Seanad Éireann debate -
Thursday, 1 Jun 1933

Vol. 16 No. 23

Railways Bill, 1933—Report Stage.

Mr. Bagwell

I move amendment 1:—

New section. Before Section 3 to insert a new section as follows:—

3.—(1) As from the passing of this Act a separate account to the end of each year of the receipts and expenditure in respect of railway working shall be kept by the company in respect of each subsidised line which has been kept open during such year in the form prescribed by the Railway Companies (Accounts and Returns) Act, 1911, or in such other form as may be prescribed by the Minister after consultation with the company.

(2) The company shall submit copies of such accounts when completed to the Minister for Finance and to the Minister, and every officer duly authorised by either Minister shall have power to make such investigations into such accounts as he may deem necessary, and for that purpose he shall have access to the relevant books, accounts and returns of the company, and the officers and servants of the company shall afford to the Ministers and to any such duly authorised officer such facilities as they or he may require.

(3) The Minister for Finance and the Minister shall consider such accounts and shall endeavour to agree with the company the amount of the loss (if any) incurred on the working of each subsidised line, as shown by the relevant accounts. In the event of any disagreement with the company, either as to such amount or as to any other matter arising under this section, the same shall from time to time be referred or submitted to and determined by the Railway Tribunal.

(4) The amount of the loss in respect of any year's working of any subsidised line, when agreed or determined as aforesaid as the case may be, shall be paid to the company annually out of moneys to be provided by the Oireachtas.

(5) The expression "subsidised line" means every railway line (whether forming or not forming part of a larger railway line or of a system of railway lines) for or towards the construction of which a free grant was made out of public money, or which was constructed under a Statutory Order whereby a presentment by a Grand Jury guaranteeing payment of dividends and/or loss in working by the company constructing such line was confirmed.

This amendment seeks to remedy the mistake made in the Railways Act of 1924, in placing the burden of a number of uneconomic lines on the railway system which was created by that Act, and with which this legislation deals. At the time the railways were more or less economic, and were above the margin of subsistence, so to speak, but the legislation which was passed was nationally harmful, because it compelled the new system to take over and to include a number of lines which were obviously wasters instead of feeders, and tended to bring the whole thing to ruin, and to make the more efficient less efficient. The second objective which the amendment has in view is to enable the Great Southern Railway system to turn the corner of adversity and to work out its own salvation, which we hope it will be able to do as a transport system, with the help of the provisions contained in the transport legislation now before us. That legislation is very comprehensive, and goes very far to try to help the Great Southern Railways to right itself, and to preserve whatever parts of the system it is in the national interest to preserve. That will take money and time. The danger is that the Great Southern Railways have to meet it before they get round the corner. A section of the Bill provides for the discontinuance of train services where lines are found to be hopelessly uneconomic, but the Minister has got to be satisfied that an adequate substitute is provided. That means the raising of capital by the Great Southern Railways to buy buses and lorries, in order to provide that adequate substitute. I can visualise subsidies to provide adequate substitutes as being no light matter. In principle I am opposed to subsidies. I know that some Senators are in favour of closing lines which have proved to be wasteful, and to provide an adequate substitute. That will take time and money. Meanwhile, I suggest that it would be in the national interest to continue some payments of public money to hitherto subsidised lines, because the patient is ill, and, as far as I can judge, will probably be much worse before there is any recovery. If the Great Southern Railways collapse the country may find itself faced with something much more expensive than is contemplated by the amendment. Under the proposed sub-section (3) of the amendment, it will be seen that the first two paragraphs deal with the keeping of accounts with respect to these lines. The third sub-section leaves the matter entirely in the hands of the Minister and the Railway Tribunal. Otherwise it may seem as if this amendment provided for the permanent subsidising of lines of that character. That is not what I am contemplating. (Sub-section (3) of amendment read.) That gives the Minister power to say: "No, I will not continue to subsidise these lines; they ought to be closed. The information would show that they ought to be closed and road transport substituted." The subsidy could be stopped at any time. I trust the amendment will commend itself to the House. I claim that it is quite in consonance with the general trend of this legislation. Unless the railways get temporary assistance in respect to these lines I believe that something of the kind will very likely be urgently necessary when the time comes, because transference from railway transport to the roads cannot be done in a moment. Meanwhile, some of these lines will have to be kept open in the public interest.

Minister for Industry and Commerce (Mr. Lemass)

It is quite clear that what Senator Bagwell is proposing in this amendment is an alternative to the Bill before the Seanad. The idea behind the Railways Bill we are discussing, and the Road Transport Bill which we had yesterday, is to provide means by which the railway company can avoid the possibility of loss and to put itself into the position that it will be able to secure a return for the services it gives, sufficient to meet working expenses, as well as providing a return to the shareholders. Senator Bagwell is proposing a method of achieving the same end, but in a manner different to what these Bills propose. We propose by legislation to allow the railway company to get into a position that they will have a monopoly of rail and road services, subject to safeguards necessary in the public interest, so that rates will be fixed at a level which will secure to the railway company an adequate revenue. We also provide that where a railway line cannot be worked economically, having regard to the volume of traffic carried over it, the services can be reduced, or the line can be closed and a road service substituted. Instead of proceeding in that manner, Senator Bagwell proposes that we should say to the railway company that they can work any services they like over their system or any part of it, and that if there is a loss it will be made good by the taxpayers. That is the essence of the proposals before us, and I think it is one which should not be adopted.

It is better that the railway company should be put on a sound economic basis by a reorganisation of its services and finances rather than that we should have to subsidise it out of State funds for the purpose of maintaining services not needed or keeping open branch lines the utility of which has long since passed. Apart from that, the whole idea behind the amendment is in conflict with the principle of the Government's railway transport proposals. I think it should be resisted on that account. It is difficult to say, if the Government is going to subsidise uneconomic railway services, why subsidisation should be confined to the Great Southern system only, or if confined to the Great Southern Railway only, why it is only to be confined to specific parts of that system. As far as I have been able to discover, there are some 40 parts of the Great Southern Railways to which this amendment would apply. I do not see why, if the railway company are to be put in the position of running any services they like on these lines, with the certainty that the State will make good the loss, the same thing could not apply to the whole of the Great Southern system.

If we get to the point that any loss on the whole system must be made good by the taxpayers, I do not see why the taxpayers should not have a directing voice in the management of the railways, when in effect we would have reached nationalisation. Even if it were possible to confine this provision to the subsidising of lines either baronially guaranteed or constructed by Government grants, why should not other lines, not controlled by the Great Southern system, but in exactly the same position, receive the benefit of the subsidy? There are lines in Donegal, for example, which are in exactly the same position as some of the branch lines to which this amendment applies. In the case of these lines there may be, and I think there are, possibly, circumstances which would justify action not justifiable in other cases. The Senator's proposals are quite contrary to that, and he proposes to give, in the case of the other lines, assistance which is not at present being given to lines which, on the face of it, would require assistance more urgently.

However, I think that the main reason for rejecting this amendment is that it would involve a complete recasting of the legislation which is now almost through the Oireachtas and the embarkation on an entirely different policy in relation to the railway situation here. It may be that a case can be made for the State making good the loss upon railway services, where it is desired to maintain these railway services even though their maintenance cannot be justified on purely economic considerations, but I think that we certainly should not adopt such a device until it has been completely demonstrated that there was no system of organisation which could put transport in this country on a sound economic basis. We think that transport can be put on a sound economic basis by the adoption of the provisions of the Bill before the Seanad now and of the Road Transport Bill. I should like to see that method tried out before any question of subsidisation is considered.

It is to be noted that the Senator does not propose that the State should have any check whatever upon the services to be run on any of these branch lines or that the Great Southern Company should be under any restrictions in that regard. If this amendment were carried, of course, Section 8 of the Bill would become completely inoperative. I think we could hardly expect the Great Southern Railway Company to apply for an order to reduce their branch services under that section of the Bill when, under another section, any loss involved in the running of these services would be made good by the taxpayers. They would probably continue to maintain these services, even though they were unremunerative, provided they were guaranteed against any loss. I think a much better way is to reorganise the transport system and to put it on a sound basis, a basis which will ensure that the revenue derived from the carriage of merchandise and passengers will provide the working expenses of the railway and a reasonable return for the shareholders. It is only when the attempt to reorganise the transport system can be shown to be a failure, and if it is then decided to maintain the railways, even though they cannot be maintained on an economic basis, that the question of a subsidy should arise. While I would hope that that day would never come, it certainly should not come until the alternative proposals have been given a few years to operate.

Mr. Jameson

I wish Senator Bagwell had given us a more definite description of what he calls subsidised lines. In his remarks he said that these were lines which had been joined to the Great Southern Railway Company by the Act of 1924, greatly to the financial detriment of that Company. That, I think, was the class of line with which he intended to deal in this amendment, but the Minister has taken it for granted that it is intended to deal with far more than that. He seems to have looked for a specification of the lines with which the amendment dealt, and he stated, as far as I could make out, that this amendment might apply to any section of the Great Southern Railway system.

