. Neither have the debenture holders themselves the power to summon such a meeting. Their position is altogether different from that of the other classes of shareholders.
A meeting of debenture holders was held last week, summoned by a committee of the debenture holders, and summoned under circumstances which would make one think that a full attendance was likely to result. Notwithstanding this, the meeting did not represent one quarter of the total debenture stock of the company. We could have inserted in this Bill a section which would give us power to summon a meeting of the debenture holders and also to provide that decisions arrived at in such a meeting, whether unanimous or majority decisions, would have certain effects. In the end, however, the only decision we would have regarded as satisfactory would be one which would have the effect of changing the nominal value of these stocks, or the yield of interest on these stocks in the manner in which the Bill proposes. We consider that it is essential that a reconstruction of the company's finances should take place. That is our attitude and I want Senators who are concerned only with the position of railway stockholders, whether debenture stockholders or ordinary or preference or guarantee stockholders, to have regard to the nature of the legislation before them and to the very drastic restrictions which we are putting upon the liberty of other people who are competing with the railway company, and to the prospects of increased charges on those who avail of the services. I would also ask Senators to bear in mind the sacrifices which the workers of the railway company have been asked to make in order that expenditure might balance its receipts.
From the purely theoretical point of view, I think that a case might be made against proceeding in this way, as I say, but I do not know that these are times in which to have regard to purely theoretical points of view. Let us have regard to the purely practical point of view and not to what is the difference between the holder of this class of stock or that class of stock. It must be remembered that the debenture holder has the right, in the event of the company's defaulting in the payment of interest to him, to put in a receiver, who can only carry on the company in a proper manner until he has paid off whatever arrears of interest have accumulated and then the receiver disappears.
The Board of the company have paid debenture interest in this year, and they have paid it, in my opinion, by making what would ordinarily be regarded as insufficient provision for depreciation or for the maintenance of the system, the renewal of stock, repair of the permanent way, and so on. The Board of the company can do that. There are certain statutory powers in relation to them which might be exercised, but on the whole it may be said that the board of the Great Southern Railway Company have the power to make whatever provision they think the receipts justify and without regard to what the condition of the system justifies. A receiver, nominated by the debenture holders, would have to make full and proper provision for depreciation and maintenance, and only after he had done that could he allocate payment of interest, and we would have reached the point where they would never get interest again, because that receiver could not get out of the railway system, as it now is, sufficient to pay its working expenses and make these provisions for depreciation and maintenance and at the same time pay interest on the debenture stock. So that, in fact, the debenture holder is in no different position, so far as his prospects of getting paid interest are concerned, to that of any other stockholder. His prospects of getting paid interest depend on the earning power of the company. He has, of course, this safeguard, that the first charge upon any surplus receipts is in his favour. The first charge must be the payment of his interest. It is only after his interest has been provided for that any other class of stockholder can get paid a return on capital. The debenture holder cannot get his money back. As Senator Colonel Moore pointed out, the only way in which he can get his money back is by taking his stock to the stock market and getting somebody there to buy it. The newspaper quotations tell us that if he does that the best price he is likely to get at present for it is £35 or £36. Personally, I think that price is too low.
That brings me to the next practical consideration: that the life of the railways is definitely limited. I do not think anybody contemplates the railways lasting into the future indefinitely as the principal means of transport. At some stage some one may invent a freight carrying aeroplane or an airship. Some one, perhaps, will discover a means of sending goods by wireless. In any case, some means of transport may be devised which will eliminate the railways. At the present time the railways are fighting for their lives against road competition. That road competition may not be altogether fair, but certainly, in the manner in which it is at present providing a means of transport, a large section of the public seem to prefer it. Given omnibus services and rail services side by side or a road merchandise service and a railway service side by side, a large section of the public seem to prefer the road service to the rail service. That may be due to the fact that at the present time these road services are being sold at uneconomic rates, but whatever the conditions are that is the fact. We are creating not a position in which the Great Southern Railways Company will be able to preserve the Great Southern Railways, but one in which the Great Southern Railways Company will be able to transform itself into a transport organisation, operating not merely railway but road services and within which any changes in transport methods can take place. Conceivably in 50 or 100 years' time we will have the Great Southern Railways Company still in existence without railways but operating an air service or road service or whatever other transport services are required. The Great Southern Railways Company are, apart from the railway system, having their future secured by this Bill. Personally, I think that anybody who can buy their debenture stock for £36 on which interest at the rate of £3 8s. 0d. per annum is paid, should, having regard to the present return on capital, buy it. If I had any spare money I would have no hesitation in doing so.
We decided that it was necessary that this reorganisation of the company's finances should take place. The reason is that we want it made quite clear that we are not reorganising the transport situation here and imposing a number of burdens upon other people merely for the purpose of providing a return upon the full amount of the capital invested in the railway company, particularly having regard to the fact that a great part of that capital is represented by assets no longer capable of earning revenue. On the last occasion that we discussed this I mentioned that last year the railway company shut down certain lines: that at the present time men were taking up the rails, dismantling signal boxes and removing the last traces of these lines. Is it suggested that we should take out of transport in this country, by imposing charges upon those using the services we are providing, the money necessary to pay a return on the capital invested in these lines that have been closed down? There are a number of other assets in the company created out of capital which are no longer of any value and are not capable of earning a return for those who subscribed the capital. Is it suggested that we should impose upon the transport organisation of the State, rail or road, an obligation to provide a return upon all that capital, a large part of which is properly describable as dead capital? If we were to attempt to do that we would be defeating our own aims, because the burden to be placed on the people would be so great that there would be a movement against this legislation and to reverse this section, or else the traffic would not offer at all.
Those who direct transport organisation work, I think, on the principle that rates are fixed at the highest limit which traffic will bear. The theory is that you can put a rate at such a point that traffic will not offer. In the case of people growing potatoes and sending them to the Dublin market, of people sending live stock or any other commodity to the market, you can put the rates at such a point that traffic will not move because the prices people are likely to get for their stock or their produce will not yield a profit and the transport charge. Therefore, by putting on your transport organisation an undue burden of capital to be remunerated, you are taking the chance that you are going to do national damage in so far as you are going to make the internal transport of a number of commodities impossible, or certainly very costly.
We had regard also to the fact that everybody else was being asked to make sacrifices for the benefit of the railways. Not merely the railway workers who were asked to accept a 15 per cent. reduction in their wages, but everybody else in the community is, under this legislation, being asked to make sacrifices. Those at present operating competing services are going to be put out of existence and compensated only in respect of the pecuniary losses they sustain by the cessation of their present services. If we were to terminate the Great Southern Railways service at the present time on the basis of compensating the owners of the railways for the pecuniary loss they would suffer by its termination, does anyone suggest that the owners of the different classes of stock would get for each £100 the figure set out in the third column to the Schedule? We are doing that in the case of the competitors of the railway company. We are creating a position in which an increase in transport charges must take place.
The whole purpose of this legislation is calculated to increase transport charges so that everyone travelling by bus or rail, or sending goods by road or rail, is going to pay a higher rate, and in that higher rate will make a contribution for improving the position of the Great Southern Railways Company. The State is wiping out entirely the debt due by the company to it, and by doing so is imposing a burden on the taxpayer. In every way we are taking from other people resources which they cannot very well spare for the purpose of strengthening the railway company's position, and it is not unreasonable—in fact, it is only just and right—that those who own the railway company should make their contribution. I do not think there will be any serious attempt to controvert that contention. In fact, those whom I met, whether they represented debenture holders, preference holders or guaranteed stockholders, as well as those who have been writing letters to officials in my Department, accept it that the owners of the different classes of railway stock must make their contribution to this scheme of reconstruction. All those who have regard to practical considerations accept it that there is no simpler method of carrying out a reconstruction of the finances than the manner proposed in this Bill. It can be said that it is a novel method, and it may be said that it is unprecedented: that theoretically it may have undesirable results, but in principle it is no different to that which Senator Sir John Keane suggests in amendment 4.
