Before this Bill passes, I should like to voice one final word of what might appear to be futile protest against certain provisions in it. I intend myself, from the point of view of record, to vote against the measure. The proposals I referred to are those connected with the capital reconstruction which are so manifestly unjust that I do not think they ought to be passed by the House without protest. As I understand those provisions, the effect is definitely to limit the earning power or to limit the surplus revenue of the company to a sufficient quantity to pay a reasonable return on that reduced capital so that, whatever may happen in the future, however much conditions may improve and the monopoly of transport improve the earning power of the company, no increased benefit on those earnings may come to the present shareholders, and the effect, furthermore, will be that, if fresh capital is required for the purpose of development and can be obtained, as, presumably, it can, if things improve, it will earn reward on the full amount subscribed, whereas the old shareholders who have built up the undertaking and borne the burden and heat of the day will be pegged down to these monstrously low reconstructed values. It is because the thing is so unjust and pays so scant regard to the rights of property and is, in fact, virtually confiscation that I propose to vote against it.
Railways Bill, 1933—Fifth Stage.
I did not intend to say anything in connection with this Bill but, as Sir John Keane has opened the discussion, there are some points, however unpleasant they are, I must refer to. This Bill gives the railway a practical monopoly of the carrying of the country. It is the only possible chance that we have seen of giving the railway an opportunity of rehabilitating itself, but it will not do so if it is managed as it has been managed in the past and if regard, in the matter of promotions, is going to be had more to the social and the religious views of a person rather than his proficiency and competency for the position offered. Nobody in this country can reasonably object to any man getting a position, no matter what his religion is, but he should not get a position, as he used to in the past, because of his religion.
I want to refer to another matter equally unpleasant. A railway strike took place recently on the Great Northern Railway. Everybody who knew anything about it knew that, from the word "go," that strike was doomed to failure. It did fail after some very wrong things had been done—I am not going to say they were done by advice—but, when that strike was practically finished, an unauthorised strike broke out on a small section of the Great Southern Railways. It inflicted considerable hardship, inconvenience and expense on a number of people and it had no justification whatever. I would not refer to it but, recently, a so-called labour leader, who must know how hopeless these attempted strikes were, sent around a message to railwaymen: "Be ready." If the public are to be held to ransom by irresponsibles of that type, who know that, if railwaymen went out on strike, in all probability, a considerable number of them would never get back, the authority that gives a monopoly to the railway will have to reconsider its position and consider the public, and give the traffic the alternative transport facilities the chance that is being taken from them by this measure.
Probably I also would not have said anything but for this matter being raised. I agree with what Senator Dowdall has said that, unless the railways are managed differently in the future, they will not pay. I will give an example of what I refer to. About a fortnight ago, a ship came into Galway Bay from New York. It had had a beautiful passage, with perfect weather, but it was 12 hours late. It was scheduled to get into Galway on Saturday, early in the morning, but, as a matter of fact, it arrived at 12 o'clock at night. There was no fault on the part of the Irish officials; my information is that everything that could be done was done by them. The tender went out when the ship came in and occupied an hour transferring baggage, which was reasonable enough. Some 200 passengers, who intended to land in Galway, were put into the tender. They remained for four or five hours in Galway Bay unable to land because the tide was out. Everybody must have known perfectly well that the tide was out and they should have been kept on the ship until the tide came in or something else should have been done. They were tossing about Galway Bay for some four hours.
I cannot give the exact time they were kept in the tender, but they eventually did get to land in Galway and found that there were no trains because it was Sunday, and I am told, but I am not quite so sure about it, that there were no buses. At any rate, there were no trains, and some 200 people were left wandering about, not knowing where to go or what to do or where to get food. One and all, they said that they would never travel by the Galway route again. Surely some arrangement could have been made by the railway company, at all events—they were to blame in this case—to have a train ready to take these people up. They must have known about it and, meanwhile, the ship people ought to have known that it was not right to put a number of people into a tender at midnight and leave them in the Bay for a number of hours. The Irish officials did their business quite all right and helped as far as they could, but what could they do? That is all I will say about the management. There are more instances of extraordinary behaviour on their part, but I do not propose to refer to them now.
The Galway Harbour Bill is designed to obviate what the Senator complains of.
I do not know to what extent the railway company are responsible for the fact that the tide was out when a certain boat landed in Galway. There is an old saying, that "Time and tide wait for no man." Even a railway company cannot overcome a difficulty of that kind. I fancy if there was any delay in that respect, the main portion must have rested upon the shipping agency, in the first place, for putting people on a tender and leaving them tossing about in the Bay; and secondly, probably for not having informed the railway company that passengers were likely to offer, when, probably, if they did not put on trains, they would put on buses.
Senators have referred to an official stoppage of a minor extent that occurred on the Great Southern Railways, and to the issue of a "Be ready" circular. I do not know what the reference was, or who the labour leader was, but it should be sufficient for the Seanad to know what the official attitude is with regard to it. No one can control unofficial action, either in a trade union or in a political party, except to a limited extent, but one can quite understand the impatience and the resentment of the men, when, in addition to many previous reductions, they have to submit now to an additional 10 per cent. from what are very meagre earnings, when one considers the amount of talk and noise that has taken place on the part of debenture holders who, for the first time, are asked to submit to a reduction of 15 per cent. It is all very well for Senator Sir John Keane, Senator Jameson and others to talk of principles which are sacred and inviolable, but principles which have no relation to the effects on life are not worthy of consideration.