Mr. Lemass

If I might explain, I said that I could see no case for applying a proposal of this kind to one part of the system and not applying it to the whole of it.

Mr. Jameson

Senator Bagwell's contention is that these lines are a definite source of loss to the Great Southern Railways Company, that we are trying to save the railways, and that the responsibility of maintaining these branch lines is a danger both to the country and to the railways. The Bill as it stands provides for the shutting down of these lines and the provision of sufficient transport of some other kind for the district through which the railways run. The Minister must take care before he agrees to the shutting down of these lines that that alternative transport is provided. Senator Bagwell has pointed out that in the present financial condition of the company it is nearly impossible to foresee that the railway company can raise the money to provide the transport which that section of the country will require. If the State does not help in some way, undoubtedly the railway company will not be able to raise money to do it. I think the Senator has drawn attention to a real danger there.

The Great Southern Railways Company was compelled to take over these lines. There are certain events in the sections of the country through which these lines run, such as fairs, which can never be adequately catered for except by a railway line. They can never be dealt with by the kind of transport that would be provided under the Road Transport Bill. It is extremely probable that if a transfer is to take place of traffic from the rail to the road that some kind of improvements will be required to deal with such occasions. One can see very great difficulties arising in that connection and it seems to one that it is the duty of the State, if it is going to save these railways for the good of the State, in some way to assist the railway company to do what all sections of the country will require it to do. If this matter is not dealt with in some such way as the amendment suggests, and if some power is not given to the Minister, when he is called upon to shut down a line, to enable him to try to provide adequate alternative transport, if he is satisfied that the railway company cannot get the money and that the transport cannot, therefore, be provided by them, I think it will be a very serious matter. I think that the Minister should have power to come to the Oireachtas under some section of the Bill and ask for leave to give a grant. In the Bill no such power is given to the Minister. Hereafter, if the Minister makes an order to shut down a line and comes up against such a difficulty as Senator Bagwell foresees, he has no power, as the Bill stands, to ask for money to keep the railway going or to take care that the capital is provided——

Mr. Lemass

It does not need a section in the Bill. If it were decided to give a grant to the railway company the only thing required would be the voting of the necessary money by the Dáil. It would not require the enactment of a Bill to enable a grant to be given.

Mr. Jameson

Under the Bill as it stands no notice whatever is taken of this kind of difficulty. Supposing the Minister is face to face with the fact that he cannot assist the railway company to provide alternative transport, he, therefore, cannot, according to the terms of the Bill, make the order he wants to make. That is the situation we are visualising. Surely it would be far better if there were a clause in the Bill providing that he could himself propose that the State should meet that difficulty. There would be the principle embodied in it that sooner than let the most useful system of transport for the district be scrapped and go to pieces, the Minister should have authority to bring forward proposals that the State should come in to assist. That is the principle behind the proposal, and if it is not somewhere provided in the Bill we can easily see the difficulty that will arise. I can see the Minister himself, if the Bill is passed as it now stands, coming forward in a year or two and saying that he cannot provide adequate transport for a certain district, that the line is not paying, that he cannot shut it down unless some other form of transport is provided and that there is no money to do that. I think the Minister would not be in a very happy position if he came with a statement of that kind to the House. That is the principle which Senator Bagwell is bringing forward in the amendment. It does seem worthy of serious consideration whether there should not be a further section put in the Bill that, in a case where a railway is going to be shut down and where the necessary money cannot be provided by the company, the State should come in. I believe the State is paying for a great many things at present which are not at all so vital to the welfare of the country. I doubt whether we can give the necessary assistance unless some clause is inserted which will give the Minister in certain circumstances power to apply for such assistance.

Mr. Crosbie

I am sure it has come rather as a shock to the Seanad to learn that there are 14 branch railways on the verge of collapse.

A Senator

Forty.

Mr. Crosbie

I thought the Minister said 14. I wonder would the Minister give us an approximate estimate of the amount of money these 40 railways are losing? It would then be possible for us to judge how much would be required to keep these railways running. Down south in County Cork the railway directors have already shut down the Crosshaven railway. We were informed by the railway directors that they were losing £4,000 a year on that line, but that matter was never examined by anyone except the railway directors. The closing of that line has undoubtedly been a very considerable hardship to a great number of people. Youghal, which is a very important centre, is also very apprehensive that its railway may be among the 40 that are threatened. It would be a very considerable loss to the whole of the South of Ireland if that line were shut down. I might say that some of us thought it a very short-sighted policy on the part of the railway directors after closing down both the Kinsale branch and the Crosshaven branch to proceed straight away to dismantle all the railway equipment in these places. We all know that there are inventions coming along every day, and it is quite on the cards that within a very short time some new invention may come along that would make these lines available again. Of course, such places as Youghal and Crosshaven can be adequately served only by railways and not by buses.

Mr. Comyn

I do not think it is an ideal solution of the difficulty to take power to close these subsidised lines. At the same time, it seems to me that Senator Bagwell's amendment wants too much and gives nothing. I was surprised to hear that there are 40 different lines affected by this amendment.

Mr. Bagwell

I never made the statement that 40 lines were affected.

A Senator

The Minister did.

Mr. Comyn

I was of opinion—of course, I have not complete information—that the number of substantial lines affected would be about eight or ten. There is one in Galway, a very important line running to Clifden, I think. There is one in Clare running from Ennis to Kilrush, up to the north of the county and along the coast. There are two lines in Cork. I think these are the main lines with which I am acquainted, and they are the lines in respect to which special consideration is necessary.

Now I would like to tell the reason why. If the West and South-West Clare line is closed it will, in my opinion, become immediately necessary to close the line between Ennis and Limerick, because it will no longer be a paying concern. That will probably involve the closing of the line from Ennis to Athenry. That is a matter which the railway company ought to consider. What they are asking in this amendment is that the capillary lines—because they are feeders of the main lines—should be kept running, and that the loss sustained in their running should be borne by the State. I say that is not fair, and for this reason: that although the mileage rate may not be sufficient to pay for the working of the branch line, taken as a separate unit, what I say is that these branch lines bring custom to the railway company. Let me take this case. If you close the West Clare line from Ennis to Lahinch and on to Kilrush, many persons who travelled from Dublin to Kilkee will go by motor rather than by rail to Ennis, and by motor from Ennis to Kilkee. In that way tens of thousands of pounds will be lost by the railway in tourist traffic. Then take the case of the railway to West Galway. I would imagine that if a person were to travel to Connemara or to Clifden and were required to go by rail to Galway and then take the chance of a motor car from Galway to Clifden, he would probably say: "Well, it is just as well to take a motor from Dublin." Therefore, I do not know whether the railway companies fully realise their position. I consider that the railway companies have a very direct and very substantial interest in keeping these branch lines open, and that they ought to bear the greater part of the cost. That is not Senator Bagwell's amendment, and it is not the proposition that has been spoken to by Senator Jameson. I do not differ at all from what Senator Jameson has said, but his speech does not support this amendment. Senator Bagwell's amendment provides that these branch lines should be kept open. I personally think they should, but the Senator's amendment goes on to say that the whole cost should be borne by the State. I object to the system of accounting suggested in the amendment. I think it is not fair in any accounting to say that a branch line which gets goods on board a train has not earned more than the mileage rate upon the few miles of rail that are covered until it gets to the broad gauge line. Therefore, this amendment, while it hints at a matter that might be rectified—I think the Minister ought to consider that—is not one which meets the situation in the fair spirit of give and take. If the railway company would come forward frankly to the Minister and say: "We do derive a benefit from these branch lines, and we are prepared in consideration of that benefit to bear something," the matter might be considered by him.

We have simply to vote "Yes" or "No" on this amendment, which provides that the railway company shall have all the benefit of a system which, I think, they ought never, in their own interest, to close. What they want is that they should have all the benefit and that the State should sustain all the loss. I could not support an amendment of that kind. I think they would have been better advised if they had brought forward an amendment in the spirit of Senator Jameson's speech. Then, probably, the Minister would have an opportunity of considering the pros and cons of the situation and of giving due consideration to the fact that these branch lines meet a real necessity: that they are useful to the public and to the main haulage system of the country, and are a great national asset which ought not to be allowed to fall into decay.

When these branch lines were originally constructed all the arguments in their favour were brought forward. The main argument was that they would open up backward districts and would become, as it were, canvassers for railway haulage: that they would be capillaries from which the railways would benefit. All these arguments were used. They were considered to be sound arguments at the time, and have proved to be sound arguments in the event, because, undoubtedly, the small lines fulfil a very useful purpose. I do not think they are yet superseded by motor traffic. I would be in favour of suspending judgment for a while. There are a lot of motors on the roads now, and the roads are in good condition. Will it be possible to keep them in that condition? Senator Sir John Griffith on one occasion in this House called attention to the fact that the motor car had a capital expenditure and perfect roads provided for it.