The suggestion in that amendment is precisely similar to that contained in an amendment introduced in the Dáil but not moved there. It does not matter in what way you alter the contract under which a debenture stock holder has invested his money, whether you alter it by referring the matter to the Railway Tribunal or to the Minister for Industry and Commerce. The question is of no real importance. The suggestion here is that if the railway company do not themselves submit a scheme the question is to be referred to the Railway Tribunal. The Tribunal, under the amendment, is to consist of a chairman and two assessors having knowledge and experience of railway accountancy and finance. If the obligation to appoint an assessor on the Railway Tribunal to assist the chairman devolved upon me whom would I select? The person who prepared the scheme that is in the Schedule, and he was selected by the Board of the Great Southern Railway Company. Undoubtedly that person fulfils the qualifications of having knowledge and experience of railway accountancy and finance. He was selected by the Great Southern Railway Company to advise them. He is a person of very considerable reputation and I cannot think of anyone better that I could appoint as assessor to the chairman of the Railway Tribunal under sub-section (3) of the amendment.
If that person produced a scheme for the railway directors, do Senators think that he would produce a different scheme for the chairman of the Railway Tribunal? It has also been suggested that the Minister for Industry and Commerce might go before the Tribunal and be heard there. If the Railway Tribunal were to sit to-morrow to consider the question of the reorganisation of the finances of the Great Southern Railway I would not feel that I would be doing my duty, under these circumstances, by advocating a reduction in the nominal value of the different classes of stock in the manner set out in the first Schedule. On any basis that you care to go on: the market quotations since 1925, the average of the railway company's receipts since 1925, the earnings in 1932, the market quotation of the stock to-day and the future earning prospects of the company in default of this legislation—on any basis that you care to make your estimate, you could make an almost unanswerable case for a much more drastic reduction in each class of stock than that which this Bill proposes to effect. If this amendment were accepted and inserted in the Bill, and if the Railway Tribunal were to consider this matter, if it were my responsibility at the time I would feel obliged to make the case that the reduction proposed in this Bill as it stands was inadequate, having regard to all the circumstances, and that a much more drastic reduction should be effected. I am certain that there is nobody who could produce any estimate, fact or contention which could offset the facts, contentions and arguments that could be advanced in favour of a much more drastic reduction than that proposed here.
The position, therefore, is that on practical grounds everybody must make their contribution to the reconstruction of our national transport system. On theoretical grounds the case for the proposals in this Bill is in my opinion, quite sound and can stand criticism. The only point upon which any argument could be based is that we are doing something which has not been done before, something which may be misunderstood abroad, or misunderstood at home in a manner that may do damage to the national credit. No damage to the national credit has been done yet. In fact, if Senators will study the day to day quotations of the key stocks from the date on which this Bill was introduced to the present day they will find, first of all, that the national credit has improved in so far as the price of the various Government stocks has improved. They will find also, and this is a rather interesting point, that the value of Great Southern debenture stocks has depreciated much less than the value of the Great Northern Company's stock during the same period. I have found no evidence of any uneasiness. I think everybody who knows anything about this matter at all appreciates that the position of the railway companies is unique and abnormal and that the type of legislation which we have to introduce, in order to deal with that position, is also unique and abnormal, and, consequently, there is nothing in these Bills which could be quoted as a precedent, either by an individual lender or borrower of money, or by any succeeding Government in relation to an ordinary commercial concern.
There is one other point I wish to make before I conclude. It has been suggested, as a practical consideration, that, because of the reduction in the nominal value of the debenture stocks, the railway company may not be able to raise money in future. There are only two things I wish to say in connection with that. There are Senators here who could tell us what exactly were the prospects of the Great Southern Railways Company of raising money last year or in the year 1931 and whether, in fact, the Great Southern Railways Company did try to raise money for the purpose of carrying out certain reconstruction works and, if so, what success they met with. Secondly, on practical grounds, if you accept the contention that this measure is a measure unique in essence and not capable of being regarded as a precedent, the prospects of the railway company's borrowing should be improved in so far as, by a reduction of the present prior charges, the prospect of the company paying interest on new debentures is substantially increased.
I think the Minister may rest quite easy in his mind so far as our belief in the great efforts he is making to solve this traffic problem is concerned. We are all fully with him. It is a very serious problem and he has made a great effort to try to meet it. Whatever we may say as to the methods, there is no doubt that we fully recognise what he is trying to do. To come back to this amendment which we are considering, the Minister argues in the same way about the debenture holders and the holders of the City of Dublin Junction Railway stock as he does about the ordinary and preference stocks. He argues that everybody admits that the reconstruction scheme, in relation to the debenture stock and to stocks like the City of Dublin Junction Railways stock, which are of a totally different character, is a perfectly practicable proposition, and that the railway company were in a position to put, and should have, I daresay, put before their shareholders the scheme for reorganisation. He argues that, because they were not able to earn dividends on these stocks, the nominal value of them should come down, but, so far as saving the railways is concerned, that is not really worth a farthing. You get no dividend out of reducing the value of a certain stock on which no dividend is being paid at the present moment. You may call it a £5, £10 or £50 stock, but there is nothing in it to help the railway, because they are not bound to pay a farthing on the stock unless they make it. It comes out of profits over and above the working of the railway so that, when we set out to help the railways by interfering with the nominal value of every stock which is dependent on the profits of the company, we are not really helping the company in the slightest degree.
I do not suppose that there is a great deal, so far as that aspect of the matter is concerned, between the Minister's proposal and what the railway company probably think they would get their shareholders to agree to. I think it is only fair to say that, in regard to holding a meeting of their shareholders, the railway company were in a very difficult position. It must always be remembered that we had a general election in January and that they were not in a position to know who was going to dictate to them until after it was over and, therefore, they did not know what sort of proposition they could put to their shareholders. When the present Government came in, they knew, I think, what the Minister was going to insist on in regard to reductions and so on. It was confidential knowledge that they had and they were, therefore, in a very difficult position. I do not think that too much stress should be laid on the fact that the railway company did not summon a meeting. They could not summon debenture holders and I do not think any of us would say that they were in a position to summon their ordinary shareholders considering the negotiations that were going on with the Government. I do not think that, so far as this amendment is concerned, giving them time to carry the resolutions of their ordinary shareholders amounts to very much. There is no money in it for the company and no money in it from the point of view of keeping the system going but it is quite a different question when we come to the other stocks.
You will notice that, if this amendment is passed, the debenture stockholders and the City of Dublin Junction Railways stockholders will be given some time before these deductions come into force whereas sub-section (2) of Section 3 of the Bill states that the Minister shall, by order, as soon as conveniently may be after the passing of this Act, appoint, in respect of each denomination of the capital stock of the company, a day on which all these things which are described in the Bill are to take place. The position I am in is that I put down my amendment for the purpose of having discussed the question of the debenture holders in reference to Schedule 1 but I can see now that I was wrong and that my amendment should have come in on these sub-sections (2) and (3), with the result that I am in a difficult position. With regard to the general reorganisation of the company, this is probably as good a scheme as any and, personally, I would not argue with the Minister about it, outside these two stocks. I have, however, no amendment down to either sub-section (2) or (3) and I daresay that you, Sir, will tell me, when we come to the Schedule, that my amendment is out of order. I would ask you, or the Minister, because he is not in the least likely to closure argument on the subject, what I am to do.
The Minister dealt largely with the debenture stocks but I should prefer to leave that aspect of the matter over until we get them segregated and not mix them up with the other stocks. So far as the saving of the company is concerned, I think that probably the Minister's solution is just as good as any other except where Senator Sir John Keane came in. Anybody can see that if you cut down the capital of the guaranteed and the other stocks for ever, if the company once more comes to be a paying concern, and the Minister evidently thinks it will, the whole of the benefit will go to the ordinary shareholders but the cut-down capital will remain.