It reminds one of the story of a man after being married, to whom his wife said as they were leaving the church: "Now, John, on principle you and I are one but, as an essential proposition, I suggest that you order dinner for two." The same applies to the question of debentures. There are certain hard facts which cut across this principle, and we have to recognise them. An attempt is being made here to preserve the railways so that they can pay debenture holders their interest, or portion of it. A reduction of 15 per cent. has been effected, so that the remaining 85 per cent can be paid. All other types of shareholders have had to make colossal sacrifices, from the point of view of cutting down capital, and workers have had to give up a very considerable portion of their earnings. In fact, from the peak period, they have given, in some cases, over one-third of what they were earning. All this has been done, not because it was considered they were too highly paid, but because the facts of the situation demanded that reductions should be made, in order that the railways could continue to exist. It is a rather deplorable condition to find this cry, this whine about these sacrifices or so called sacrifices on the part of debenture holders. One would imagine that capital was the one thing that could not be tampered with. The late William Jennings Bryan of America in a presidential address asked: "Must humanity be sacrificed on the cross of gold?" It would look, as far as the Great Southern Railways was concerned, that the workers must be sacrificed and bled white in order that the debenture holders may get their 4 per cent.
No one wants to do anything calculated to damage the credit of the country under the existing system, but it is too far-fetched to suggest that, in the present exceptional circumstances of the railways, and in a supreme effort to try to save them, when interest has been reduced by such a small amount, the credit of the nation is going to be irretrievably ruined. This Bill is entirely without prejudice to anything that may happen. I cannot imagine it being taken as a precedent at all. In the long run the debenture holders—when it would be too late—would have to agree to a far bigger writing down than has been the case. As a result of the prosperity which we hope will come to the railways following this measure, they will gain more in the actual market price of their stocks than they are going to lose as a result of the nominal writing down. While saying that in regard to the effects of the Bill, I am not very optimistic regarding the immediate recovery of railway prosperity. The Bill has certain limitations which, I think are going to retard that recovery considerably. We must look for the recovery of general prosperity before we can hope for prosperity for transport.
As has been pointed out by previous speakers, there will have to be greater attention on the part of the management controlling the destinies of the railway system if we are to have a recovery of prosperity. The practice of selecting people merely because of the extent of their holdings in any industry, or the amount of influence and voting power they can command, as the management of a complicated system like that of rail and road transport, is fatal. Until it is drastically altered—and it is not altered in this Bill—and until control is given into the hands of people who know the industry, we cannot look for anything in the nature of permanent prosperity.
Notwithstanding the reply given me last week by the Minister, I wish to say that the property of the debenture holders has been confiscated, contrary to their wishes. The Minister said they were agreed, to some extent, at any rate. That is not true. A meeting was held in Dublin at which all the debenture holders who could be got together were present. They were unanimously opposed to that part of the Bill which dealt with their property. Everybody knows that a number of these debenture holders are not people who could be brought together. A number of them are trustees and nuns in convents, and people who could not attend such a meeting. So far as I have been able to find out, the debenture holders are unanimously against this proposal. Notwithstanding all that Senator O'Farrell said, I regret that this House did not make at least a formal protest against this confiscation no matter how it is sugar-coated in the Bill. We are told that the action now taken will not affect future legislation, but we are promised a Bill for the wholesale confiscation of land.
Cathaoirleach
That does not arise on this measure.
We have been promised that and that throws to the wind the idea that the principle of confiscation will obtain only in connection with the Railways Bill and that it will not affect the credit of the country. It will have its effect on other matters.
I should like to tell Senator Colonel Moore that if his friends would go by Cobh rather than by Galway, they would not be subject to the inconvenience which they suffered.
I do not wish to interrupt the Senator.
Cathaoirleach
Senator Colonel Moore cannot speak twice on this matter.
The same thing happened in Cobh.
The tide is always in in Cobh. With regard to this Railways Bill, I think that it is only right to congratulate the Minister on this—that, on the Fifth Stage of the measure, nobody, apparently, has any question to raise on what we all know is a very delicate and thorny subject—the railway problem—except in regard to the question of capital. There was a gentleman in Cork some years ago, Mr. Foley who took up the packet office boats when they were in a worse condition than the railway is to-day. That was, perhaps, as hopeless a proposition as anybody ever tackled. Yet, he was able to make that one of the most prosperous steamship companies in any part of the two islands. That gentleman writes to me to-day to point out that there is no reason why the railways should not recover in the same way as this cross-Channel line did; it will take a little time, perhaps, and it will take a great deal of hard work, but there is no reason why these railways should not be once again as successful as they were in the past. I cannot understand why this question of capital should be inextricably mixed up with the success of this measure. He suggets that the capital clauses in this measure should be treated separately, that they should be examined by experts and that, if necessary, a course should be adopted which, I am afraid, a lot of us feel should not be adopted—that is, confiscate, if you like, the property of the shareholders that, at the moment, has no value. I think that it would be very wise for the Minister to withhold, if possible, that portion of the measure which deals with the reorganisation of capital until the matter is more minutely examined and, perhaps, more equitably dealt with.
I propose to support the motion, as I supported the Bill in all its stages, but I must say that I am not very happy as regards many of the provisions of the Bill. I am sure that they will lead to loss, inconvenience and expense on the part of the farming community and those interested in live stock. The railway company are to have a monopoly. We are giving them that monopoly so that they may be able to rehabilitate themselves. If they use that monopoly in any harsh or improper manner, I should like to warn them that the powers that gave them that monopoly can take it from them.