Mr. Farren

At the expense of the motorists.

Mr. Comyn

At the expense of the public, but Senator Sir John Griffith indicated that although these roads might stand up to traffic for some time that probably, in the course of a few years, they would not be able to stand up to the traffic on them. I remember well—I listened to every word of the Senator's speech and read it afterwards —that he called our attention to the position of affairs in England at the time of the industrial development when the coal mines were being worked and when the roads in England, then the best roads in the world, became after a few years quagmires. He pointed out that industrial development could not continue if it had not been for the advent of the railways. This is a very serious question to consider. Will our country roads, especially where the foundations are not sound, be able to sustain the increased motor traffic? I believe they will not. I believe that some of the roads in West Clare, from Ennis to Kilkee, will not be able to stand up to the traffic, but the roads in the north of the county, which are on a rock, will probably be able to support the traffic.

I think it is very unwise, both in the interests of the railway company and of the public, to regard it as a foregone conclusion that all these subsidised lines are to be closed. I know it is quite right that the Minister should take power to close them. I am not acquainted with the circumstances of all of them. I certainly am aware of more than one line which, in my opinion ought not in any circumstances to be put out of commission at the present time. For that reason I think that some amendment on the lines of the speech delivered by Senator Jameson ought to be considered. Senator Bagwell is a great railway man—he has had great experience—but certainly this amendment of his is all on the side of the railways. There is no consideration at all for the public, and it is for that reason that I am opposed to the amendment.

Mr. O'Farrell

I do not think there is any chance whatever of the House accepting this amendment. In fact I think it might be argued that it is not in order because it seeks to impose a public charge. At all events, it is an indication of what is in the minds of some of those associated with the railways as to what is to be the ultimate result of the two Bills which propose to reorganise transport and put it on a sound financial basis.

It is argued that the railways are now being given a monopoly outside the twelve great areas. The trouble is that they have got to purchase that monopoly, and that, in the main, the dice are loaded against them on the question of purchase. Every possible protection is brought in on one side and every possible expense is incurred on the other. I personally cannot see where the railway companies are going to get the money to buy out their competitors, except to a small extent. The reserves of the Great Southern Railways, for instance, are already well below the margin that a railway with a capital such as it has should hold. Senator Jameson, a banker, tells us that they cannot raise the money. He knows something about the money markets, and I presume he is speaking with authority, so that this monopoly that they are getting is imaginary or theoretical unless they can raise the money to purchase it. On the other hand, they are given facilities under the Bill to close down branch lines that are being worked at a loss.

The mover of the amendment indicated that in many cases he would feel disposed to give them the right to close down these lines if they were able to provide a road transport service instead. But, of course, if they are not able to provide it, because of their inability to find the money to purchase the necessary alternative service, they will not get authority to close the line and must continue to work it at a loss. The railway company is not a philanthropic body any more than any other private institution and it is not going, if it can possibly help it, to work any of these lines at a loss for any considerable time.

Senator Comyn has mentioned at least one line that he would wish to keep open—the West Clare railway. Similarly, the residents in each area would like to see their lines kept open, but until they patronise them to a somewhat greater extent than they do at present I am afraid their hopes are not likely to be satisfied. This amendment hardly approaches the subject in a proper way. Large areas in the Free State are now served by railways that would never be served by them were it not for the fact that the State gave special grants towards their construction, while in other areas the baronies guaranteed interest on the capital that was raised to build railway lines. It was, therefore, realised from the beginning that these regions could not be served economically by rail. The baronies continued to pay whatever losses there were on these services. It was ascertained in 1924 that the loss on the baronially-guaranteed lines was over £48,000. The Bill of 1924 provided that the State would pay this £48,000 per annum for ten years to the Great Southern Railways, £21,000 of which would continue to be paid for that period by the baronies concerned, and, at the end of that ten years, the Great Southern Railways would take over the whole of the responsibility. The only justification for that was that they were then giving the railways a monopoly of the transport. They were allowing them to amalgamate, to effect economies by reductions of staff, mass purchase of materials and unification of workshops and so on. Of course, since then, a regular revolution in transport has occurred and the alleged monopoly or advantage has pretty well disappeared because of road competition and, notwithstanding that fact, the £48,000 a year has now to be borne from the end of next year by the Great Southern Railways Company. With that additional burden, in order to exist, they are called upon to purchase their competitors. That being the case, one finds it very difficult to see where the revival in prosperity, so far as the railways are concerned, is going to come from or what the great value of this alleged monopoly is going to be.

I admit that it is a step in the right direction but it is a very feeble one, and it is going to be paid for very expensively by the railway companies. Therefore, the suggestion of Senator Bagwell, although it goes outside the baronially-guaranteed lines and takes in a wider field, is not quite so unreasonable as it might seem to be on the face of it. It is a proposal, of course, to subsidise a private institution at the expense of the State and to leave the State with little or no control over the management of the system subsidised. That is undesirable. During State control, in the war period, the State paid the money but had no voice of any consequence at all in the management of affairs and that period was utilised in a way that made State ownership be looked on by the people who did not know the facts as an unmitigated evil, when, in fact, it was the worst of both forms of ownership—private ownership plus State control. The State had no effective control at all and the management, naturally, was of an extravagant character because the State was paying without any effective hold over the management. I do not see that the House can possibly accept this, but I would point out to those who look on it as an extravagant and unreasonable proposal that there is a certain justification for it, in part, in any case, and the House should not run away with the idea that these Bills are giving a splendid and valuable monopoly to the railway companies that is going to restore their prosperity without any great effort on their part.

Colonel Moore

Senator Comyn's statement is correct, and I believe it would be impossible to separate the accounts of the baronially-guaranteed lines which are here referred to. It has always been said, and, I believe, with truth, that the railways used the subsidies they got from the baronies to assist them on the general line. They knew that the barony had to keep up the profits and that, if they did not, they would have to pay the amount, and the result was that the railways placed all the expenses they could on the branch lines and took them off the main lines, whereas, as Senator Comyn says, these baronially-guaranteed lines were feeders to the main lines and contributed greatly to their success. If those are cut off, of course, the railway loses, and, if they are kept on, they get the benefit for nothing, so that I think that the proposal made now is entirely in favour of the railways and is keeping up the old system, that is, that the barony, and now the public, has to pay the cost of the baronial lines which I think is quite unfair.

Mr. Bagwell

The Minister has, in some degree, misrepresented the intention of my amendment. Nothing in this amendment is proposed as an alternative to anything in the Bill. I have not criticised the way of salvation provided in the Bill—quite the contrary—but time and money are required to bring that into operation, and it is as a temporary means of giving help which I believe will be wanted that I have proposed this amendment. Also, it is no intention of mine, and it is not intended, as will be seen from an examination of the amendment, that the Great Southern Railways should be put in the position of continuing to work unremunerative lines at their own sweet will. It is a temporary help during the period of change that is proposed here, and the last part of sub-section (3) says:—

... In the event of any disagreement with the company, either as to such amount or as to any other matter arising under this section, the same shall from time to time be referred or submitted to and determined by the Railway Tribunal.

The thing is entirely in the hands of the Minister and the Railway Tribunal. It is not in the hands of the railway company, and it would not be right that it should be. The Minister is entirely in a position to refuse to give a subsidy or to terminate a subsidy which he had begun to give.

Senator Comyn opposes my motion, but he has dealt with the matter so much in other ways, especially in regard to Senator Jameson's speech, that I really have not very much to answer, because it is quite my own point of view to a great extent. I personally can see nothing of difference between what I have said and what is in the amendment and what Senator Jameson has said. We have both got the same difficulty in mind—the difficulty that will occur before salvation can be worked out under the terms of the Bill as it now stands. With regard to the matter of accounts, that also, under the amendment, is entirely in the control of the Minister. He can have any form of accounts he likes, and I need hardly say that, in this matter of profits, the idea of a branch line being assessed entirely by what is taken into the till at particular stations on that line is most absurd. Of course, its value as a feeder is taken into account. That is all part of the regular practice, but, anyhow, a form of accounts can be set up to ensure that in the fullest possible degree.

The Minister has said that he looks on the rejection of this amendment as a matter of principle, that it conflicts with the whole idea of the Bill and would involve, if carried, the re-casting of the Bill. In those circumstances, no useful purpose would be served by my pressing it, but now that the Minister has heard my second explanation of the amendment, in which I hope I have made it clear that the matter is entirely in his hands, I would be guided by what he says if he would be so kind as to say a word again on the matter. If he still holds the same view, I shall ask leave to withdraw my amendment, and, if the House thinks that my amendment is one that should be gone on with, they can refuse that permission. That is the position I am in. I do not think I can explain the amendment any further, but none of those evils represented as likely to arise out of the amendment, in my belief, will arise. It is simply a means of getting over a practical difficulty, and the Minister will be in control.