I should like Senator Jameson to explain that. The preference shareholders are getting nothing at present but, if the company prospers, they will get something. The effect of the Senator's statement is that the whole of the benefit will go to the ordinary shareholders. I say that, if the company prospers, the preference shareholders will be paid.
They will be paid on the reduced capital and not on the present capital.
But they will get something.
I grant you that but you are taking far more from them than you think. The Senator, evidently, does not quite see Senator Sir John Keane's point which is that the present value of the four per cent. guaranteed preference stock is £3,885,000 and you are now going to give them £1,942,000 or half. The dividend is four per cent., and, if the railway company goes ahead and is able to pay a dividend on its ordinary stock, the preference stockholders will only get two per cent. on the present capital, if they get four per cent. on the reduced capital. You are permanently reducing the dividend on the guaranteed as against the ordinary stockholders. That is their contribution. There is no money to be made out of an interference with the capital value at present. They are not being paid at present and what you are doing is cutting down the capital value of the debenture holders and the guaranteed preference stockholders. No matter how the railway succeeds, there will be a permanently reduced dividend, so far as they are concerned, whereas the ordinary stockholder, if the company succeeds, will get increased dividends.
In the event of the company becoming prosperous again, will it be within its power to introduce a Bill to increase its capital or the value of the shares?
That could be done, but can you see the ordinary shareholders letting that Bill go through easily? I do not think so. I do not think that that would be practical politics at all. The damage would be done, however, once you interfere with the amount of the capital stock. I am not now talking of the debentures, because I do not wish to mix them up with any of the other stocks. Sir John Keane was perfectly right when he said that you are doing, by an Act of the Oireachtas, a thing which has not been done before. In all these company arrangements, the ordinary shareholders would have had the option put to them of cutting the amount down themselves, in the interests of their own affairs, but now Parliament is stepping in and cutting it down peremptorily for the good of the State.
For the good of the company.
And they are not giving a single thing to the people they are cutting down unless they are citizens of the Free State. That is a bad principle to apply to shareholders with which the Oireachtas is now interfering. I do not know of any case—perhaps Senator Comyn may know—where a public company, owned by ordinary citizens and worked, as the railway company is, under statutory powers, had the value of its stocks arbitrarily dealt with by Parliament. I think that this is a mistake. The Government should have persuaded the company to call these people together, somehow. This sets a bad precedent, because every company of a fair size which finds itself in a difficult situation hereafter can be dealt with in the same way. Their capital can be cut down without consultation and merely on statements. The Minister has made various statements about debenture holders. He said that they have no right to come in except by receiver, that the value of their stock has gone, that the company is not even now earning enough to pay their interest. The Minister may have satisfied himself as to these statements but, publicly, there is no evidence, so far, that the railway company did not earn the dividend on their debenture stock.
The Minister himself admitted that the last audited accounts showed a balance of £40,000 after the dividend on the debenture stock had been paid. That is not a bankrupt concern. The Minister says that if the railway had been properly kept up they would not have paid that dividend; if they had not paid, the right of the debenture holders would have arisen and we would have had a receiver on that railway probably a year ago. I have not heard of a railway, even in the United States, the debenture holders of which had not the right to appoint a receiver. A number of the railways of the United States have been through the hands of a receiver. Some of them turned out prosperously afterwards and were sold to big companies or otherwise taken over. But I have never heard of a Government saying to a railway company that because they were in a bad way and were about to appoint a receiver, they would take the right of appointment away from them. If a receiver had been put in, the money earned by the company would go to the payment of the dividend of the debenture holders. Putting one man's belief against another, I think it might have been possible for a receiver to appoint a manager of that railway who would have caused it to earn the four per cent. of the debenture holders. The Minister has, no doubt, satisfied himself that it would not. What Parliament is doing is taking away the right on the strength of which this stock was put in the trustee class and invested in by the courts, by churches and by charities. They invested in it because they believed that, in the last resort, they could take possession of that railway and have it worked to pay their dividends. That was their legal right and that is being taken away. I am referring now to the debenture stock largely because the Minister brought it forward so prominently in what he said. I am in a difficulty because of sub-sections 2 and 3, which deal with the appointed day on which the debenture stocks, the City of Dublin Junction Railways stocks and others, are to be ended, and to submit to the conditions of the Bill. As regards the City of Dublin Junction Railways Stock, what is to be said? What are these stocks?
We are discussing an amendment by Senator Sir John Keane dealing with a reconstruction scheme and I submit that Senator Jameson's speech is out of order and should be delivered on the Schedule. It is hardly relevant to the scheme of reconstruction proposed by Senator Sir John Keane.
Cathaoirleach
I think that it is quite relevant. These matters are interrelated and cannot be separated.
I have to deal with this matter now because, if this amendment is not passed, when we come on to sub-sections 2 and 3, I have no amendment down. This amendment postpones for two or three years the reduction of those stocks. If this amendment is not passed, I cannot ask the House to consider the debenture question, because, if you pass sub-sections 2 and 3, you will be providing for the reduction of the stocks of which I am now speaking. I speak of them now because this amendment postpones the reduction of them. There is a four per cent. preference stock of the City of Dublin Junction Railways. That stock happens to rank for dividend ahead of the City of Dublin Junction Railways guaranteed stock. Yet, the guaranteed stock is being brought down by 50 per cent. while the stock that ranks ahead of it is being brought down by 65 per cent. That is a peculiar anomaly. The dividend on the 4 per cent. Junction Railways preference stock is not only being paid but is actually being earned. The guaranteed stock is guaranteed by the Great Northern Railway Company and by the G.S.R. There is £65,000 in Irish Free State National Loan lying in court to the credit of the G.N.R. to pay its share of the dividends and the G.S.R. Company are responsible for £4,000 of the guarantee. The City of Dublin Junction Railways Company is earning quite a lot and yet the Government take all these stocks and write them down by these huge sums in the Schedule. The same reasoning is applied to these stocks as is applied to the ordinary stock of the G.S.R. which has not paid a dividend for some years. I do not think that that is equitable. I was hoping that the Minister would consider it reasonable to allow the dividends which are being paid on these stocks to continue to be paid. The City of Dublin Junction Railways system is not part of the national system at all. It is earning its dividends and yet the Minister is going to dispose of it as if it was not worth a farthing. A stock having preference to the guaranteed stock is cut down 15 per cent. or 20 per cent more than the guaranteed stock. Perhaps the Minister would be prepared to have this question debated on the Schedule when we come down to the actual figures.
Perhaps it would save discussion if I indicated at this stage that I propose to introduce an amendment on the Report Stage deleting from the Schedule all the minor stocks.
What does that mean?
From the North Wall extension stocks to the end of the Schedule that may appear inequitable, having regard to the reductions in other stocks, but I shall explain the circumstances which have occasioned that decision when introducing the amendment. Needless to say, that cannot be done merely by a change in the Schedule. It will involve consequential changes in the body of the Act and to effect these changes necessitates complicated drafting. That difficulty will be got over. On the Report Stage, I shall indicate the circumstances in respect of each of these stocks which, in my opinion, justify their deletion from the Schedule.
From what I had heard, I believed that that was the Minister's intention. I had hoped that we would have heard about that decision before I delayed the House. As regards the debenture stock, I am in a difficulty. I have no amendment down to sub-section (2) or (3) and if the House passes those sections and does not pass this amendment, I shall not have an opportunity to discuss this stock.
Cathaoirleach
You can deal with the matter on the Schedule if this amendment is not carried.