Senator Crosbie should remember that this House passed an amendment doing exactly with this Bill what his friend suggests should be done. The amendment we passed a couple of weeks ago took out of the Bill the proposals as regards capital reconstruction and left the Bill to be judged on its merits outside these considerations. In its wisdom, the Seanad in the following week reversed that decision.
At the instance of those who moved it.
Senator O'Farrell has dealt with this measure largely from the point of view of labour. Years ago, when he and I used to meet on the Seanad at first, he used to impute motives to me which he does not impute now and, I dare say, I imputed to him motives which I do not impute to him to-day. If Senator O'Farrell thinks that the classes engaged in industry, the classes who have capital employed in industry do not recognise to the full the position of labour in the present state of affairs in this country, he is greatly mistaken. None of us raised the slightest objection to the State providing the money which prevented a strike on the Great Southern Railways. All of us, looking at the conditions of the country, believed that that was a wise proceeding on the part of the present Government. We believed that if a strike took place on the Great Southern Railways, as it had on the Great Northern Railway, the railway industry of this State would have been practically wrecked and might never recover. We knew that the people who would suffer in that case would be the labouring classes. The Senator knows that if any mighty catastrophe had happened to the railways, it is labour of every quality that would suffer. If the Senator thinks that those who are talking about the interests of the debenture holders have no thought for the men who would be thrown out of employment if the railways ceased to operate, he is quite wrong. I do not suppose he thinks that at all. Nobody knows better than the employer that this is a marriage party, if you like. We are tied up together. We cannot get on without labour and they cannot get on without us. One of the reasons we are speaking so much about these debenture holders is that labour cannot get on unless there is capital to pay for its employment. The railway company would never have been established if its promoters had not been able to get some millions of money by way of debentures. That was a cheap method of getting money and it had this great qualification, that the railway company could never be called upon to pay the money back. That has been mentioned by the Minister as one of the disqualifications of the debenture holders. It was a Godsend to the railway company, and it was the result of mutual agreement between the debenture holders and the company. The debenture holders could not call for their money but, if their interest was not paid, they could put in a receiver. These rights are now ignored in this Bill. The amount of that capital, which was a debt due by the company and did not represent shares in the company, is being arbitrarily written down by order of the Oireachtas. The unjust steward in the parable called his master's debtors and told them to write down 100 measures of wheat to 20 and, in another case to 80. Most debenture holders wonder why the Minister stops at 15. The human mind is an extraordinary thing. Why should the Minister have made up his mind that it was quite honest to cut down debenture stock by 15 per cent. and the interest from 4 per cent. to £3 8/-? He might have followed the unjust steward. He might just as well have gone to 25 per cent.
Does the Senator realise that it was the actuary appointed by the Company who suggested that cutting down and not the Minister?
You are touching a very difficult matter which I should rather you had left out. What the Board did and what representations they made to the Minister are doubtful matters to which I do not like to refer. I shall only refer to one remark made by a Senator after the division last week. He said he asked the solicitor of the company whether the Board were interested in this matter and whether it was in the interests of the company that my amendment should be carried. He was told that the Board of the company did not represent the debenture holders, and that, practically speaking, they were not interested. I am trying to quote the Senator who said that, and as far as I can make out there has been no contradiction of it. It may be taken for granted in this House that the railway company did not leave the Minister under the belief that they would actively oppose the cutting down of the capital of the debentures. That is a very serious thing, probably one of the most serious things connected with the whole matter, because if the directors of a big company do not think that its creditors are part of the interest, which they as a Board should look after, we are coming to an extremely perilous state of affairs. What I really tried to tell the House was that what we have been fighting for is the rights of the debenture holders. In a Bill like this, where the Oireachtas steps in, and without the consent of the creditors of the company arbitrarily takes away a certain amount of the money which they had a right to claim, you are establishing a precedent which will make it practically impossible for any company to raise money on debentures. This should be remembered, especially in connection with public utility companies. The moment public utility companies, although privately owned, can go to the Oireachtas, and get its debenture debt reduced, following the example of this Bill, there is a big principle involved and that is one reason why we are fighting this point. It is just as important to the Labour Party, because if capital cannot be got for public utilities and for new industries—which is a cheap method of getting capital—you are going to stop money coming to the Free State, almost for a certainty. That is the cheapest and the safest way in which money can be advanced. In a matter like this Labour should be helping, and not opposing us. It is as vital for them as it is for us that capital should come to this country. We know what the present Government is doing in trying to establish industries, and we know from past experience that it is nearly impossible to get Irishmen to put their money into Irish industries. We had evidence again and again at the Currency Commission that it was nearly impossible to get Irishmen to put money into Irish ventures. This measure is nailing down the lid on the coffin. These are the principles for which we are fighting here, and the Government could have dealt with the situation perfectly easy.