Mr. Johnson

Could I ask a question, sir?

Cathaoirleach

Yes.

Mr. Johnson

I want to ascertain whether, if this amendment were embodied in the Bill, there would be any chance at all of any branch line, no matter how unremunerative it was, ever being closed down?

Mr. Lemass

So far as Senator Johnson's question is concerned, if the State is going to guarantee the loss on the working of any branch line, I should be astonished to receive an application for the closing down of a branch line, and the railway company would have no inducement either to reduce services or even effect whatever economies ordinary prudence would seem to justify in relation to the line. The view of the Government is that, if there is a branch line so hopelessly uneconomic that no useful purpose can be served by keeping it there, it should be closed down. By that I mean that, if there is, in any part of the country, a branch line which is not being used by the people living in the area served by it or if it is clear that the needs of that area can be much more efficiently and economically served by road services, the obvious course to take is to substitute road services for the rail services.

I do not, of course, accept the point of view that branch lines should be closed down, because, on a narrow examination of the receipts taken and the expenditure incurred on that line, it seems to be showing a loss because, as Senator Comyn and Senator Bagwell have said, the loss occasioned by the traffic carried on the branch line may be completely offset by the earnings occasioned by the same traffic on the main system. We should, I think, set out to regard the whole Great Southern system as one unit and not keep separate accounts in relation to each section of the line or each branch line, and say that one is making money and the other is not. That is, I think, a wrong way to examine the question. There is a railway system, and the whole railway system is making a profit or it is not. You cannot allocate that profit to one particular part of it as against another, but there may be on the system a branch line the utility of which has long since gone, or the need for which has long since disappeared, or which imposes on the area served by it transport charges very much higher than would be necessary if the railway services were substituted by road services. In such a case, the rail services, I think, should end, but I do not contemplate that the whole of the 40 branch lines that were either built out of State grants or subsidised by baronial guarantees should be closed down or that even a majority of them should be closed down. I should perhaps explain that, when I use the figure 40, I am not purporting to give an accurate indication of their number. There is a substantial number of them—more than 40 altogether—but they are not all, of course, included in the present Great Southern system. Some of them form a quite substantial part of the system, while others are only 2 or 2½ miles long, but they would all, of course, be covered by this amendment.

Senator Bagwell will ask, however, if the alternative to subsidising these branch lines is the substitution of rail services by road services in the areas served by them, where is the money to come from to pay the compensation on the one hand and to provide road services on the other, and Senator Jameson's speech was directed to that question rather than to the amendment. I think that, if we have to face the possibility of a company, enjoying a monopoly of transport over a greater part of the Saorstát, not being able to raise the money necessary to equip itself with lorries or omnibuses or to effect whatever expenditure is necessary to carry out its services, we are in a much more serious position in relation to transport than even we had contemplated heretofore. I do not think that is the situation at all. I should say that the railway company should find no very substantial difficulty in financing its activities under this Bill, having regard to the fact that every step taken by it to the attainment of the position we want to put it in, every penny spent to that end is going to bring it nearer to the day when the charges levied on merchandise and passengers can be fixed at the particular point which is going to ensure a profitable return to the company. The only experience we have had of a company which set out to deal with its own particular problems in a drastic manner is the Londonderry and Lough Swilly Railway Company. Although their position was much more critical than that of the Great Southern Company now is, although they had, in fact, been kept in existence by State grants for some years, they found no difficulty in raising a fairly large sum, for a company of that size, to provide an omnibus service in that area—an omnibus service which has not merely repaid to a large extent the amount which was raised to provide it, but might also have helped, if other circumstances had not arisen, to meet the losses incurred on the railway system. Taking that particular case as an indication of what is likely to happen, I do not anticipate that there will be any difficulty on the part of any company in financing its activities under this Bill, especially having regard to the fact that the expenditure on that purpose is going to make, in each case, the whole undertaking much more economic and profitable than it has been heretofore. If there is any case for State assistance, I do not think that it is necessary to amend this Bill to provide it. There is nothing to prevent the Dáil at any time voting a grant for any purpose it chooses. I do not contemplate we shall, and I do not think anyone would suggest that we should, finance the company by way of grant. I do not even anticipate that it will be necessary for the State to interfere for the purpose of facilitating any of these companies in raising capital by way of loan. We have by this legislation almost guaranteed a profitable return from the expenditure of any such moneys by the companies in the future and one guarantee of that kind is enough. If difficulties arise of that kind—I personally have no reason to believe that they will arise—they will constitute a problem for the future. It is not necessary to have an amendment to this Bill to enable us to deal with that problem. It can be dealt with in either of two obvious ways without fresh legislation. That is the reason that I think that no amendment is necessary.

Mr. Bagwell

In view of what the Minister has said, I ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Douglas

I beg to move that the Bill be recommitted to a committee of the whole Seanad in respect of Section 3 and the First Schedule and the amendments relating thereto, viz., Nos. 2-19 inclusive, 40, 41 and 42.

Mr. Jameson

I second that.

Question put and agreed to.

Bill re-committed.

Cathaoirleach

Amendment 2—Government amendment.

Mr. Lemass

This amendment can hardly be dealt with until Senator Douglas's amendments are dealt with. I do not know how the Bill stands at the moment—whether the Schedule was deleted in consequence of the amendment carried in Committee or not. It seems to me it would be better to defer these amendments until Senator Douglas's amendments shall have been dealt with.

Mr. Douglas

I suggest that if we take amendments 5, 6, 9, 12 and 13 before we take any others, it will simplify matters.

Agreed.

Amendment 5. Section 3, sub-section (2). To delete the seven new sub-sections inserted before the sub-section in Committee.

Amendment 6. Section 3, sub-section (2). To delete in line 2 the words "a reconstruction scheme has been agreed to and approved by the Minister, or has been settled by the Railway Tribunal" inserted in Committee, and to substitute therefor the words "the passing of this Act."

Amendment 9. Section 3, sub-section (3). To delete in line 12 the words "reconstruction scheme" inserted in Committee, and to substitute therefor the words "third column of the First Schedule to this Act opposite the mention in the first column of the said First Schedule of each such denomination of capital stock."

Amendment 12.—Section 3, sub-section (4). To delete in line 20 the words "reconstruction scheme" inserted in Committee, and to substitute therefor the words "fourth column of the First Schedule to this Act opposite the mention of such denomination in the first column of the said First Schedule."—Senator Douglas.

Amendment 13.—Section 3, sub-section (6). To delete in line 36 the words "reconstruction scheme" inserted in Committee, and to substitute therefor the words "third column of the First Schedule to this Act."—Senator Douglas.

Mr. Douglas

I move amendment 5. I do not propose to debate the matter at length unless strong exception is taken to the amendment, when I can deal with the arguments in reply. While I have moved amendment 5, I should like to be taken as arguing in favour of amendments 6, 9, 12, and 13 as well. All of these are really, for my purposes, the same amendment. These amendments propose to put the Bill back as it was before similar amendments were introduced on Committee Stage. A majority of those present voted for these amendments because they approved of the principle embodied in them. I was one of these myself. The reason I am proposing to rescind these amendments is because, on further consideration, I am of opinion—I know the opinion is shared by a number of Senators—that, in view of the Minister's attitude, particularly the attitude he took when the amendments were carried, it would be a mistake for the House to maintain its position. That is not to say that I disagree with the principle involved. If it could be done, it would, I think, still be desirable, even at this late stage, that an effort should be made to bring about reconstruction by consent. The Minister, however, intimated during the debate that he was prepared to make pretty drastic amendments in the Schedule, and that if the amendment then in question was carried he could not. He was not prepared to do it by a different method. If the House were to leave the position as it now is, the effect would be that persons interested in what the Minister describes as the "minor stocks" would be left entirely in the air for a period, certainly of months, and possibly of years, whereas they, at any rate, can be dealt with immediately in view of the Minister's attitude. While I should have liked to have it done the other way, the gain to be achieved at this stage, after the proposals have been made and debated, is not worth the disadvantage of leaving these other stocks in an uncertain position for a long period. Another reason is that by leaving the position as it is we could not deal with the one essential point on which there is a difference between some of us on this side and the Minister. I could give a number of other reasons, but I give only the principal ones.

Amendment agreed to.

Mr. Douglas

I move amendment 6.

Mr. Johnson

Where is this phrase to be inserted? I thought that we deleted that provision.

Mr. Douglas

The words "reconstruction scheme" were inserted in line 12 in Committee. Line 12 remains the same as it was, but the Senator will have to exercise a little imagination, as they do not appear on the green form. I went into the matter very carefully with the Clerk, and I can assure the House that, with these amendments, the Bill will be exactly as it was before.