The Minister in rather an adroit way made no attempt to deal with the equities of the amendment. Senator Jameson has put the case very clearly. The ordinary shareholders get a distinct benefit. Are you to take from the debenture and preference holders and give everything that flows over to the ordinary shareholders after writing down the value of the capital? The 50 per cent. taken off debenture and preference holders accrues to the interest of the ordinary shareholders, who are in the lowest category and in equity deserve least. Surely in the face of that, the matter should be further examined, unless you are going to deal with it on the lines that there is a majority, and that capitalists have no right to argue for fair treatment. If that is so, well and good. Senator Comyn, whom I know to be a very kind hearted and generous man, might at least have pity on the forlorn hope I was facing. Surely he sees on every side attacks on capital. Surely he should allow the remnant of those fighting their battle to have their say without the incitement of his eloquence. I would ask the Minister whether it would not be possible between now and the Report Stage to find some method of dealing with the matter. It is very difficult without his co-operation to put up a feasible scheme, or a method by which the equities of the question could be examined. I cannot believe that Senator Comyn was so stupid as he appeared to be, when he said that this amendment would hold up the operation of the Bill for three years. All it could do is to prevent the railway company getting £50,000 immediately out of the pockets of the debenture holders.
I understood that this Bill was to be taken as a whole with its benefits.
What are we here for unless we are in a position to amend the Bill? Is the Bill simply before the Seanad to take it or leave it?
No. The general principle of the Bill has been accepted by the House.
The capital reconstruction clauses are essential principles of the Bill and cannot be amended without jeopardising the whole matter.
Cathaoirleach
That cannot be argued because I have accepted an amendment to alter them.
If I may say so with all due respect, I think Senator Comyn referred to it.
Cathaoirleach
Will the Senator please confine himself to the amendment and not to what Senator Comyn said.
I was suggesting to the Minister that between now and the Report Stage he would consider if some simpler machinery like the Railway Tribunal might not come into operation. They might be permitted to hear all parties, debenture holders and preference holders, and to submit a scheme for approval which would be implemented by legislation. This debate has shown clearly that this capital reconstruction is not equitable. On these grounds I think that the matter should be reconsidered. I am not tied to the amendment but I ask the Minister to accept the point of view that he should try to redress what is inequitable.
Cathaoirleach
I am sure the Minister would be inclined to meet you as far as he could.
I would like to put another point of view for consideration. The Senator's whole argument is based on the assumption that the railway company will have in some year a huge sum of surplus receipts for distribution amongst shareholders, and that the directors will decide to distribute that amongst the shareholders, and secondly, that being so, that the bulk must go to the holders of ordinary stock. I think it is a most unlikely situation that in any one year the railway company will have a huge amount of surplus receipts to distribute, having regard to the fact that this is not merely a paper reduction, as Senators argued. The charges which the railway company will be permitted to levy on merchandise carried will be fixed by the Railway Tribunal. In fixing charges the Railway Tribunal will have in mind the volume of traffic likely to be available, and the total revenue which the railway company should get, to enable them to give a just and equitable return upon the various classes of stock, with economy and efficiency in management. In fact it is not really a paper reduction, in so far as it is going to be reflected in the calculation of the Railway Tribunal when determining what standard charges will be. If, despite that situation, the railway company in any year were to earn a substantial excess over the standard revenue, presumably it would allocate it to reserves, rather than to distribution which would mean a very high rate of interest on ordinary stock. The essential thing to remember is, that the surplus which will be available for distribution will be somewhere about the point fixed by the Railway Tribunal when the standard charges are fixed, and will be just what will give an equitable return to all classes of stockholders. Consequently the changes effected between preference and ordinary stockholders are probably as fair and as equitable as could be devised under the circumstances.
Will the Minister answer Senator Sir John Keane's request and say whether he is prepared to reconsider the position regarding capital reconstruction between now and the Report Stage? There is something further to be said if the Minister does not agree.
I am taking the point of view that, in fact, there is no difference between effecting changes in the finances of the company by Act of Parliament in this way and by an order of the Railway Tribunal. I do not think there is any essential difference. In fact, I think it would be something in the nature of a trick to put responsibility on the Railway Tribunal and not to take it ourselves. That is why I am assuming that the reduction is as fair as we can devise, and that the people who suggested it originally had all the information anyone could offer and I think it is not likely to be improved by the Railway Tribunal. We contemplated that there would be a detailed examination of the minor stocks. The legal position was complicated. The decision to eliminate them removes that necessity. That is why I think we should leave the Schedule as it stands.
The Minister said that it would be a trick to have the matter referred to the Railway Tribunal and that nothing would be gained thereby. Previously he stated that the chairman of the Railway Tribunal was not likely to be a person of greater prominence than the financial expert to whom the railway company had submitted the matter previously. What was submitted to this financial expert previously? I can see the position in which the company engaged this financial expert and said to him, "There is to be a scheme of capital reconstruction, and if we do not submit it, one will be submitted. Will you prepare a scheme of proper reconstruction for us, and then we can hand that to the Minister?" On the other hand what could be required of this financial expert was this, to examine the position of the Great Southern Railways in regard to present day economy, in regard to the future of this company —under normal economic conditions —and to submit a scheme of reconstruction not necessarily of capital reconstruction. Which case was put to the financial expert?
I am afraid I could not answer that.
Everything depends upon that. I know that if a discussion were going on when this action was taken by the Board, if they were contemplating a scheme of reconstruction being carried out voluntarily, the only section in the Bill would be a permissive section. That is the whole difficulty in the case. If this financial expert were asked to consider and to advise on the whole position of the railways, to submit a scheme which would put the railways on their feet again, to secure something like adequate remuneration for the stockholders, and if this is part of the scheme of capital reconstruction submitted there would be something new. From the Minister's statement I think the House inferred that some sort of official sanction was behind the scheme which was put forward. There is no official sanction behind that scheme. The Board and the railway company do not stand behind it.
How does the Senator know?
It has been stated by the directors and by the company that they do not stand behind it. What happened was that this scheme was prepared. But we do not know the terms of reference of the case submitted to the financial expert. The Minister has not said so and no one else has said it. The financial expert prepared a scheme and handed it to the Board which, in the exercise of its discretion, it passed to the Minister. The Minister takes it and merely knows that it was prepared by a financial expert. We do not know what case was submitted to the Minister as the basis of his scheme of capital reconstruction. It may be misleading, it may be wrong, and grave injustice may be done thereby. As Senator Sir John Keane said, a grave injustice may be done to the preference shareholder in future. We are legislating at a time when we are at the depth of economic depression, when world depression is at its lowest, when the world cannot exist if it goes lower. In this country we suffer not only from world depression but from our economic war.
I knew that would come.
We have both, and we are accepting them as normal conditions. I suggest that legislation should have regard to normal conditions if we are ever to revert to that position; I suppose we will. What will be the position of the unfortunate preference holders and Irish investors? We hope to interest Irish investors in Irish concerns and to keep capital at home. If we are to have well-ordered conditions of transport in this country, it must have been necessary to introduce the proposals of the Minister, which are embodied in these Bills, and to secure legislative sanction for them. That should be done apart and away from capital reconstruction. If there is to be capital reconstruction, if it is inherently sound, and does no injustice to anyone, that is all right. Let us give effective legislative sanction to it. But if it is to be unjust to a section of the community, the preference shareholders, regardless of the earnings of the Great Southern Railway the maximum return for these unfortunate preference shareholders will be only one and a half per cent. on the capital invested. That is totally unfair.
What is the present price?
I am not concerned with that. We know what that is due to. It is caused by world depression, by the competition which was allowed by the Governments to grow up, and also by the economic war. These are quite adequate reasons for the low price at the present time. Everyone knows that well-ordered conditions of transport are absolutely essential, apart altogether from any question of capital reconstruction. If that is so, they should be dealt with on the merits and under normal conditions. Otherwise there is no chance of the railway company earning anything like adequate remuneration for the unfortunate shareholders. Why are preference shareholders and guaranteed preference shareholders to be deprived of what normally should go to them under ordinary trading conditions? I do not know what Senator Sir John Keane is inclined to do in regard to this amendment. I do not think anything could be lost by having the matter considered. It would be a departure from the reasonable procedure of consulting with shareholders before embarking on any such scheme. The Minister might be fortified by one factor, that he is likely to get holders of various denominations of capital opposed to each other. There is no doubt that they must work out a scheme. The debenture holders may be opposed to capital reconstruction, but the ordinary shareholders are bound to stand for some scheme of capital reorganisation so that they may have some small return.