I am not going into the question that Senator Miss Browne dealt with. I was sorry to hear it said that what was put before the House regarding debentures had been settled. The Minister has minimised all through the position of the debenture holders. He minimised the size of the meeting they held. If you can have trustee stock of this nature, representing holders of 2¼ millions of capital, which sent a deputation to him, I think the Minister knows probably by this time—after receiving Mr. Maxwell's letter—that they would neither suggest nor have anything to do with the the reduction of the capital of the debenture stock. Such proposals were never put forward. Senator O'Farrell said that the debenture holders were never asked to do so. I have heard the Senator and other Senators on the Opposite benches talking about asking the debenture holders to agree to such proposals. It is like meeting a man with a big club going down a lane at night. The way the Oireachtas is dealing with debenture holders is as if they had not clubs. They are taking it by jorce majeure. Again, that is another extremely bad precedent to set up. The Seanad decided by two votes not to do what Senator Crosbie's correspondent suggested, to leave over for further consideration the question of the capital. I did not think any good would have been done in leaving over the ordinary shares. I am not adverse to backing the Minister in that part of the Bill. The Minister dealt with a matter about which there was no question, stocks on which dividends were being earned. He took them out. The one blot in the Bill has been that dealing with debenture holders. The Minister has ignored the importance of these in this Bill. Unfortunately, before the advice was taken, he stated that a deputation which had discussed the matter with him gave away rather on the question of the amount of the capital. No one was here to contradict that. I have reason to know that Senators when voting were influenced by that statement which, coupled with the representation of an official of the company, that the Board was not interested is, to my mind, the main reason why the Seanad in one week reversed by two votes a decision that they had previously given by a considerable majority.
There is one other matter that I wish to refer to on this stage of the Bill. That is the position of trustees. I looked up what the Minister said in answer to an opinion that I read out about the trustee nature of the stocks as to what protection trustees who were going to buy stocks in the railway during the next two or three years would get. Senator Comyn thought I referred to holders of these stocks. He knows quite well that as long as the stocks were bought before these revelations there is no necessity for trustees to sell out. They are not under any legal liability. In this Bill there is a clause from which, on reading it one would think there was security if stocks were bought, and if there was a fall in value, of which the beneficiaries might complain, or eventually take action on. What the Minister stated was: "It was thought undesirable that the trustee status of the company should be imperilled during that period. The section gave the trustees the necessary protection for the time named in the Bill." I doubt if there is a single stockbroker in the Stock Exchange who would endorse that statement. Every dealer knows that if trustees chose to buy stock that they know "has been blown" they take the risk. No clause in the Bill would protect trustees from action being taken by beneficiaries for investing in stock which they ought not to have bought. The opinion I mentioned to the Minister was given in the interests of everyone. It was not a controversial matter. If there is a clause in the Bill which leads future trustees to think that they are perfectly safe to act in that way, and if they afterwards find out that they have not been safe, but have been misled, and accordingly lose their money, I think that is a very dangerous clause to come into the Bill. The Minister did not say anything about it here. I do not expect him to say anything now. If there is any weight in the opinion of two of the best lawyers, I say we should consider it, and when the Bill goes back to the Dáil the Minister would be well advised to alter that clause and not to have people believe that in a Bill of this kind they have security when, as a matter of fact, they have not got it.
May I ask Senator Jameson a question? Does the Senator believe that the railway company, without interference, could go on earning sufficient to pay interest to the debenture holders?
All that I can say in reply to the Senator's question is, that I do not think the House has a bit of evidence to show that it can, though there are people who believe that it can, and also think, what we all hope is true, that the company in the future is going to be greatly benefited by this legislation.
I am pretty well satisfied that without this legislation the company could not go on. The point I want to make is that listening to some of the speeches made one would imagine we were living in the moon. Some people seem to be thinking all the time of the debenture holders. There is no notice whatever taken by some of the sacrifices that railway employees have been called upon to make. All that some people think about is the earning of dividends for the debenture and other shareholders. The earning of these dividends must be maintained although the employees starve. Senator Jameson gave what, I think, was a very selfish example. He referred to the unofficial strike on the Great Southern Railways. He congratulated the Government on their intervention and on paying money to prevent the thing going on. He had no objection whatever to the money coming out of the pockets of the general community to safeguard the interests of railway shareholders. He thought it was a noble thing for the Government to come to the rescue of these shareholders.
If the passing of this legislation means, as I am told it does, a saving of upwards of £50,000, then that sum so saved will be available for distribution in other directions. The Government is giving a monopoly to the railway company under this Bill. That will give the company an opportunity of developing their business. I do not profess to know very much about finance or the ramifications of what is called capital. I know enough, however, to understand that when a firm or an industry becomes bankrupt the creditors are called in, and of the available assets a division is made. Sometimes the arrangement represents a payment of 5/- in the £, and sometimes only half a crown. At any rate, there is an arrangement come to to divide up whatever assets are available. The railway company had almost arrived at the point of being bankrupt. The arrangement made in its case under this legislation is certainly a very much better one than the creditors of an ordinary commercial concern, for instance, would get. In addition, the company is getting a very valuable monopoly to carry on.
As Senator O'Farrell pointed out, the railway employees to the extent of thirty-five per cent. have had to make sacrifices. Railway workers to-day are earning less than £2 a week. Great numbers of people entered the service of the railway company in their youth. They believed that they were entering not only lifetime, but pensionable, employment. Many of these have been thrown out on these streets. We have heard no protest from Senator Jameson or Senator Sir John Keane against that. Now when an attempt is made to re-establish the railways on sound business lines all that some Senators are concerned about is the dividend-paying end. They do not trouble at all about the workers who have had to suffer. I think the Government are to be congratulated on taking this step to safeguard the future of the railways and, let us hope too, to ensure a decent standard of living for those employed on the railways.
Senator Jameson has upheld the cause of debenture holders with a degree of perseverance that has surprised me. He threatens the most serious consequences to this country as a result of writing up to £85 debenture stock that now stands in the open market at £37. Senator Foran asked a very impertinent question. It was this: if the Government had not intervened at this stage to give the railway companies a virtual monopoly what would be the value of the debenture stock? Would it be £85, would it be even £37, would it be saleable at all? I do think that Senator Jameson has made rather too much of this question of the writing down of the debenture stock without the consent of the debenture holders. I do not think it is, in the circumstances of the case, an invasion of the rights, a real substantial invasion of the rights of creditors, and I do not think it called for the Senator's paraphrase of the Parable of the unjust Steward. I find it extremely hard myself to see the application of that Parable in the present case, except indeed that the people who are hardly treated in his legislation are perhaps the general public.