Amendment agreed to.

Amendments 9, 12 and 13 (Senator Douglas) agreed to.

Cathaoirleach

Amendment 2—Government amendment:—

Section 3, sub-section (1). To delete in lines 41 and 52 the word "existing" and to substitute therefor the word "major."

Mr. Lemass

This is the first of a number of amendments to be moved for the purpose of amending the Schedule in respect of what have been called the "minor stocks" of the company.

I think that it is desirable that some explanation be put on record of the reasons which induced the Government to effect this change in the Schedule, because a feeling might be created that a certain class of the shareholders of the Great Southern Railways Company were being treated in a more favourable manner than others. With your permission, A Chathaoirligh, I should like to run through each class of stock affected and indicate the position in relation to it which induced the Government to effect this change. I might say that when the Bill was being originally prepared we had not at our disposal the very full information necessary to enable the legal position in relation to these stocks to be clearly understood. The financial expert employed by the Great Southern Railways Company to advise them on reconstruction had also been unable, in the time at his disposal, to satisfy himself as to the position of these stocks, and he made no recommendation concerning them. We felt, when the Schedule was being prepared, that we were taking, to some extent, a leap in the dark, but we contemplated the possibility of the Schedule being amended when the fuller information required was made available from the sources that could supply it. That information is now available, and it is on the basis of that information we have decided to delete these stocks from the Schedule.

The first of these stocks is that of the North Wall Extension Lines. As these shares are not held by the public but by the London Midland and Scottish Railway Company and as the return upon the shares is an apportionment of the net receipts of the extension lines, it is immaterial whether we amend the Schedule or not. The amount paid upon the shares will be the same whether they are of the denomination of a 1d. or £100. The next item in the Schedule is the 4 per cent. New Ross and Waterford Extension Railways Guaranteed Stock. That stock is in a position of some uncertainty. The dividend upon the stock has for its security a guarantee which the Great Southern Railway Company informs us is, in their opinion, payable out of the gross receipts of its Dublin South-Eastern section. In so far as these gross receipts are probably inadequate to pay working expenses and to make good the guarantee, there would, at first sight, appear to be no reason for treating these stocks in any way differently from the other guaranteed stocks of the company. The Dublin South-Eastern Railway was never at any time a very remunerative system and, although no separate accounts are now being kept in relation to it, it is not unreasonable to assume that the gross receipts are barely adequate—more probably inadequate—to pay the working expenses. As the working expenses should take priority over any payment on foot of the guarantee, there is probably no fund from which the guarantee-payment could be made. On the other hand, it has been, apparently, the practice of the Great Southern Railways Company, since the amalgamation, to regard the payment on foot of the guarantee as a charge upon the gross receipts of the whole system. That fact did not become apparent until this year, when payment of the dividend upon these stocks was made, although payment of the dividend upon the other guaranteed stocks was not made. It would appear that the Great Southern Railways Company has been treating the payment on foot of the guarantee in respect of these stocks as a charge ranking in priority to debenture interest, although it is not by any means clear that they are legally obliged to do so. Because of that position, we decided to delete these stocks from the Schedule.

The next item in the Schedule is the 4 per cent. City of Dublin Junction Railways Debenture Stock. That is in a different position. The gross receipts of this undertaking have been more than adequate to pay interest on the debenture stock. On the other hand, the undertaking itself would be of very little value if the other railway services of the Saorstát were not maintained on a basis which would enable them to work more or less profitably. In the case of other railway companies being unable to carry on, or for any reason ceasing to work to any considerable extent, the earnings of this company would fall considerably, debenture stock would depreciate very much in value, and it is unlikely that the debenture holders would secure, on the realisation of the assets, what they had loaned. On this consideration it might be argued that this debenture stock is in the same position as the other debenture stock of the company. The fact that the gross receipts in the past have been more than adequate to pay the interest, so long as the Great Southern Railways continue to work, it is almost certain that debenture interest will be earned and paid. We decided that these stocks can be deleted.

On the City of Dublin Junction Railways preference stock the amount necessary to pay the interest is £2,000 per annum. That was within the net receipts of the undertaking, even last year. Any reduction in the dividend payable would merely relieve the guarantees upon the next stock in order of priority, and consequently, no purpose would be served in effecting a reduction. We decided to delete it. The next stock is the guaranteed stock of the City of Dublin Junction Railways. The dividend amounts to £9,000 yearly, and is payable from two sources—the net receipts of the undertaking, and the guarantee, which is shared by the Great Southern Railways Company, the Great Northern Railway Company and the late City of Dublin Steampacket Company, whose liability is met by funds now lodged in court. The Great Southern Railways Company state that their portion of the guarantee is payable out of the gross receipts of the Dublin and South Eastern Railway section, and in that regard, therefore, is on the same basis as the guarantee in respect of the Waterford-New Ross section. In so far as that part of the system is not earning gross receipts in excess of working expenses, there is probably no fund at all from which guaranteed payments could be made. The Great Southern Railways Company have been treating the payments on foot of the guarantee as part of the gross earnings of the whole company. As that has been the position—that they have treated this charge as ranking prior to debenture interest, even though not legally obliged to do so—the position is the same as in the case of the Waterford-New Ross stock. The Great Northern Railway Company say that they have been legally advised that their portion of the guarantee does definitely rank in priority to debenture interest. Having regard to that fact, and that the Great Southern Railways Company have regarded the payments on foot of the guarantee as payable out of gross receipts, and that the other portion is fully covered by funds lodged in court, it was decided not to interfere with the stocks.

The City of Dublin Junction unguaranteed stock is now held entirely by the Great Southern Railways and it is immaterial what the nominal value is. These are the considerations which induced us to treat these stocks differently from the other stocks. It might be possible to make a case against that. If anybody was inclined to make that case, I might find it hard to argue against it. But a case can be made for treating the stocks differently from the other stocks, and leaving them out of the scheme of re-organisation. That is strengthened by the fact that the total amount involved cannot substantially affect the general plan. I hope the amendment will be adopted.

Mr. Comyn

Is there a definition of the word "major"?

Mr. Lemass

It is not essential. The word is put in to prevent misunderstanding. The Schedule will be amended, and the term will relate only to the stocks mentioned.

Mr. Comyn

If the Minister is satisfied, I am.

Amendment agreed to.

Amendment 3 not moved.

Cathaoirleach

Government amendment 4:—

Section 3, sub-section (1). Before the word "capital" in line 45, where it secondly occurs, and also before the word "capital" in lines 48 and 51, to insert the word "major."

Amendment agreed to.

Cathaoirleach

Government amendment 7:—

Section 3, sub-section (2). Before the word "capital" in lines 3, 5 and 7 to insert the word "major."

Amendment agreed to.

Cathaoirleach

Government amendment 8:—

Section 3, sub-section (3). To delete in line 9 the word "existing" and to substitute therefor the word "major."

Amendment agreed to.

Cathaoirleach

Government amend ments 10, 11, 14 and 15:—

Section 3, sub-section (3). Before the word "capital" in line 14 to insert the words, "the major."

Section 3, sub-section (4). To delete in line 16 the word "existing" and to substitute therefor the word "major."

Section 3, sub-section (7). To delete in lines 42 and 43 the word "existing" and to substitute therefor the word "major."

Section 3, sub-section (8). To delete in line 55 the word "existing" and to substitute therefor the word "major."

Amendments agreed to.

Mr. Jameson

I move amendment 16:—

Section 3, sub-section (8). To delete at the end of the sub-section the words "other than debenture stock."

The amendments in my name apply to the one subject. We were in a difficulty after voting on one amendment but the Minister has explained away a good deal of it. When considering the First Schedule we were met with items which were totally different to those in Section 3. It was only when examining the Bill we began to discover that the First Schedule was overloaded. We do not agree and I do not think it was pointed out by our critics in what respect the amendment was overloaded, or went further than was intended. In trying to save some part of Schedule I, we were up against the difficulty that the Minister could not say what he proposed to give. I think we made a mistake in previous amendments. The Minister has taken five or six sections out of Schedule I and all that is left to deal with, after the Government amendments, are the debenture stocks, preference stocks and the ordinary stock of the company. I mentioned in my amendment that Schedule I should deal merely with the four per cent. guaranteed stock, the four per cent. preference stock and the ordinary stock. That really means a reconstruction of the stocks of the company. It is a very unusual proceeding for a Parliament to deal arbitrarily by law with the reconstruction of the stocks of a private company. We had that in mind when we put up the amendments. In this case we are up against some serious facts. The railway company has not been able to produce a reconstruction scheme of its own, for reasons which have been mentioned. As far as we can judge, in future they could not get any scheme of a reasonable nature carried through by the consent of the shareholders. It would be a terrible task. It looks as if it was going to be done by the Government. That being so, as the Government tells us that a reconstruction of the stocks of the company is an essential part of the Bill, and that without it the scheme would be wrecked—why that should be I do not know—we have to take it for granted. I do not think any section is prepared to hold up the Bill, when the Government says that the part I am referring to is an essential part of the scheme.

