On Section 3, I should like to make a submission. You will observe that under Section 3, an offence under any section of this Act may be prosecuted by the Minister. It seems to me that there is some ambiguity about that, having regard to the provisions of Section 62, which creates the offence of trespass. Section 62, in fact, provides that any offence under that section may be prosecuted by the company. It seems to me that there is some ambiguity between those two provisions. I think I can understand how it occurred. When the Bill was originally submitted to the Dáil, Section 62 was not there at all. I think it was submitted subsequently by the Minister on the Committee Stage in the Dáil, and perhaps the draftsman inadvertently passed Section 62 without having adverted to the provisions of Section 3, which appears to me to mean that every offence under every section of the Bill would be prosecuted by the Minister and by nobody else.
Public Business. - Transport (No. 2) Bill, 1944—Committee.
Not necessarily by nobody else.
If the Minister is satisfied I am satisfied. I merely want to draw attention to it.
I may point out that Section 3 is merely an enabling section. It empowers the Minister to prosecute under the Act, but it does not relieve the Gárda Síochána of their task of enforcing the law, or prevent interested parties from invoking the law in the protection of their own interests in relation to specific matters. It is proposed to empower the company to prosecute, but neither the provision of this section nor of Section 62 is exclusive to the extent of debarring anyone else from taking action.
I move amendment No. 1:—
Before Section 5, page 8, to insert the following new section:—
5.—(1) Each year (other than the year 1945) the Minister shall not later than the 31st day of March lay before each House of the Oireachtas a report of his transactions under Chapters II, III, IV, V and VI of Part IV of this Act.
(2) If a resolution relating to the report mentioned in sub-section (1) of this section is tabled in either House of the Oireachtas within thirty days after such report is laid before that House, it shall be competent for such House to discuss and determine such resolution within the next subsequent twenty-one days on which that House has sat.
When this Bill was under discussion on the Second Reading, the Minister, I understood, was rather inclined to agree with the suggestion that there should be some machinery by which certain of his transactions under the Bill might be reviewed at some stage, or by some method, in both Houses. This amendment is very limited in scope. It proposes merely that a report of the transactions of the Minister under certain specified Chapters in Part IV of the Bill will be reported to both Houses so that an opportunity will be given, if it is desired, in both Houses to discuss what is being done in respect of these transactions. The matters dealt with in these Chapters are the revised railway classification of merchandise mentioned in Section 71; the revised schedules of maximum charges in Section 72; the alteration of classification of merchandise and of maximum railway charges mentioned in Sections 73 and 74. There is also the determination of disputes regarding dangerous goods, but personally, I am not concerned whether that is a matter of report or not, because I do not think it is important that it should be reported.
Then there is the determination of the Minister regarding charges for the carriage of merchandise by road which will be applicable to any statutory carrier. That is in Section 92, and there is also the revision of the scheduled charges of canal undertakers. These are the only matters, I think, that would come up for report under the amendment, and it will be noted there is no suggestion in the amendment that there would be power to annul anything the Minister has done. All the amendment does is to provide an opportunity for discussion, if there is a desire for discussion, in both Houses, following determinations of this character by the Minister. I do not suggest that the amendment as it stands shows the best possible draftsmanship. If the Minister is agreeable to make a report in regard to these transactions, and to submit an amendment of his own later which will secure that that is done, I will be perfectly satisfied.
With regard to the amendment, apart from the merits whether the Minister ought to make a report or not, paragraph (2) of the amendment is completely unnecessary. If it were desired that a report was to be laid before the Houses, then the Houses have in themselves power to discuss that report and this particular Bill, when it becomes an Act, could not give that power if it were not in existence. I suggest to Senator Duffy that paragraph (2) of the amendment is entirely unnecessary. The important part, of course, is paragraph (1).
I wish to support the principle embodied in the amendment. I am not concerned how the matter comes before the House, but I do feel that there should be some method by which this House would have an opportunity to review the operations of this transport monopoly, because that is what we are facing now, a transport monopoly. I know that it can be dragged before the House on motion, but that is never a satisfactory method. It involves something like putting the Minister in a sort of pillory on the occasions on which you table a motion.