Senator Jameson asked for the co-operation of the Labour Party. In all the clauses of this measure and in all the debates that have taken place on it he has got the intelligent co-operation of the Labour Party. But there is another party to be considered. There is the person who uses the railways and the person who uses the roads; the people for whom these utility services are required. A virtual monopoly is being created here over road, rail and in the air itself. The Government have done well for the Great Southern Company. The Minister is quite right in saying that there is the possibility that, as a result of this legislation, the debenture stock and the ordinary stock will rise and rise sharply. Not alone have the railway company got a monopoly of transport, but they have got the right, with the consent of the Minister, to close the guaranteed lines that were so useful in the backward parts of this country. I hope that right will not be availed of to a very great extent.
What I would say before this Bill is passed is this: that the railway companies have got a chance, and a splendid chance, from the Minister of making good. If they do not use that monopoly prudently and efficiently, if they think merely of their dividends, I would not be surprised to see a serious agitation for the repeal of this measure. When Senator Jameson asked for the co-operation of Labour I want to tell him that there are other interests in this country as well. The Senator referred to a very useful section in the Bill, put in by the Minister, dealing with trustee securities. That is a very well-thought out section which apparently shows that the Minister has foreseen a situation that might arise. If that section were not there and if these stocks ceased to be trustee securities at any time and by reason of any non-payment of dividends they were all thrown on the market, then indeed the stock would be "blown upon" as Senator Jameson said. These stocks have been very considerably blown upon in the course of the discussions that have taken place in the Seanad. I would be the last in the world to attribute to Senator Jameson any motive whatever except the highest motive in regard to these stocks, but I do think that the value of this property has been very considerably enhanced as a result of this legislation. I would have expected from Senator Jameson some statement that would show his appreciation of that fact.
I join with the other Senators in congratulating the Minister on the skill with which he has framed this measure in both its parts because this measure consists of two parts: reconstruction and financial help by means of a monopoly. One cannot be enacted without the other. It would be impossible to allow this company to go on without reconstruction and, at the same time, to give it the wide monopoly over the transport services of this country which this Bill proposes to give it. Those who represent the country interest, the travelling public and the small farmers of this country, wish well to this monopoly. We hope that the railways will succeed. We even hope that the flat rate will succeed although, indeed, that flat rate, unless it is administered with an absolute sense of justice to the small people and unless it is carefully watched by the Minister, it will be the cause, I should say, of great bickering and great discontent. Taking the whole measure under review I think that the criticisms of Senator Jameson are not at all justified. The Bill was introduced to deal with an emergency. It is only a great emergency that could have justified the wide monopoly that has been conferred upon this railway company. We are willing, some of us, to give that a trial, but I can tell Senator Jameson, whether he talks for debenture holders or for ordinary stockholders, that unless this monopoly is carefully guarded so that injury will not be done to the public he will probably find an agitation for the repeal of this measure.
I did not intend to say anything at this stage of the debate as I did not think it would serve any useful purpose, but statements have been made in the course of the discussion this afternoon which make me feel that I should say something. I am one of those who are opposed to the reconstruction of capital proposed in the Bill, particularly that part of it referring to debentures. I am not against that part of the Bill merely from the point of view of the debenture shareholders. I do not happen to be one of them and I have no special associations with that particular class of stockholders. I am against the proposals purely in the interests of the country as a whole because I believe if debenture holders are treated in this way it will be very difficult to raise debentures to finance any Irish endeavour in future. The allegation has been made that those who attack these proposals do so from the point of view that dividends must be paid even though railway workers may starve. That is a sort of statement that does not impress me in the slightest degree. I know that it is entirely a misrepresentation of the true position. The real position is that railway workers are a specially favoured wage earning and salary earning class in the country. They are far better off than any other class of a comparable size. Compared with their position in pre-war times, they are very much better off than they were. They are paid twice or more than twice as much as they were in those days, whereas the shareholders' income—and many shareholders are very poor people—has diminished from five or six per cent. to nothing at all. That is the real position.
There has been a great deal of talk about a monopoly. It is true that there is a very large element of monopoly in this Bill. It is one of the features of the Bill, but it has been spoken about as if it were a thing that could come about in a few weeks. It should be remembered that it is merely a potential monopoly and it is a thing which is going to be very difficult of realisation. The realisation of that monopoly will be the means whereby the railways can be pulled out of the difficulties in which they find themselves at present and put on a paying basis again, but that very realisation is not going to be made any easier and, in fact, in my opinion, will be made more difficult by the proposals regarding reconstruction of capital in the Bill. It is not going to be an easy thing to raise the money to make that potential monopoly an effective one. On the whole, as I have made clear in a previous debate, I realise the great difficulties of the position and I think that the Bill is in the main a most excellent endeavour to put it right. I am not in favour of the reconstruction proposals. A good deal of that part of the Bill does not actually affect anything in the way of saving money. That part of it which does, namely, the part dealing with debentures, is, I think, a very bad thing for the country at the moment. I am afraid these are proposals which are likely to come home to roost.