I hope that it will be allowed somewhere in the next stage to ask the Minister what is this scheme and upon what terms of reference was based that report of that financial expert employed by the Great Southern Railways Company. I think that the Minister may have been misled into thinking that there was some kind of official sanction for the scheme on which that was based whereas there may have been no such official sanction at all.
I think that Senator Jameson, in the course of his analysis of this amendment, left on the mind of the Seanad the impression that there was something dishonest committed in regard to the debenture holders. It is quite true for the Senator to say that no matter how prosperous the company may become in after years — suppose that it earned a dividend of 20 per cent. on the ordinary shares—that under no circumstances can the debenture holders get more than 4 per cent. on £85. That is true. Their contract has been interfered with. But I think it is only fair to have regard to the existing condition of the company and to the probabilities of the case. Suppose that this company now is left to itself, is there any sort of possibility that this company will ever again pay, let us say, 5 per cent. on its ordinary shares, or even 4 per cent.? I think that the gentlemen opposite are riding a technical objection to death. There is no doubt that we are interfering with the legal right of the debenture holders, but are we not interfering with the legal right of the person who has a bus running on the roads and with the legal right of every person who has a few shillings and goes into a railway station and buys a ticket? There is a considerable interference with the legal rights of a great number of people. There is an interference with the contractual right of the debenture holders. Does Senator Jameson say that we ought not to interfere with the legal right of the people who are running buses? If he does, he ought to vote against this Bill lock, stock and barrel. Therefore, I think it is not just to say that in this measure it is proposed to be dishonest or unfair to the particular class of debenture holders. They must make some contribution towards the success of the railways. If the users of buses — the public generally — are all required under the terms of this Bill to make substantial sacrifices in order that the railways may go on and earn dividends for the debenture holders and the debenture holders are to give nothing at all in return, would Senator Jameson when he uses that argument, and uses it so well, be prepared to say that if this measure is not passed the debenture holders are going to get their 4 per cent. on the £100 for all time? I think he would not.
I think that everybody must admit that this Bill is in the interests not merely of the ordinary shareholders but of the preference shareholders and of the debenture holders as well. I think that opposition, based upon what is undoubtedly a technical point, has been pressed too far on this measure. Suppose there were another measure whereby it was sought to break contracts. I think that probably Senator Sir John Keane would have merit as well as law on his side and I think he misunderstood me in what I said, because my point is this, that the present Bill is the wrong Bill upon which to raise that great question as to whether contracts ought to be modified or not by the State. Everybody is interfered with. All legal rights are interfered with. There may be a chance, by means of this and other legislation, whereby the railways will be put on their wheels, if I might say so, and whereby the ordinary shareholders will get a reward for their capital and the time may come, in circumstances of great prosperity, when the debenture holder can say: "Under my contract I was entitled to 4 per cent., but under this law I am only entitled to 4 per cent. on £85." Should that day come — I think that day is distant, but if it does come, the debenture holders can come here for relief just as the ordinary shareholders are coming now.
I ask the House again by their vote to call for more deliberation in this matter. It is only just recently that I have come to appreciate the bearings of Section 5 — that is standard revenue — on this question of capital reconstruction; and that, in my opinion, makes it all the more necessary that it should be given careful consideration. The effect of the two together makes me modify what I said before. In fact, the Minister explains the position and my alarm is only deepened. What you are doing now is to stereotype the value of ordinary stock at the lowest possible point of depression.
Oh, no, not ordinary stock.
You are writing down your ordinary stock nine-tenths and then saying to the railway company: "You are only earning sufficient to give a reasonable return — 5 per cent." That is an utterly inadequate figure. You are tying down the railway only to earn a reasonable return on that stock which you have written down to the lowest point in the trough of depression. I think it is very wrong to absolutely pin the ordinary shareholders down to the lowest possible point that stock has reached. They should get some of the benefit of recovery. I do not say they should get all. People seem to think that all that has happened in the past is to be forgotten and that all these sacrifices are to be just wiped out by an Act of Parliament. If one comes to think of it, all the amenities of civilisation have been built up by the sacrifices of individual enterprise, and it is not fair for the State to come in and arbitrarily deny to people the potential reward in the event of recovery — not what is probable, but what is possible. I think that the House should leave the door open to further reconsideration of this question of capital reconstruction. You could write down the ordinary stock not to one-tenth but to one-fifth, but let all that be reconsidered and make some of the preference shares participate in surplus revenue. It is not to be expected that such a complex matter as capital reconstruction could be debated on the floor of this House, and I only ask that the door should be left open to further reconsideration. If the Minister is prepared to meet us on these lines I should be satisfied.
Cathaoirleach
Senator Sir John Keane has spoken three times. If the Senator speaks again it will be to close the debate.
I only want to emphasise a point that seems to have been forgotten and that is that this Bill is more or less in harness with the Road Transport Bill and that they are both brought forward to save the railway company, and that if neither of the Bills is passed the railway company's day is done. It seems to me that what Senator Sir John Keane is arguing for is to let the railway company alone and not to interfere with their present rights nor to give them any more privileges. Assume that position to have been attained then what is the value of saying that they own the railways? I do not know if any merchant is capable of buying the scrap which the railway companies are worth in this country, but they would not be worth any more than scrap if left alone in the hands of their owners. To say that the calculation in the Schedule is at the lowest point of the trough of depression is questionable. Who is to say that? If the railways are not backed up by this Transport Bill are they at the lowest point of depression? They would go very much lower, I am afraid, if they were not protected by the assistance given in the Road Transport Bill, and kept in being, in fact, by the legislation now before the Seanad.
It is of no use to talk about this reconstruction scheme as though the State were not coming to the aid of the railway companies. The main factor to be borne in mind in these Bills, I think, is that it is an attempt to save the railway company from utter ruin. It is a question as to how much should be saved for the shareholders and what amount of privileges they should get; and to speak as if they were being mulcted by these Bills when, in fact, they are being granted property and given privileges by an Act of the Oireachtas, is the very opposite of what is true.
The last speech shows an entire want of appreciation of the main arguments put forward during the last hour. No one, as far as I know, is stating that there should be no reconstruction scheme or that in a Bill for the benefit of the railway company there should be no reconstruction scheme. What is being put forward is that the method which is being adopted is wrong and inevitably brings forward into the Bill a principle which was described as "guess-work" in the Dáil. It is not a question of no reconstruction. This amendment, taken with the following amendment, is an attempt to try to find a way by which this scheme may get further consideration and to prevent something that would be inequitable; but it is not to say that there should be no scheme of reconstruction.
As far as the principle involved is concerned, I admit that what the Minister says is true. There is no difference in fundamental principle between the State doing it and the Railway Tribunal doing it because the State says they are to do it. The advantage is that an effort will be made, first of all, to get it by agreement and, failing that, by compulsion. That is, taking the two amendments as they stand together.