When we are up against a difficulty it has to be dealt with some way. My trouble is that it is not going to make any money for the company. The debenture stock, with which I will deal later, is the only one in which money is coming in to the company. If the Bill is amended the whole of Section 3 will apply to the new Schedule. If we take out the words "other than debenture stock" the rest of the section will apply to the new Schedule. The same thing would apply to sub-section (10), which deals with the capital value of debenture stock and the reduction of interest. It does away with the right of debenture holders to take the steps which, if the railway company had tried, they would be able to take, that is, they would have appointed a receiver. The amendment enables the Bill to be altered by deleting sub-section (10) and to insert a new sub-section in its place where I deal with the debenture stocks and also with the rights of the holders of debenture stock to take action in regard to the reduction of their interest.

I come now to the main part of the whole question. By taking out the debenture stock you separate what is a debt of a company from what are shares of a company. The trouble in regard to this Bill is that it dealt with creditors and debtors in exactly the same way and established the principle that you could write down a creditor's claim, by Act of Parliament, to a debtor's. That is a very wrong principle and if in any way we could achieve what the Government seek by this Bill, without establishing that principle, I think we would have done a good day's work. I think the whole House will recognise that if a company owes money and if this House comes along and says: "We will cut down the amount of money you owe," this House is doing a wrong thing. That is what the cutting down of the capital value of the debenture stock means. It is quite evident, of course, that the rights of these debenture holders are clearly limited to the right to put in a receiver and get their dividend paid. The Minister is quite right when he says they cannot get their capital back. That is perfectly true. In a great many of the very best stocks we know of you cannot get the capital back, except you dealt in stocks such as Consols of the British Government. I know several private companies in which debenture stock is only redeemable at the wish of the company and not at the wish of the holder of the debenture stock. Because of that I cannot see the Government or Parliament coming in and saying to the holders of debenture stock, who have no right to claim their capital back, that, therefore, the value of the debentures should be cut down. It does not seem to be a sound argument. I would rule out, as a point that should be raised, that because the debenture holders cannot insist on the repayment of their capital, therefore the capital of the debenture stock is liable to be cut down. If such a principle were once established it would be impossible to issue any debenture stock in the Free State.

In this proposal I am now making, where to meet the Government I am moving that we ought to cut down for some years the interest to be paid on the debenture stock, I think we are going a long way, but I believe we would be doing more harm at the present time by not fighting that principle than if we gave way to the Government's view. I am suggesting that for a certain number of years the interest should be reduced, but that the capital should be left intact, so that eventually if everything happens as the Minister thinks it will, and the railway company gets on its feet, we shall have done no harm, as far as the capital is concerned, to the debenture holders. They will have their capital intact. The injury they are asked to suffer is that for a certain number of years they should join in the reorganisation of the company and suffer the loss of a certain amount of interest. In regard to that, you will see that in my fourth amendment, I adopt the words of sub-section (10) of Section 3 of the Bill, the precaution taken by the Government to ensure that the debenture holders should not have the right to appoint a receiver because of the fact that the interest is being reduced. It is quite evident that it is necessary to do that, and I have adopted the wording of the Bill as it stands and inserted that as sub-section (2) of my fourth amendment in dealing with debenture stocks.

If you are to try in any way to preserve the rights of the creditors of the company, the debenture holders, you must leave the capital alone. I am providing for a reduced rate of interest for a certain number of years, but the debenture holders will keep their capital intact and, unless fresh legislation is introduced, the interest on their stock will go back again to the former rates after a period. Under that arrangement we shall not permanently injure these creditors for the benefit of others. That is the principle behind the amendment, that the rate of interest on the debenture stock is to be reduced, but the amount yielded will be the same as would be paid under the Government proposals. I am leaving the capital intact.

The number of years is a debatable point. I am fighting for the principle that there should not be this endless destruction of a debt, but you may set a number of years during which the reduced rate of interest will be paid at a certain figure. I suggest five in my amendment. If the Minister was at all inclined to assist us in this matter I have no doubt that he would propose something less in the way of years. I would agree to five years, with some clause providing for reconsideration at the end of the five years. That is all a matter for discussion. The one principle I am fighting for is that we should not destroy the capital value of the debenture stock of a great concern, that we should appoint a time at which, if the new scheme is successful, the interest will go back to the original figure. If the suggestions I am making are adopted, we will not destroy for ever the rights of the holders of the debenture stock given to them by an Act of Parliament. After the period I mentioned has expired, the interest will be restored to the old figure and the capital will have remained intact. I think the Minister will recognise that this is a genuine effort to try to keep the Oireachtas from interfering with the rights of private creditors. With these few remarks I would ask the House to consider the amendment sympathetically.

Mr. Comyn

The principle for which Senator Jameson so stoutly contended on the Second Reading of the Bill he has abandoned now. The principle, broadly speaking, was this, that where a man lent money on a mortgage at a certain rate of interest, you cannot interfere with that contract without his consent. That is not the principle which Senator Jameson has enunciated here to-day. No doubt there is a reduction of the debenture stock from £100 to £85. That is justified by reason of the fact that it is part of a scheme of reconstruction. That scheme involves the violation of many rights. It involves the creation of what is practically a monopoly of the transport system of this country. It interferes with the right of the travelling public. In fact, it affects every member of the community as well as debenture holders. Now Senator Jameson argues that the £100 which the man lent on the mortgage should not be reduced to £85, that his capital should not be interfered with, but what does Senator Jameson do in the second amendment which he has brought forward? In amendment No. 19 he reduces the rate of interest on the debenture stock from £4 to £3 8s. May I ask Senator Jameson what authority has he to interfere with a man's property by reducing his rate of interest from £4 to £3 8s.? The principle is the same. The modification which the Senator has introduced is in reality no different from the proposal of the Government. It looks nicer, I admit; it looks more conformable with precedent, with the conversion loan, but in reality it is the same thing. A man is as much entitled to his £4 as he is to his £100. Senator Jameson proposes, without his consent, without having a meeting of the debenture holders, without consulting them in any way—he himself not being, perhaps, a debenture holder at all— that another man's interest of £4 should be reduced to £3 8s. He accepts the principle of the measure. Therefore let us hear no more about this invasion of proprietary rights.

Mr. Jameson

Does the Senator know the difference between time and infinity?

Mr. Comyn

I have never yet been able to form a conception of infinity. We are dealing here only with time. Senator Jameson says he will reduce that man's interest without his consent from £4 to £3 8s. He will do that only for five years. What right has he to limit it to five years? None whatever, except the generous impulses of his own mind. I think the question for the House is this: what contribution should the debenture holders make to the reconstruction scheme which will save portion at least of their property? Is it too much to ask of them to contribute £15 in every share of £100? I think it is not too much. I think it would be unfair to the other shareholders and to the public, who are also interested, because there is machinery in this Bill for regulating railway rights. I think it would be unfair to other members of the public to let them off by a reduction merely of 16/- for five years. I think that that reduction ought to be permanent, seeing that if these railways are not rescued from the position which they now are in it is quite on the cards that no interest will be paid on the debentures. If these railways are left to their fate, I cannot see how interest is payable on the debentures. I cannot see how the debenture holders, if they were to put in a receiver, would be able to pay working expenses and interest on the debentures out of the Great Southern Railways. The Minister is really by this measure preserving the property of the debenture holders. The question of principle being now abandoned, let us face the situation fairly and, instead of truckling in reference to interest, deal with it in a straightforward fashion and reduce the £100 to £85, with a permanent reduction in the rate of interest to £3 8s. I think that represents a fair measure of the contribution which the debenture holders ought to make. If you take power to reduce the rate of interest, to invade the contractual right of the debenture holders, then the manliest and fairest way to deal with it is in the way it has been dealt with, namely, by reducing the £100 to £85.

Mr. Lemass

I think I should first of all point out to Senator Jameson that his amendment, No. 16, has probably been tabled under a misunderstanding. I must say that the misunderstanding was as much mine as his when I first read it. It appears clear that the reference to debenture stock in sub-section (8) has nothing to do with the proposals to reduce the value of the debenture stock. If it were decided to amend the Bill in the manner in which he desires the reference to debenture stock would still remain there. The only effect of deleting it might be to give debenture stockholders a right to vote at the annual meetings of the company. It relates there to the application of Sections 10, 11 and 12 of the Great Southern Railways amalgamation scheme to the capital stock of the company. The words "other than debenture stock" appear in Section 12 of the scheme. The powers of the stockholders to participate and vote at the annual meetings of the company are set out, so that if the amendment carried out the Senator's wishes it would not involve an alteration in sub-section (8) or the deletion of the words "other than debenture stock." That is a minor point.