Senator Jameson told us again that his particular insistence in this debate has been on a matter of principle, the principle of financial probity, straight dealing with capital and so on. I suggest, that, looking beneath the surface, it will be found that the principle that Senator Jameson in particular and Senator Sir John Keane, Senator Miss Browne, Senator Bagwell and others have really spoken of, is the principle that where capital is invested in a concern there should be a recurring perpetual income by right available to that capital.
Nonsense!
I am tempted to quote an article which was written in Studies in September, 1932, on this question by the Rev. J. Coyne, S.J., M.A., and I should like to draw the attention of Senators to the points Father Coyne made in the course of that article. He stated: “First and foremost, in my opinion, the financial facts of the Irish railways should be faced. There are a considerable number of years of Irish railway financial history which should be investigated on behalf of the community by some firm of auditors. The facts and figures that should be faced are: (i) The total amount of money distributed as interest or dividend since railways were introduced; (ii) the total amount of money distributed to the actual workers of the railways in salaries and wages for the same period; (iii) the total amount of money actually earned by the railways (i.e., not the original or fresh capital issues) which was applied to renewals of fixed capital, permanent way, rolling stock, etc. It should be possible to secure these figures without much trouble.... Above all, it should be clearly settled who in equity has paid for the railways as they stand to-day, for the present rolling stock, buildings, permanent way, etc. It is generally taken for granted that the shareholders, the owners of the railways, have paid for all these—not only at the commencement, but even up to the present day. It may be so. An investigation might clearly establish this fact. But on the other hand it may not be so. It might be found that in equity a great portion of the present fixed capital of the railways should be put to the credit of the users and the workers of the railways for the past 70 or 80 years. Before any final solution of this problem is decided on, the whole of the accounting side of the question from a moral, social and economic point of view should be gone into.”
I was hopeful in the course of this discussion on the Railways Bill that some of these figures and the finances of railways might have been presented, but they have not been. I intend just to put forward one or two figures I have, within the last few hours, found and which I think are worthy of notice, touching these questions which Fr. Coyne raised in his article in Studies. I have not got the figures for the Free State railways, except as regards the existing capital stock which is contained in the Schedule of this Bill, an amount of £25,701,000. I have the figures up to 1921 for the whole of the Irish railways and the capital then invested was something about £47,000,000. Senator Jameson spoke of the shareholders, the old shareholders, who bore the burden and the heat of the day.
Did I?
I did that; I was the delinquent.
I beg your pardon. Senator Sir John Keane stands by the old shareholders who bore the burden and the heat of the day. £25,000,000 odd was the amount that is invested capital, or raised by loans and debenture stock up to 1864. The figures before that are not available. So that more than half the total of the present capital of the Irish railways, taking the country as a whole, was invested so long ago as 1864 or earlier and the amount, which was paid in dividends to all classes of shareholders, ranged about 4 per cent. for many years. In the few years following that there were additions to the capital. Between 1865 and 1880 another £8,000,000 had been added—53 years ago. In 1889 another £4,000,000 had been added—44 years ago. In 1900 another £3,000,000 had been added—33 years ago. Up to 1921 the dividend which had been paid on this capital ranged round 4 per cent. Those people who put their money, their hard earned savings, into the railways 80 odd years ago, in the hope of getting 4 per cent., let us say might have put their money into British Consols and got 2½ per cent. or 3 per cent., but they preferred to put it into Irish railways and take a certain amount of risk. Presumably they did not then see the coming of the internal combustion engine. That was one of the risks they took. It came, but, according to the arguments we are now hearing, there was to be a perpetual claim to a dividend round about 4 per cent. for these people who put their money into Irish railways 80 years ago.
I suggest that looking at the thing as a real matter-of-fact affair, not merely as a financial accounting matter, if a man put £100 in rolling stock and permanent way 80 years ago, and got for 50 or 60 years, 4 per cent. on that money he has no reason to complain if eventually he loses it completely. Father Coyne asks how much of the fixed capital of the company had been actually provided by the users and the workers of the railways. Here again one cannot get detailed figures in regard to the Great Southern Railways, but one can get this figure, that for all the railways in Ireland in 1913 the proportion of expenditure which was devoted to the maintenance and renewal of ways and works, and the maintenance and renewal of rolling stock, was 39 per cent. of the total expenditure. The figure for the year 1921, which was just after the war and might have been an exceptional period, had risen to 45 per cent. of the total expenditure. One sees the position that the railways were provided out of the capital savings of certain people. As years went on, of course, almost every year there was renewal required and the amount expended on renewals each year was over one-third of the total expenditure and at the end of 56, 70 or 80 years the railways, owing to renewals out of earnings were a better property, from the point of view of mere physical efficiency, than they were during any intervening period. So in fact the railways were renewed out of the annual takings of the company.
The proposition seems to be that money having been invested, lines having been laid, rolling stock having been provided, all that has to be expected is that the wheels of the finance shall go on perpetually, and that the dividends shall be always forthcoming. I dare say the Minister will not be a supporter of the doctrine I am prepared to preach, that there should be a limit to the number of years during which capital is going to be recompensed, that dividends cannot go on perpetually and that there is no justification in equity that capital should go on perpetually paying dividends to shareholders who are merely waiting to receive them—"bearing the burden and the heat of the day"! How much of the burden and the heat of the day does a man who has his name in a book suffer or share? None at all; he is simply receiving what other people earn.