The advantages would be that you might reach possibly an agreed scheme or, failing that, a scheme which had been carefully investigated. I think the statement made by Senator O'Hanlon was an excellent one. Personally, I am in entire agreement with it: that is, that we are really being asked to pass something here because we are agreed that there should be some sacrifices and that, therefore, this must be the right method of doing that. I am not now dealing with the debenture issue which will come on later. I do not think the two questions are related at all. I cannot see that, apart from the debenture gain, it matters to the scheme whether this particular form of reconstruction takes place within the next fortnight or in a year or so. The statements made by Senator Johnson and the Minister rather confirm that. None of us expects that any large sums of money will be available for distribution at an early date. The question of the debentures does affect the income of the railway but the other scheme does not. Everything you take off the preference shareholders, whatever it is, must be a gain for the ordinary shareholders, and I am not arguing that something should not come off the preference shareholders. The only case I can see is that this thing has apparently been done by one firm. It put something before the railway directors which they did not consider. They handed it to the Minister. With the minimum amount of consideration by him, because he had not got the facts on which he could draw out a full scheme, and because of the future, it must largely be a matter of guesswork. No matter who does it, it is going to be guesswork, but if there is going to be an element of guesswork in it, is it not well worth while trying to get some agreement, especially when the delay is not going to affect the carrying forward of the scheme? I am certainly not going to propose that something should be introduced into the Bill which would prevent a scheme of reconstruction. The amendment would ensure that there would be such a scheme. The remarks made by Senator Johnson indicate that he does not appreciate at all the attitude taken up by some of us here.
I appreciate the arguments used in support of it.
The Senator has experience enough to know that we are debating an amendment, and that if we were to debate the arguments put forward by various Senators on every amendment there would be absolutely no limit to our discussions. Our attitude is not to be taken in any sense as meaning that there should be no reconstruction scheme. We have very grave doubts as to some of the proposals here. We are not satisfied that the immediate carrying of this particular scheme is part and parcel of the proposals before us, taking the two Bills as a whole.
Is it the Senator's point that the total of the reduced capital, which amounts to £4,800,000, should be readjusted as between the guaranteed preference, preference and ordinary stock holders?
So far as I am personally concerned I am not competent to say whether the sum total figure is exactly the right one. It might possibly, on investigation, be found that it should be even a lower total. There is no legal obligation to pay dividends on any of these stocks at all. The railway company might go on for years without paying any one except its debenture holders. The shareholders cannot go in and appoint a receiver. Therefore, there is no need for haste. The actual amount at which the stock is fixed only makes a difference as between the classes of shareholders. My contention is that with an investigation into the assets you might, with reasonable prospects, get an agreement as between those different classes. If you did get it you would not run the risk of a great deal of feeling—complaint and discontent that you may at a later date easily open up in the absence of agreement. I think there is a good deal in what Senator O'Hanlon said. I do not want to go into the question of the causes for the present situation. Some Senators are sensitive if you mention any immediate cause, but we know perfectly well that there is depression and acute depression at the present moment. There are many contributory causes for that. This Bill is expected to improve the position of the railway companies. We hope it will. Within a comparatively short period we would be able to have some sort of an idea as to the effect it was having. Leaving the debenture question over for the moment, I cannot see how a delay in the ultimate decision as to what the relative holdings are of the different classes of shareholders is going to affect the scheme.
I ask leave to withdraw amendment 3, and to take the decision of the House on amendment 4.
Tá
- Bagwell, John.
- Browne, Miss Kathleen.
- Counihan, John C.
- Crosbie, George.
- Douglas, James G.
- Fanning, Michael.
- Garahan, Hugh.
- Griffith, Sir John Purser.
- Jameson, Right Hon. Andrew.
- Keane, Sir John.
- McGillycuddy of the Reeks, The.
- Milroy, Séan.
- Moran, James.
- O'Connor, Joseph.
- O'Hanlon, M.F.
- Staines, Michael.
- Wilson, Richard.
Níl
- Chléirigh, Caitlín Bean Uí.
- Comyn, K.C. Michael.
- Cummins, William.
- Dowdall, J.C.
- Foran, Thomas.
- Johnson, Thomas.
- MacEllin, Séan E.
- Moore, Colonel.
- Quirke, William.
- Robinson, David L.
- Robinson, Séumas.
- Ryan, Séumas.
Cathaoirleach
Amendment 5 is consequential, I presume?
It cannot go in automatically because the last amendment was carried but we will simply oppose the motion.
I move amendment 5:
Section 3, sub-section (2). To delete in line 2 the words "the passing of this Act" and to substitute therefor the words "a reconstruction scheme has been agreed to and approved by the Minister, or has been settled by the Railway Tribunal."
I move amendment 7:
Section 3, sub-section (3). To delete all after the word "the" in line 12, where it first occurs, down to the end of the sub-section and to substitute therefor the words "reconstruction scheme."
This is consequential on amendment 4.
I want to prevent misunderstanding arising and I take this opportunity of doing so. I informed Senator Jameson that an amendment would be introduced by me on Report Stage dealing with the minor stocks of the company. It is clear that that amendment cannot now be introduced. On the general question, of course, the Government will have to consider its position in relation to the amendment carried and I cannot make any statement on that point now but I am anxious that the Senator should not misunderstand my position. I said that I was going to introduce an amendment but it cannot be introduced on Report Stage now. It is a matter that will arise for consideration.
I quite understand the Minister's position because I am in very much the same position myself in debating with regard to debentures.
Perhaps we could, on Report Stage, introduce an amendment to delete the improvident amendment that has just been carried in this House?
Cathaoirleach
Of course, you can.
That is what Report Stage is for.
I move amendment 8:
Section 3, sub-section (4). To delete all after the word "the" in line 20, where it first occurs, down to and including the word "schedule" in line 22 and to substitute therefor the words "reconstruction scheme."
This is also consequential.
I move amendment 9:
Section 3, sub-section (6). To delete all after the word "the" in line 36, where it first occurs, down to and including the word "Act" in line 37 and to substitute therefor the words "reconstruction scheme."
This is also consequential.
I move amendment 10:
Section 3, sub-section (9). To insert before the sub-section a new sub-section as follows:—
"(9) Any director possessing the necessary share qualification pursuant to the provisions of sub-section (3) of Section 34 of the Great Southern Railways Amalgamation Scheme, 1925, at and after the date of the passing of this Act shall remain so qualified up to the election of directors after the next annual meeting. The qualification of a director elected after the next annual meeting shall be the possession in his own right of reduced Ordinary Stock of the Company of the nominal value of not less than one thousand pounds."
The object of this amendment —
Perhaps it would avoid discussion if I said that I will introduce an amendment covering these points on Report Stage.
I move amendment 11:
Section 5, sub-section (1). To delete in lines 44-45 the words "passing of this Act" and to substitute therefor the words "appointed day."
This, I understand, is consequential in order to bring the Bill into line with amendment 4 that has been passed.
I propose to withdraw amendment 12 which is as follows:—
New section. Before Section 6 to insert a new section as follows:—
(1) The provisions of sub-section (4) of Section 34 of the Great Southern Railways Amalgamation Scheme, 1925, shall henceforth apply to the election of a director as if the words "thirty days" were therein substituted for the words "ten days."
(2) No proxy sent out by the directors for the general business of the Company shall be available for the election of directors.
(3) A list of candidates who have duly submitted their names for election as directors shall be sent by ordinary post to the shareholders of the Company not less than ten days before the date fixed for the meeting at which an election of directors is to take place. The names of the retiring directors shall be indicated on the list.
I understand it has been met by amendments introduced on Report Stage in the Dáil.
Have we gone past Section 4?
Cathaoirleach
Long ago. You will have to wait for Report Stage now, Senator.
With regard to amendment 15 and a number of the amendments following it, might I ask if the Minister will allow his officials to examine these points? They are purely technical but some of them may be desirable from the drafting point of view.
Certainly.
I move amendment 16:
Section 7, sub-section (3). To delete the sub-section and to substitute therefor a new sub-section as follows:—
(3) The term of office of every director of the company who holds office as such director immediately before the next annual meeting with the exception of three of the aforesaid directors, who shall be selected by all the aforesaid directors in such manner as they may determine, hereinafter called ‘the three former directors,' shall expire at the conclusion of such meeting, but every such director, except the three former directors, shall be eligible for election under this section as a director at such meeting.