A motion tends to be treated as a sort of hostile criticism, whereas if we could have a report which would be laid before the House as a matter of course, the House could discuss any transaction arising during the past year out of transport policy. All through this Bill, I am very concerned to see that there is practically a Government dictatorship over transport policy, and the Minister is going to resist any attempt to allow the users of transport to become vocal, to permit the ordinary people to have an opportunity of voicing any grievances they have. I feel that Parliament should have an opportunity of discussing transport policy as a matter of course, and the principle which the Senator has put in his amendment ought to be pressed by the House, not necessarily worded in the way the Senator suggests, but in some equally adequate manner.
I would like to support this amendment with the same proviso as that introduced by Senator Sir John Keane. It is the spirit of it rather than the exact wording which I wish to recommend. It will be within the knowledge of members of the House that when railways first came into prominence they were encumbered with a great number of restrictions. At every stage, from the time when they first promoted their Bill, they had to satisfy Parliament that what they were doing was right, and in addition to satisfying Parliament they were also subject to very stringent supervision by the courts, or by other tribunals, such as the Railway Tribunal. That was done because it was felt that with the power which they could wield, and the extraordinary, financial control likely to come into their hands, they might exercise their powers and privileges in such a way as to hurt the ordinary citizens. It may be strange to members of this House to hear that all that railways were allowed to do in the beginning was to put down a railway track on which any ordinary person could, if he wanted to, run a coach. People other than railway shareholders were safeguarded both by the continued supervision of the legislature and by the courts or independent tribunals.
Now all that is changed. For reasons so well expressed by Senator Douglas in the first speech made on Second Reading a great many people besides myself do not want to take up in regard to this Bill a position of violent antagonism. The Bill has, certainly, received the approval of the Dáil. It has also received the approval of the people of Éire. Even apart from that, it must be recognised as a courageous experiment to solve an exceedingly difficult problem. It must also be recognised that that experiment should be regarded as a whole, and the mere fact that one can pick holes in certain portions of the Bill should not induce anybody to attempt so to whittle away the characteristic structure of the Bill, as, possibly, to make it unworkable. It is the Minister's experiment. We hope it will be a successful experiment. It should be given a chance to work within the limits I have laid down, but a number of us feel somewhat apprehensive as to the principles which lie behind the measure. So far as the principles which we distrust or dislike can be modified without hurting the effective power of the Bill, we should like to get that done.
Senator Sir John Keane has referred to the fact that this Bill is really an experiment in dictatorship. In the course of the debate, many other Senators will probably make much the same point. It is an experiment not only in commercial dictatorship, because of the power which is being given to the chairman, but it is an experiment in Governmental dictatorship, because the Minister very frankly stated that the chairman was meant to be the spokesman of the Government and to be capable of being controlled by the Government in any manner which it thought fit. Therefore, it is an experiment in a double dictatorship and there are a number of people besides my friends on what, I suppose, I may call, for the sake of clarity, the Labour Benches, who very much distrust that principle. There is no doubt that, at first, a dictatorship always works. It is an improvement. It gets one directive mind and it gets economies. I anticipate that, for the first few years, this Bill will show economies and will show an improvement. But that is not where the danger comes. The danger comes subsequently when the director will have exhausted his initial impetus for good, when he becomes seated in the saddle, when his mind has become fixed and when he is resentful of any opposition or criticism. I think I am quite correct in saying that the whole history of dictatorship shows that it is not at the beginning that the damage is done but when the dictators are seated in the saddle and when they come to the conclusion that what they think is what is right and what should be the law.