I think that the railway shareholders are, by this Bill and by the Bill that has been running in harness with it, the Road Transport Bill, in fact, receiving a gift from the State. They are being presented with a property and assured of an income which, without these two Bills, would not be theirs and I wonder what would be the value of this permanent way and rolling stock if the community was not there to use it and to pay for its use, and if the State were not coming forward to help it to withstand the competition of the new and more modern and, apparently, more popular form of transport? My view in this matter is that the State is very generous to the railway shareholders and while it is a desirable and a necessary thing that the railways should be kept in actual activity, the shareholders ought to be thankful and not complaining of the action of the State in coming to their assistance as they have done in this Bill.
As a matter of explanation, Senator Johnson seems to have quite misinterpreted anything I said. What he has been talking about I have not been talking about at all. I spoke about the people who lent money to the railways and not the shareholders, but the whole of his speech has related to the shareholders.
I include the debenture holders in anything I have said.
If the Senator included debenture stock and regarded it as money invested in the railway, it was not. It was money lent to the railway company.
The railway company's own statement is that the paid up capital, on 31st December, 1921, including ordinary common guaranteed and preferential stock and capital raised by loans on debenture stock, amounted to £47,875,000.
These loans and debenture stock are the one thing, and if the Senator will look into the Act that established that, he will find that to be so. The loans and debenture stock are on one side. The capital of the company is a totally different thing.
My remarks apply to loans and debenture stock.
Then, all I can say is that, in so far as they were intended as a reply to me, they were quite inappropriate, because anything the Senator has said applies to nothing that I have said. I was dealing with the rights of people who had lent money to the company, and I think the Senator will admit that, if you lend money to anybody, you can surely claim the right to get it back. If you are going to suggest that anybody who lends money should be faced with the prospect of getting nothing when the time comes for his loan to be repaid, we get into a sphere into which I do not like to move. The man who lends money expects to get it back. That is the principle I am acting on, anyway.
I do not propose to delay the House unduly, but I should like to deal with some of the remarks made by Senators in the course of this discussion. I noticed that some Senators used the word "confiscation" in relation to this Bill and, although I think it is possible to use that word, those who did use it, misapplied it. To a certain extent, there is confiscation, but it is confiscation for the benefit of the railway company, and that fact appears to have been ignored by a number of the Senators who addressed themselves to this measure. We are going abroad into the country; we are going to every person in the country, rich or poor, whether he is a debenture holder, an ordinary stockholder, or one of that large and respectable body who never owned any stock, and we are taking something from them for the benefit of the railway company. Let us get this fact straight, because every member of this Seanad seems to have discussed this Bill as if the only people who are being asked to make a contribution to the new transport scheme were the owners of railway debentures or railway stocks. It is not so. On the contrary, they are being asked to make a smaller contribution than many other classes of the community. We are going to the taxpayers; we are going to the users of the transport services; we are going to the owners of competing transport services, and we are taking something from everyone in order that the railway position might be strengthened, and that the debenture stockholders might get what they have not got now—some security for the continuity of their interest payments.
If the debenture holders are being asked to accept a lower annual return in the future than they have got in the past, they are getting good value for it, They are going to get the certainty of that payment continuing which they have not got for many years past. Senator Foran asked Senator Jameson if there were any people in this country who believed that, without this legislation, the railway company could continue to pay the debenture interest. Senator Jameson replied that he knew many people who believed that the railway company could continue to pay the debenture interest. If there were many people who had that opinion, they must not have been very anxious to risk their own savings on the opinion. The prospect of the railway company continuing to pay the debenture interest is adequately reflected in the price at which debenture stock was quoted on the market. I do not think that that argument is contested.
If there was any reasonable certainty that the interest on these debentures would continue to be paid, not even permanently, but for a considerable time to come, that stock would not be quoted at its present price. Those who can get 4 per cent. for their money, at the present time, consider themselves lucky. A 4 per cent. gilt-edged stock will be quoted at par, if not above par, on the stock exchange here or anywhere else and the fact that these £100 stocks are being quoted at £36, is a fair measure of what the capital owners of this country thought were the prospects of the railway company being able to continue to pay debenture interest for any time to come.
The proposals in this Bill have been attacked from many points of view, but I do not think that anybody seriously suggested, before to-day, that they were unfair. They have been attacked on the ground that it was bad policy, taking into account general considerations, to interfere with the nominal values of the debentures of a public utility company of this kind. They may have been attacked on the ground that information which would justify a fair allocation of a new value is not available, but to attack them on the grounds that it is unfair to do it, having regard to everything that is being done for the benefit of the railway companies, is, in my opinion, ludicrous. Senator Sir John Keane said it was unfair to do it, but he backed his argument as to unfairness with a new contention, something which was not advanced in any previous discussion on this part of our transport proposals. He said that persons will put money into the railway company in future and will be getting a higher rate of remuneration on that money than those who did so before. Senator Jameson, I think, has a different point of view from Senator Sir John Keane in this matter. He not merely thinks that nobody will ever again put a penny into the Great Southern Railways because of this measure, but that nobody in this country will ever be able to raise money on debentures. Senator Sir John Keane, on the other hand, thinks that the railway company will have no difficulty in getting new capital, but he points to the unfairness of the fact that new investors will be remunerated at a higher rate than the old investors. He is forgetting, however, that the assets which will be created by the new capital will be revenue earning assets. I refer him to the assets that were created by the old capital and ask what percentage of them are capable of earning any revenue now. Surely, there must be some consideration of the actualities of the position and not merely the theories that might be advanced in relation to it.