The object of this amendment is to preserve continuity in the directorship of the railway and, briefly, if carried, its effect will be that three of the present directors will not offer themselves for re-election but will automatically be re-elected to the new Board. I do not think I need say any more except to suggest to the House that it is desirable to have this continuity and not to have a clean break, with entirely new directors, after this Bill is passed.
I do not think that either Senator Sir John Keane or myself have the slightest hope that there will be a clean sweep, and that none of the outgoing directors will succeed in securing re-election. We have to consider, however, that the number of directors will be reduced and that it is a question really as to whether the members of the existing Board to be selected for the new Board are to be selected by the shareholders in the concern or by the existing directors. It is our view that the selection should be made by the shareholders. They will do it at the annual meeting at which the first election of the new Board takes place. I have no doubt whatever that a large number, if not all, will be outgoing directors. I think it is reasonable enough to assume that. I think it is preferable, when the task of selecting from the 12 outgoing directors the seven who are to be on the new Board arises, it should be performed by shareholders and not by the outgoing Board.
I am inclined to agree with the Minister. I have some faith also in the good sense of the shareholders. With the leave of the House, I shall withdraw the amendment.
The Minister thinks that there will be some of the old directors returned. Could we not add words providing that three of the directors shall be directors who are at present acting?
Is not that an unnecessary interference with the discretion of the shareholders? I am surprised that a member of the legion of the rearguard, in defence of capital, should put forward the suggestion. After all, we are leaving the matter to the shareholders, who are the owners of the company. If they choose to select an entirely new Board it is their right to do so.
It would be for the good of the company that three of the directors should know something about the railway. It would be to the detriment of the company if, by any chance, a whole new Board were to be returned.
That cannot happen unless a majority of the shareholders want it.
If you were to put into the Bill a provision whereby some of the old directors would be returned, you would be serving the interests of the company. You might get a brand new board, and any person with a knowledge of railway matters will tell you that that would not be for the good of the company. Does the Minister think that that is absolutely impossible?
I am afraid so.
It is quite clear that some people think the directors are not there by merit alone.
It has been pointed out to me by many persons whose opinion I respect that it would not be wise to move this amendment. I refrain from moving it, not because I think it is undesirable, but because it goes rather too far. The principle contained in this paragraph has already been admitted, and I should like to show that, despite what Senator Comyn said, I am not entirely die-hard. I am prepared to accept facts and, while moving perhaps slowly, to keep abreast more or less of the times. Therefore, I shall not move the amendment. At the same time, I should like to point out that when we talk of the handicaps a railway suffers as compared with other enterprises, we must bear in mind that other enterprises do not have to compensate redundant staff. In that respect, railways are under great penalties and very great expense, and it adds largely to their present embarrassment.
I move amendment 24 on behalf of Senator O'Farrell:
Section 8, sub-section (4). After the word "Company" in line 68 to insert the words "in anticipation of or".
It will be noticed that the decision to close down a branch line will be made by the Minister, who makes an Order after the railway company has made application. It is feared that the railway companies, knowing they are going to make an application for an Order and expecting to get it, will not wait until the Order shall have been made but will anticipate the Order by dispensing with the services of some of their employees, thus avoiding the obligations which the section imposes in regard to the compensation of those employees. It is required by the amendment that the dismissed railway employee shall prove, if he can, that the dismissal was made in anticipation of the Order merely for the purpose of saving the company from liability. If that is proven, the company will not be exonerated from liability under the Bill. I lay stress on the fact that the onus will still be on the employee to prove that the dismissal was in anticipation of the Order to be made and was, in fact, carried out to avoid the liability the section imposes. That, in short, is the case that Senator O'Farrell would wish to make for the amendment. He would, no doubt, have elaborated it and spoken with more knowledge of the procedure and ways of railway companies than I have. However, I think the amendment will appeal to the Seanad as being quite reasonable. A railway company should not be allowed to anticipate an order of this kind, and, in that way, evade its liabilities. A railway company, knowing that it is going to make an application for an Order, may plan accordingly. Part of the plan would be to dismiss some of their servants so as to avoid the responsibility which would fall upon them if they waited until the Order had been made.
I think that this is a very dangerous amendment and I hope that the Minister is not going to accept it. It would involve all sorts of subtle inquiries into people's minds to ascertain their intentions and I think that that would be quite impracticable. It might also impose a burden on the railway companies which they should not properly be called upon to bear.
A similar amendment was moved in the Dáil and I resisted it there mainly on the ground that it was unnecessary and added nothing to the section. I told the Dáil that if, in fact, in the operation of this Act, any railway company was evading by any device the clear obligation to pay compensation in certain circumstances, we would introduce specific legislation to deal with that device and prevent them from evading their obligation. Since then, I have been looking into the matter and, although there are very considerable drafting difficulties, I think something might be done to meet the point which the Senator has in mind. Personally, I think that this amendment does not do what is sought to be done. This amendment leaves the sub-section unaltered. If the Senator is satisfied to hold over the amendment until Report Stage, we shall see what we can produce in the meantime.
I shall be very glad to do so, if permitted.
Amendment adjourned to Report Stage.
Amendment 25. Section 8, sub-section (4). To delete paragraph (e)— Senator O'Farrell, Senator Sir John Keane.
Perhaps it would be as well to defer this amendment also.
Cathaoirleach
Unless Senator Sir John Keane desires to move it.
It is extraordinary how two Senators, viewing the matter from different angles, arrived at the same proposal. I should only move this amendment in the event of amendment 23 being carried. As amendment 23 has been withdrawn, I do not wish to move this amendment.
Cathaoirleach
We can allow the amendment to remain over until the Report Stage.
It might be preferable to let the amendment go, and the Senator can reconsider the position for the Report Stage, because there will be no further opportunity, after Report, of dealing with any point that may arise. I should have to resist the amendment as it stands. So far as I know, Senator O'Farrell's opposition to the section is based entirely upon the circumstances relating to one company. In drafting this amendment, he ignored the fact that all railway companies in the Saorstát were affected by it. The object could be achieved equally well by a slight change in the wording of the paragraph. If the amendment appeared in its present form on the Report Stage, and were rejected then, there would be no opportunity of amending the wording, whereas if the amendment is left out now, there may be an opportunity of amending the wording of the paragraph to meet Senator O'Farrell's difficulty.
I take it that the Minister's point is that it would be better to have this paragraph deleted now so that the point can be dealt with properly on the Report Stage.
No.
Cathaoirleach
The Minister's desire is, I think, that the amendment be taken as not moved.
I move amendment 26:—
26. New section. Before Section 9 to insert a new section as follows:—
9.—(1) The company shall keep a separate account of the following expenditure:—
(a) the cost of keeping in good repair and condition the roadways over the bridges in the City of Cork forming part of the railways formerly known as the Cork City Railways;
(b) the costs and expenses of maintaining the said bridges as opening bridges and all works and machinery used in connection therewith, including renewals of any of the foregoing; and the costs of opening and closing the said bridges.
(2) The account shall be made up annually to the 31st December in each year and copies thereof shall be sent by the company to the Minister, to the Cork Corporation, to the Cork County Council and to the Cork Harbour Commissioners.
(3) In the event of the Cork Corporation, the Cork County Council or the Cork Harbour Commissioners desiring to dispute any such account in whole or in part, notice thereof in writing, stating the extent of the dispute, may within six weeks of the date of receipt of the account be served upon the company, who may thereupon submit the matter in dispute to the Minister for settlement. The Minister shall be at liberty to nominate any person to settle the said dispute, and the dispute shall be determined by the Minister or by the person so nominated by him as the case may be, and the determination shall be final and binding upon all parties.
The costs of any such reference and determination shall be in the discretion of the Minister and shall be payable by such one or more of the parties as he may determine.
(4) In the event of there being no notification within the said period of a dispute, the account as furnished by the company shall be deemed to have been accepted by and shall be binding upon the Cork Corporation, the Cork County Council and the Cork Harbour Commissioners.