This amendment is an attempt to impose one check on the dictatorial powers given in this Bill. It suggests that the operations of the dictatorial element should be the subject of a report to the Oireachtas and should be capable of being reviewed. Surely, there can be no objection on the part of the Minister to that, either in theory or in fact. If the operations can be supported by argument, then, because of a majority in the House or, perhaps, because of quiet reasoning behind the scenes, there will be no objection, no interference and, perhaps, no questioning. But we must assume that even the Minister-dictated chairman may go wrong. That is not a very hazardous assumption to make about anybody who is given absolute power. If we make the assumption that he may go wrong, there is nothing which should shock Senators in the suggestion that there should be power whereby the Oireachtas could, if necessary, control the wrongdoer. I support this amendment because it seems to me that it places in the hands of the Legislature a very necessary power of examination and, if necessary, correction. I may, perhaps, save a certain amount of the time of the House later by saying that where, in other parts of the Bill powers which are at present in the hands of independent tribunals are being taken away and are being placed in the hands of advisory bodies, who will not exercise judicial functions and before whom ordinary members of the public will not be able to come, I shall, again, suggest that these bodies be substituted by some tribunal which will exercise an independent judgment and before whom ordinary people can make their cause known. For that reason, I strongly recommend that members of this House should impress upon the Minister that he should yield to some sort of amendment, not necessarily in these words, which will enable the Legislature to interfere, if it so desires, and not entirely to abrogate the position of watch-dog which is so strongly insisted upon in all earlier legislation.
In regard to this amendment, I suffer from the disadvantage that the first intimation I got of it was when I arrived in the House to-day. For that reason, I was rather doubtful whether I should speak on the matter at all or not. I should like to have had this amendment before me for a few days at home, so that I might compare it with the relevant sections. From what I have heard so far, I feel that I cannot support the amendment. I take the view that, so far as the public interest is concerned, the method of appointing the chairman sufficiently safeguards the public interest. It is the first duty of the Government to see that the interests of the community, as a whole, are safeguarded. The fact that the Minister takes power to appoint the chairman shows that the Government is fulfilling its function in that respect. Anybody who has been watching the course of transport for years past cannot have failed to notice that the great difficulty of the railways has been the degree of inflexibility with which they had to contend. They were bound hand and foot. This amendment would, to my mind, tend to remove whatever degree of flexibility is being assured to the railways by this Bill. If it interferes with the flexibility and freedom of the railways, we should, I think, reject it. For the next 10 years, at least, I am in favour of giving to the railways the utmost freedom possible, provided always that we feel confident that the chairman will secure that the public interest be safeguarded. If it is decided that the classification should be altered, or any other arrangement come to, I feel that if these arrangements or proposals on the part of the management of the railway company are to be subject to public review and public criticism, it will make for sluggishness within the board of the transport company itself. If these people feel that their every action is going to be subject to review or discussion in the Oireachtas then they will be very slow to take these actions, to make these arrangements or go on with their proposals. Because I feel that this amendment would interfere with the proper functioning of the transport system, I cannot support it. Indeed I feel that the Bill as it is, although I approve of it, does not go far enough to meet my wishes in the matter of freedom and of preventing any interference with freedom. For that reason and because of the circumstances with which I am concerned I cannot support the amendment.
Before the discussion gets much wider I would like to draw the attention of the House to the meaning of the amendment. The amendment has nothing to do with the chairman, with the board, with the company, or anybody else. This amendment proposes that when the Minister makes an Order in the course of the year relating to maximum charges, he would report that fact to both Houses of the Oireachtas the following year, so that if the Deputies or the Senators in this House desired to discuss what the Minister has done they would have an opportunity for that discussion and for telling him what they think about it. But that would be without any power whatever to undo anything in those Orders. I suggest that that is what is in the amendment. The amendment does not once suggest that either House, or both Houses, of the Oireachtas would have power to undo anything the Minister has done. Where that interferes with flexibility puzzles me.
Have you not power to tell the Minister what you think of him?