Mr. Jameson

I take it that what the Minister means is that amendment 16 is unnecessary.

Mr. Lemass

Amendment 16 would be unnecessary to effect what the Senator desires. The main difference between us is the length of time over which any reduction made in respect of debenture stock should operate. For practical purposes, I do not see that the difference between reducing the nominal value of the debenture stock and paying 4 per cent. on it and of leaving the nominal value unchanged and paying a reduced rate of interest is of any great importance. It might be argued that there is some value in having the nominal value of the stock maintained at the old level, but personally I think most people will have regard to practical considerations, and as far as practical considerations apply the one method is precisely the same as the other, except in so far as the Senator desires to limit the operation of the reduction over a number of years. In that case it is undoubtedly simpler to apply a reduction when it is a rate of interest that is being changed and not the nominal value of the stock.

So far as the period for which the reduction should apply is concerned, I think I must entirely disagree with the Senator's point of view. I do not want to go over again all the considerations which justify in my opinion the reduction effected by the Bill in the value of the debenture stock. Senators will remember that that relates, not merely to the present position of the railway company and the necessity for action concerning it, but also to other provisions which are embodied in the entire transport scheme which imposes a definite obligation, a definite cash obligation, upon a large number of other people whose interests in the railway company are much smaller than those of the holders of the company's debentures. As I have already pointed out, we are, on the one hand, imposing a charge on the taxpayers. We are wiping out a debt due by the company to the State. We are not proposing merely to suspend payment of interest on that debt for five or ten years, but we are wiping it out entirely, and the taxpayers of the country will have to make good the amount formerly paid by the company in respect of interest on the loan. In addition, we are wiping out the company's competitors. We are not merely wiping them out for a period of years, but we are wiping them out entirely. We are only giving them compensation for the pecuniary losses they suffer by their elimination and the withdrawal of their licences.

Senators will remember that we discussed yesterday whether we should take into account, when determining the amount of compensation, future profits. The Road Transport Bill passed without any such provision, even though a person operating a road merchandise transport service or a passenger road transport service may feel convinced that the present loss accurring from the service was going to be changed into a substantial profit in the future. He cannot get in respect of that anticipated future profit any compensation when the whole service is wiped out and his licence withdrawn. We are imposing upon the people of the country the probability of having to pay higher charges for transport services. The present charges are admittedly too low. They are uneconomic. Transport is being sold over the greater part of the country at less than the cost of production. The present situation is, of course, a blessing to some people. There are traders, manufacturers, shopkeepers, the general public and others who are at the present time receiving benefits from the present position in the form of lower charges for the transport services rendered to them. We are going to end that, and end it for the benefit of the railway company, and end it, I hope, permanently. These people will have to pay permanently in the future higher transport rates than they are paying at present. Having regard to the fact that all the other people who are being asked or forced to contribute to the reorganisation of transport for the benefit of the Great Southern Railways Company have no time limit fixed to their contribution, I see no reason for fixing a time limit to the contribution that the debenture holders are to make. Possibly circumstances that we cannot foresee now may arise in the future that may change that. I am not denying that. But I do not think it is open to us to legislate for unforeseen or unforeseeable future circumstances. In so far as we can foresee the future, we can see the railway company laboriously and painfully improving its position and getting itself on a sound basis. The prospects will be laborious and painful, not merely for the railway company but for a number of other people too. We see the taxpayer, the users of transport services—the owners of other transport services—all making a permanent contribution to produce that new position for the benefit of the railway company.

Under these circumstances we say it is not at all unreasonable that the debenture holders who loaned money to the railway company at a time when the transport situation was entirely different, when the prospects of the company were quite good, and who have enjoyed the payment of interest on the sums of money they advanced at a fixed rate since, should make a contribution now, particularly having regard to the fact that that contribution is going to secure for them a greater degree of security in the future. If you were to offer any one of the debenture holders a choice between getting £4 per cent. for five years, and the prospect at the end of that time of only getting paid such an amount of interest as a receiver appointed by him were able to get out of the railway company, or alternatively £3 8s. per cent. for all time—I think that is the prospect we are opening up for him— there is not one of them, I am sure, who would not jump at the alternative of the permanent return of £3 8s. 0d. per cent. The very precarious £4 per cent. that they have at present is indicated fully by the fact that the commercial community of this country value these debenture stocks at £39 for every £100. That is the present market quotation of the stock. As I said before, there is no reasonable prospect whatever of that £4 per cent. continuing to be paid for any substantial period of time. If there was, the debenture stocks of the Great Southern Railways would be quoted on the stock exchange above par to-day instead of being quoted at £39 for every £100. We are, therefore, asking the debenture holder to accept a smaller return, but because of that we are giving him a much greater degree of security than he has at the present. That has got to be a permanent arrangement. It cannot possibly be a temporary arrangement, and that is why I think that the proposal that the contribution of the debenture holders should be limited to five years is one that could not be accepted, unless we devised a scheme designed merely to carry over the present situation for the five years, and then letting everything go back again into the melting pot at the end of that time.

If we were to ask the railway debenture holders to make a contribution for five years only, we should not ask the taxpayers or anybody else to make their contribution for a longer period. We might conceivably have gone to the Dáil with some patchwork arrangement designed to prevent the situation getting worse for five years, with the intention of reviewing it at the end of that time, or either let the railways go by the board or adopt some permanent measure. We decided against that. We decided that the time was suitable for trying to effect a permanent arrangement which will put the Great Southern Railways into a position of security for the future. I want Senators to appreciate this fact because it has a very direct bearing on the position of the debenture holders; that the future may bring the disappearance of the railways. It may be that railway transport as such will not be able to survive. Other means of transport may be made available. The future may bring the disappearance of a road transport merchandise service. It may bring changes which cannot possibly be foreseen now. The effect of what we are doing now will be to secure the position of the Great Southern Railways Company. We are giving to the company a monopoly of public transport. Whatever changes in the type of transport take place will take place under its direction and within its organisation, so that conceivably, as I said on the Committee Stage, we may have in 25 or 50 years' time the Great Southern Railways Company not operating railways or even operating a road service, but confining its attention entirely to the operation of air services. The debenture holders are going to be secured in any eventuality, so that any changes in methods of transport, due to new inventions that may come on the market, are not going to jeopardise their security as they might have done if this legislation were not introduced. On the contrary, such changes may conceivably only improve their position and still further prolong their prospects of getting a return on their investments. Under these circumstances, I think that the proposal to limit to five years the contribution of debenture holders is one that could not be accepted and I gather that that is the main difference between the Senator and ourselves.

Mr. Jameson

I am sorry the Minister takes that view. His mind is evidently very full of the railway problem. When Senator Comyn says I agreed to the reduction in interest I say to him—I think he has heard the words—"My necessity, but not my will, consents." I think it is as wrong to cut down the interest as it is to cut down the capital, but I had hoped that the Minister would view the matter from the national standpoint and from the standpoint of the credit of the State. These wonderful things for the railway company are being secured at the expense of a considerable amount of reduction of the debenture capital and interest inflicted on these people by an Act of the Oireachtas. Just think of what debentures are. Debentures are the best method of securing cheap capital for every concern in any State. And why are they so?—because of the debenture deed and the claims it gives the debenture holders to getting back their money. It is a debt. Debenture holders are not shareholders, and, if you look at any of your Stock Exchange lists and see the rate of interest you get by investing in debentures and compare it with that of ordinary stocks, you will see the reliance that is placed by the investing public in the rights held by debenture holders.

It is here, I think, the Minister is wrong. He is putting forward these proposals for a certain purpose, and he rejects the offer of a temporary thing to meet the necessity, and makes it permanent. Therefore, he is asking Parliament permanently to reduce the value of the debt due by the company to the people who lent them the money and, if you establish the principle that Parliament can come in and take away the rights of the debenture holders in any one company, you establish that, in the Free State, whoever lends money on debentures to any company is liable to have the rights of his debenture deeds taken away by the Oireachtas. I doubt if we will ever again, if this is passed, see, in this State, anything like a 4 per cent. debenture subscribed for. That is what I am fighting for. I am fighting for the establishment of the principle that the State will not interfere and take away the right to recover private debts. That is what is at the bottom of all this. What is the good to the State of settling all this railway trouble by these Bills—I compliment the Minister very much indeed on them—but why complicate the matter by linking it up with a great State issue and with a principle that would apply to every penny lent in this country?