Railway lines have been built and have been closed down. As I said here, on a previous stage of the Bill, there are workmen at present employed, in certain parts of the country, taking up lines, dismantling signalling boxes, and scrapping other apparatus that is used in connection with railways. Is it seriously contended that we should take out of the transport organisation in this State, in the way of higher charges or some other way, the amount required to remunerate the capital invested in these lines now abandoned? Money was invested in railway stations and other equipment throughout the country, a large part of which is now an unnecessary burden and expense on the company, much less a source of revenue. In so far as the old capital has been expended on assets the utility of which is gone, it is right that that capital should be written off. In so far as new capital may be raised, it is only to be expected that it will be utilised to create assets capable of earning revenue for the company to remunerate the capital and, even, perhaps, to help to remunerate some of the old capital as well.
One other argument has been advanced during the course of this discussion and it is that the actual reductions carried out in the different classes of stock have very little to justify them in so far as it is not possible to produce all the information that should be available before one could say what the reduction should be with mathematical precision, and Senator Jameson asked why did we reduce the debenture stock by only 15 per cent. I cannot answer that question. I think it is much too small a reduction. I think that anybody who has regard to the known facts of the revenue of the company since the amalgamation and to the present value of that stock on the market can only come to the conclusion that 15 per cent. was too small a reduction.
Is it too late to amend it?
I, however, felt that we could afford to take the risk of erring in the direction of making the reduction too light than of erring in the opposite direction. We have been told that the debenture holders have not agreed to this reduction. There is nobody here, or anywhere else, has any right to say that. It has been suggested that I misled the Seanad with regard to the views of those whom I met and who represented one-fourth of the debenture holders of the company. That is a rather serious allegation and I will deal with it in a minute. Nobody here has a right to mislead the Seanad as to the views of the remaining debenture holders. They have not expressed their views. No Senator or no member of the Dail or of the public has any more right than I have to come in here and say that the debenture holders do not agree to this reduction. The debenture holders have not got an organisation through which they can express their opinions. Certain debenture holders held a meeting. They invited, through the public Press, all debenture holders to come to that meeting for the purpose of considering their views on these proposals and representing them to the Government and the meeting was held. It is preposterous to say that the meeting was only representative of 25 per cent. of the debenture stock because most of the stock was held by trustees. The majority of those who attended the meeting were trustees. I should say that, of the deputation I met, three out of every four members were there in the capacity of trustees—not holders of debenture stock in their own names but representing organisations and bodies of one kind or another—and it was as trustees they spoke. The full meeting represented one quarter of the debenture stock and the representatives who came to me expressed their willingness to make a contribution to the reduction of the charges on the Great Southern Company by reducing the interest payable on the debentures for a limited period of time. I think that is what I said in the course of the discussion on the Report Stage on this matter. The report of the debate is not yet available, but I intend to examine it to see if any word I used on that occasion could have misled anybody into believing that I meant anything different from what I have now said.
I do not want to prolong this discussion but there are a couple of other points to which I want to refer. As regards the section dealing with the trustee status of the prior stocks of the G.S.R. Company, if Senator Jameson is right, no harm is done by having the section in the Bill. The section purports to protect trustees who invest trust moneys in the stock of the company. If that section were not there, it is quite clear that trustees could not invest trust moneys in these stocks. Senator Jameson says that the insertion of the section does not give them the right to invest in these stocks. If that be so, the section is doing no harm. We can either leave it in or take it out. If the Senator's views are correct, it makes no difference which course we adopt.
Perhaps I might interrupt the Minister. This is merely an exchange of opinion. A trustee might easily be misled by that section. If he is misled, he has no remedy. That is the real trouble. A trustee who reads the Bill and who reads the Minister's statement that he believes trustees will be protected by that section from any action the beneficiaries might take, might buy that stock and yet the section will give him no real protection whatever. So long as the Minister is considering the matter, I do not want to say more but a trustee who, on the strength of that section, finds himself mulcted in costs will not say "thank you."
The only angle from which that contention can be put forward is that a trustee is under an obligation, in any event, to invest trust moneys to the best advantage and that that obligation remains whether certain classes of stock are classified as trustee stock or not. We are not altering the trustee's legal obligation in that respect. We are merely preserving the nominal trustee status of these stocks during the period of reorganisation—until the 31st December, 1935. It has been suggested that this action has had adverse effects on the credit of the country. The only answer I can give to that is that it has not had such adverse effects. In no way has the credit of the country been affected. If Senators look at all the possible indices to the credit of the country, they will find that it stands higher to-day than it did when this Bill was introduced.
Many Senators spoke about the management of the company. It is quite true that no legislation that human wit could devise could preserve the company if the management was incompetent or if those responsible failed to take advantage of any opportunities provided. I have no reason whatever to believe that the G.S.R. Company's management will not rise to the opportunities provided by this measure. If they do not, there is a new situation—a situation that will have to be dealt with. I cannot say that I share the view obviously held by a number of Senators, that the management of any concern by private owners of the concern must necessarily be efficient and that the management of a concern which is publicly owned must necessarily be inefficient. My own experience has generally shown things to be the other way round but if we find that, under private ownership, we cannot get efficient management of our transport organisation, we shall have to get it in some other way. I am quite certain that, on evidence of incompetence being produced, very few in this House would object to the State interfering for the purpose of securing efficiency. The prime consideration—the provision of adequate, efficient and cheap services for the public—will override all other considerations.
I should like, in conclusion, to express appreciation of the manner in which the Seanad has given consideration to this Bill and to the Road Transport Bill. The discussions we have had here have been particularly useful and the amendments inserted in both Bills have considerably improved them. It is my intention to recommend the Dail to accept all the amendments.