(5) The amount of the account, when determined or accepted as the case may be, shall be payable to the company by the Cork Corporation, the Cork County Council and the Cork Harbour Commissioners in three equal parts.
The amendment aims at transferring the cost of maintenance of Cork City Railways from the Great Southern Railways to the Cork Corporation, Cork County Council and Cork Harbour Commissioners. It also provides for the ascertainment of the annual cost of maintenance. As many Senators probably know the Cork City Railways were constructed under the Act of 1906, which was promoted by the Great Western Railway of England. It was hoped to develop railway traffic from West Cork via Fishguard and Rosslare to England. These hopes were never realised, and the Cork City Railways were a failure from the start. They were of little use. There was no return in capital and the cost of maintenance was more or less additional money thrown away. That was the position for many years prior to 1924, when by the Railways Act the whole concern of the Cork City Railways was transferred to the Great Southern Railways, partly on the principle that no English railway could be allowed to lose money on the Cork railways but that it was quite legitimate for an Irish company to do so. That was the effect of the legislation. The working expenses amounting to about £3,000 a year were taken off the shoulders of the Great Western of England and put on the shoulders of the Great Southern of Ireland, although that company never had anything to do with the promotion of these railways. The Great Southern Company did not want these railways. They are practically useless to them for railway purposes and are hardly used at all. The company would be willing to remove the bridges but these bridges are of very considerable value to the City of Cork. I know Cork well enough to say that they definitely add to the amenities of the city, and that internal communication is greatly improved by them.
The idea behind the amendment is that those who want these bridges should pay for them, and not those who do not require them. It is reasonable that the three bodies mentioned in the amendment should bear the cost of maintaining the Cork City Railways as they want them maintained. These bridges were provided without expense to these bodies by other people's money. If they want to have them maintained by other people's money for all time I think that is unreasonable. The railways are in a poor and struggling condition and should be relieved of the obligation of maintaining bridges which are of no use to them. This is not a case of the railway company being saddled with the results of a mistake made by themselves.
Senator Bagwell is quite right in saying that the Cork City Railways Company is only another name for the Great Western Railway of England. I have rather painful recollections of the promotion of these lines because it happened that my firm had to leave premises they occupied but which were required by the railways and it cost us £1,000. This railway was promoted by the Great Western Company for the purpose of mobilising naval stores and forces at Castletownbere Station and the Imperial Government paid £68,000 of the cost. I noticed that there was another amendment, not so camouflaged as this one, which I think was sponsored by Deputy Good and by Deputy Dockrell in the Dáil. This amendment is put forward by Senator Bagwell and Senator Sir John Keane who take such an interest in the amenities of Cork City. Senator Sir John Keane looks as if he were almost innocent of the effect this amendment would have. This question has been the subject of discussion time and time again between various parties. The ex-President of the Executive Council, possibly by reason of his office, and possibly because he is senior Deputy for Cork, in conjunction with the then Lord Mayor, Deputy French, the County Council and the local authorities met and came to some form of agreement. Why that agreement has been upset or discontinued I did not know until I saw the amendment. Let the railway company go and negotiate with the local authorities as was done before. I am strongly opposed to the amendment.
Like many people I am getting somewhat alarmed at the revolutionary spirit that is beginning to manifest itself in this House. This amendment looks very like an attempt to tear up a contract without a reference to one of the parties. It may be that the obligation to maintain the bridges is an onerous one for the Great Southern Railways, but the bridges were built in consequence of the passage of a Bill through the Imperial Parliament, which placed that obligation on the railway company concerned, and did not place any obligation to pay the cost of maintenance on the local authorities. To take the obligation of maintaining the bridges off the railway company, and put it on the local authorities would certainly, I think, be an inequitable thing to do, until there have been discussions and, if possible, agreement between the railway company and the local authorities. As Senator Dowdall stated, the proper course for the railway company is to get into contact with the local authorities and to discuss the question with them. I gave an undertaking in the Dáil that anything agreed upon would be embodied in legislation, and I think I can promise on behalf of all Parties that it would have a speedy passage. Consequently I do not think we should take action in the matter, particularly having regard to the fact that a Private Bill promoted by the company has been already defeated by the Oireachtas. Under these circumstances, I think the amendment should not be pressed, but that the railway company should be advised to go and seek an agreement first with the local authorities.
The Minister said that any agreement come to by the local authorities and the Great Southern Railways will be given a speedy passage. I do not think the House will agree to any agreement of the kind. I remember when the Bill for Cork Junction Railways was introduced. The cattle traders took an interest in the project, and as their representative I went to London to give evidence on behalf of the promoters. The Cork Junction Railways are very important, and it would be a great mistake if they were not kept going until we have better times. These railways are important for the development of West Cork. I am not particular who maintains the bridges or the railway as long as they are kept intact.
Do we understand that the railways are determined not to use the bridges any more?
Cathaoirleach
It is the cost of repairs we are concerned with.
The railway company has been using them.
Of course, they use them every day.
Cathaoirleach
The proposal in the amendment is that a separate account should be kept.
The fifth paragraph of the amendment says that the amount shall be payable to the company by Cork Corporation, Cork County Council and Cork Harbour Commissioners in three equal parts.
A Bill was promoted which brought about the construction of these railways. I think the obligation of maintaining them falls on the railway company. There have been contributions from the Cork Corporation towards the repairs.
There were discussions.
Is there anything in the Bill compelling the railway company to carry on this line?
The obligation of maintaining the bridges was placed on the railway company by the Act of 1906.
And to run trains.
Cathaoirleach
The amendment does not discharge the liability.
Will the Minister make the point clear? Surely the Act of 1906 did not impose the obligation upon the Great Southern Railways, because that company did not then exist. That could be done only through the Act of 1924.
That is true. By amalgamation the liability was transferred to the present company. Of course Section 8 of this Bill imposes on the railway company the obligation of maintaining whatever train services were in existence on the first week of January, and unless they are released from that obligation, the railway company cannot terminate the train services.
I understand that there are expenses on the railway company that they are not entitled to bear, and that the matter should be negotiated between the railway company and the Cork authorities. If such an agreement was arrived at the Minister said he would do his best to get it through.
Quite so.
That seems to remove the cause of the trouble. If the Minister undertakes that if any negotiations take place he will see that any agreement will be equitably carried through, that seems to be enough.
If the railway company are bound to maintain the junction railways there is not much hope of the Corporation or the County Council coming in to relieve them of the obligation.
I think there are some honest men in Cork.
I would like to say that there was no camouflage about the amendment. It is a straight issue. It is quite evident from the debate that these railways are of use to the City of Cork. The Great Southern Railways Company does not want them. That company can do very well without them, and can save a good deal on their maintenance. I cannot see how it is fair that they should be saddled with this obligation. It would be much fairer that the loss should be paid by the people who want them. To refer the company back to Cork County Council, Cork Harbour Commissioners and the Corporation with this legal obligation around their necks would lead nowhere. Of course these authorities would never agree to pay the expenses when they can use the bridges for nothing. I do not see how the company can get rid of the obligation except by legislation of some kind. If the Minister says that there is no prospect of the amendment being accepted in this form, then I shall move an amendment on the Report Stage giving the company power either to remove the bridges or to abandon the line. I do not see anything fair in this particular piece of railway being exempted from the general legislation contained in the Bill.
It is not. This Bill gives the Minister power to terminate the train services, but does not give power to enable the company to dismantle the bridges. The bridges must be maintained. They are the matters in dispute.
That is the difficulty in this case, because I imagine the bridges constitute the great bulk of the cost. If the Minister tells me there is no use forcing the amendment, and if it has no prospect of being accepted in this form, as an alternative I shall propose another amendment on the Report Stage giving the company power to remove the bridges.
That will cause a revolution in Cork.