There are many concerns which go to their bankers and say: "We owe you so much money; we must have more, and we cannot carry on if you do not give it to us." The banker says: "There is one source of security which you can give us. You can give us a debenture," and then they get the money on the debenture which they could not have got any other way, and the concern is saved by getting that money. Who will lend money on a debenture if this is passed? Who can lend money on a debenture with the knowledge that, the moment the Government come to the conclusion that it is in the interests of the State that the debt should be written down, the Oireachtas will do it? Once it is done, it can be done again, and we are, therefore, now face to face with the position that the Free State is to be held as the taker away of the rights of debenture holders. As I said before, when debating this, if the British Government were to bring in such a Bill there would be an absolute revolution, and what the Stock Exchange would be like I do not know. It is serious enough here. It means that any of our debenture stocks, and not only railway stocks but all sorts of debenture stocks, are liable to the same attack, and I should like it to be said that the Seanad did not approve of this and that, after consideration, they gave it as their opinion that some other way of settling the matter should have been adopted. They can do so by passing these amendments. It will at least keep us clear of the accusation that both Houses of our Oireachtas agreed in passing a measure which many of us hold extends far beyond the railway company and will do serious damage indeed to the credit of the Free State. That is what I am asking the Seanad now to vote for.

Mr. Johnson

As the Senator has raised the issue of high principle, and would desire that this matter should be discussed quite apart from the railway situation, I feel constrained to say one word. Recently, I was reading some of the debates on the various Land Purchase Bills that were introduced into the British Parliament and the debate on the 1923 Bill, incidentally. Before the principle was established of the right of Parliament to interfere with the position of the landowner vis-á-vis his tenant, all the things that have been said by Senator Jameson to-day were said in opposition to those Land Purchase Bills. The answer that, I think, is a conclusive one to the contention raised by Senator Jameson is that, where a dispute exists between two parties, as in this Bill, between the creditor and the debtor, the railway company, and where there is a third party vitally interested, the State, and where the third party is coming in to create a new property and handing that property over to the company, the State has a right to make its terms. The terms in this case are that the recipients of the new State-created property shall sacrifice something of what they hitherto held to be their own and shall recognise that that something that they are getting they are getting by grace and by the action of the State.

The public interest is undoubtedly the main factor that is operating in connection with these Bills. I think that the Minister is trying to save what might be called the system of private property in public service, to maintain it for a few years for the benefit of the present owners of the railway and the present creditors of the railway. I think he may be mistaken in that policy but that by the way. When, however, he comes along and makes a present of this new property to the railway company and, thereby, saves for not only the owners of the railway but the creditors of the railway the greater part of what they would otherwise lose, the State has a right to make its conditions and part of the conditions here are the writing down of both the debenture stock and the other classes of stocks. I am quite prepared to back the attitude of the Minister on the ground of the principle that, where the State is coming along and saving for the present owner that owner's property, it has the right to make its own terms and its own conditions.

The McGillycuddy of the Reeks

I should like to say one word about the parallel which Senator Johnson drew in regard to the arbitrary reduction of the values of land. He seems, in reading the various Land Acts debates, to have missed one thing and that is that exactly what Senator Jameson has suggested with regard to debenture holders—the position of the mortgagees in relation to the various estates—was not disturbed by any of the Acts whatever.

Mr. Comyn

It was very wrong.

Miss Browne

It has not been mentioned by anybody that the debenture stockholders are, as a matter of fact, entirely opposed to the Minister's proposals.

Mr. Lemass

With regard to what Senator Miss Browne says, I should like to have it on record that the only persons whom I received on behalf of the debenture holders indicated their acceptance of the principle of the making of a contribution to the reduction of the charges on the railway in the present circumstances, but they urged that the contribution, as Senator Jameson has proposed, be limited in time. These people, however, represented only one-quarter in nominal value of the total debenture holders of the company. I want to say, in order to prevent misunderstanding, that these proposals are being put to the Oireachtas only as proposals for dealing with the position of the Great Southern Railways Company as we find it in this year, 1933. They are not put forward as indicating acceptance of principles in relation to debenture stocks or other classes of stocks or as a policy that might be applied to any other concern under any other circumstances. We were concerned only with the transport position of the Saorstát and the position of the Great Southern Railways Company in relation to it, and we decided on the policy that seemed best suited to deal with that position and to the circumstances of the Great Southern Railways Company.

As Senator Jameson has chosen to discuss the matter entirely apart from the practical considerations that apply to it and on theoretical grounds only, I should like to deny that these proposals are altogether the innovation he suggests. It may be that no Government submitted proposals precisely similar to these in relation to a company situated precisely similarly to the Great Southern Railways Company, but Governments, including the British Government, have taken action which interfered with certain accepted claims and rights just as drastically, and, in fact, much more drastically, than is done here. I have here a £1 note—I hope so, anyway. Some years ago, I sold certain goods to an Englishman and he gave me that note for them. That note had for me a very definite value. I could have taken it to Great Britain and got a Bank of England note for it. For that Bank of England note I could have got four dollars and 80 cents. in the United States. I could, under certain circumstances, have got a certain amount of gold for it. It represented a certain amount of goods equivalent to the amount of goods I had sold to the British Government. After going to an election and asking for a mandate to preserve the value of that £1 note, the British Government decided overnight to change its policy. That note is not worth to-day what it was worth when I received it in return for the goods I supplied. That was an interference with my rights. It was an act in breach of contract much more drastic than anything we are contemplating here. I regret to say that the bankers of Great Britain and the bankers of the Free State, who probably benefited considerably by that transaction of the British Government, did not rise to protest against this action, taken for the benefit of one section at the expense of another. I submit that, in principle, what we are doing here has much more to justify it than has what the British Government did when it broke its contract to give, in return for the notes issued by the Bank of England, a certain stated quantity of gold. However, these are all theoretical considerations and, if we started a discussion of them, it might go on for ever. The main point I want to stress is that we are not enunciating policy in relation to debenture stocks. We are not endeavouring to establish a precedent. We are merely endeavouring to devise a plan which will enable us this year to get a transport organisation into being which will ultimately enable the Great Southern Railways Company to be reconstituted in its services, finances and in every other way, so as to make it stable, secure and prosperous in the future.

Mr. Jameson

Although the Minister does not want to establish a precedent, he is unfortunately doing so. The amendments I am proposing are quite as good as the provisions of the Bill and they do not destroy the quality of the rights of the debenture holders. The Bill does establish a precedent in the Free State. I shall not enter into a discussion of gold standards. It is a tempting subject, as the Minister says. What I am concerned with are the interests of the Free State; I do not care a rap about what is done elsewhere. It is wrong for the Oireachtas to reduce the rights of the debenture holders. In the case of the railways, the Government could get all they wanted without doing that. I ask this House to say that they will not approve of the principle of taking away the rights of debenture holders without their consent, and to say that it is wrong to interfere with private debts and private rights. If the Seanad does that, it will, at least, show that it does not approve of the manner in which the debenture holders have been dealt with.

Cathaoirleach

As amendment 19 is the principal amendment, I propose to put it first.

Mr. Jameson

I agree.

Amendment 19. New section. Before Section 4 to insert a new section as follows:—

4.—(1) Interest shall be payable at the rate of £3 8s. per cent. on the 4 per cent. debenture stock of the company, amounting to £8,323,797, for five years from a day to be appointed by the Minister.

(2) The reduction of interest effected by this section payable in respect of the debenture stock of the company shall not entitle any holders of such debenture stock to appoint a receiver or to take any other steps for enforcing the payment of interest at any greater rate than that to which it has been reduced by this section for any period after the appointed day.

Amendment put.

The Committee divided:—Tá, 13; Níl, 15.

Tá

• Bagwell, John.
• Bigger, Sir Edward Coey.
• Browne, Miss Kathleen.
• Costello, Mrs.
• Dillon, James.
• Douglas, James G.
• Duggan, E.J.
• Griffith, Sir John Purser.
• Jameson, Right Hon. Andrew.
• McGillycuddy of the Reeks, The.
• Milroy, Seán.
• Moran, James.
• Staines, Michael.

Níl

• Chléirigh, Caitlín Bean Uí.
• Comyn, K.C., Michael.
• Cummins, William.
• Dowdall, J.C.
• Johnson, Thomas.
• Kennedy, Cornelius.
• Linehan, Thomas.
• Moore, Colonel.
• O'Farrell, John T.
• O'Hanlon,M.F.
• O'Neill, L.
• O'Rourke, Brian.
• Robinson, David L.
• Toal, Thomas.
• Wilson, Richard.

Tellers:—Tá: Senators Jameson and Douglas; Níl: Senators D. Robinson and Dowdall.

Amendment declared lost.

Amendment 41 not moved.

Mr. Lemass

I move amendment 42:—

First Schedule. To delete the 1st, 2nd, 3rd and 4th columns from the reference to the North Wall Extension Lines 1 and 2 £100 shares down to the end of the Schedule.

Amendment agreed to.

Schedule, as amended, agreed to.

Bill ordered to be reported with amendments.