Perhaps I might intervene in this discussion for a moment, because I do not think that even Senator Duffy has given a fair description of his amendment. The amendment has nothing to do with the matters referred to by Senator Kingsmill Moore. It is a different matter from what Senator Duffy describes. The Orders which may be made under the various chapters of the Bill may relate not merely to Córas Iompair Éireann but to any railway company or canal company and the provisions of the Bill are designed to ensure that these Orders may be made in circumstances of the maximum publicity. I take it that what Senator Duffy is trying to secure is, first, publicity, and, second, discussion in either of the Houses of the Oireachtas. So far as discussion in either House is concerned, I think Senator Hayes has demolished the need for the amendment. The standing Orders of the Seanad permit, I presume, of motions being tabled to ensure discussion on any matter of public interest. If they do not so provide they cannot be altered by this Bill. In so far as publicity is concerned, I think what Senator Duffy is trying to secure is that he and other Senators will be saved the trouble of having to acquaint themselves with what has been published by having the Minister report these matters here.
The Orders which may be made under the chapters of the Bill referred to in the amendment are to be made under the Seventh Schedule. The Seventh Schedule provides that where an application is made for an Order the Minister shall require the applicant to publish in such manner as may be directed notice of the application. When the application has been considered and the Order is made after the report has been received from the advisory committee or otherwise, then again there must be publicity. Section 103 of the Bill imposes upon the company not merely the obligation of publishing, but that of keeping published, the documents which will enable the public to know what are the maximum charges in operation and what are the classifications of merchandise which have been prescribed and in respect of which Orders have been made. There is no suggestion that any of the Orders made under this chapter of the Bill will not be published. They will all be published. The whole essence of the Bill is that there must be publicity for them. Clearly, they would not be of any value to anybody unless they were sufficiently known to all members of the public who have to avail of the services provided by this company or by any other transport company. These Orders relate not only to Córus Iompair Éireann but to a canal company or any other company.
Any statutory carrier.
There is a special provision in the Bill relating to the maximum charges of these companies, and there is provision in the Bill to secure publicity for the Orders. The Orders will be published and the application for the Orders must be published before they are considered. The company must maintain at every depôt, or any other place where business is carried on, the publication of classification of schedules, and in so far as that provision is in the Bill there is no necessity to provide for it in this amendment.
Senator O Buachalla will have to change his mind because I think he is opposed to this Bill as put forward by the Minister. Whatever any Minister does may be the subject of a motion in the House, and the position we have is that if no Minister is there, if no Minister is responsible, then a motion will be out of order, because you would become a debating society and not a House of Parliament. When Senator O Buachalla says he is in favour of the Bill because he wants to give liberty to the railway company he is making a most tragic error. He will have, therefore, to change his mind and his politics, and it is really very sad about him altogether.
I am afraid that is not correct.
The only way Senator O Buachalla can get what he wants is by taking the Minister out of the Bill altogether. So long as the Minister remains in the Bill the possibility for discussion remains with the House and remains with the public. I think, as I have said, Senator Duffy does not need paragraph (2) of his amendment at all, because in so far as the Minister does something that something is open to discussion. I take it that these Orders will not be operated until published. Is that the position?
That is true.
In that case motions can be put down in the House. Senator Sir John Keane put his finger on a difficulty when he said it is not always easy to frame these motions or to keep track of everything that is happening, or to put down a proper motion, one that may be discussed dealing with a big problem like transport, and not with a political matter. To say that the public is safeguarded by the Minister appointing a chairman baffles me.
There is one point I would like to make in reference to what has been said by the Minister. I accept entirely what he said about publicity. There is full publicity but the public has no possibility of answering back. I think that is the snag.
Oh yes, they have. Any member of the public may appeal for alteration of an Order, and if he does he will have to publish also what alteration he wants to have made.
The company will be required to publish notice of its intention to apply for increased charges or for re-classification of merchandise.
It is much wider than that. Any member of the public may apply for an alteration in the schedule of maximum charges, the classification or anything else.
I accept that. But am I to understand that the company or any company comes under the expression in Section 92 of the Bill in relation to the charges for carriage of merchandise by road? That is applicable to all statutory carriers, so it is much wider than merely this company. Any person concerned may make application to the Minister for a re-classification Order or for a modification of the schedule of maximum charges. The Minister will have that application examined, but nobody is sufficiently childish to think that the Minister can sit down and examine all these applications himself, or to deal with them himself. They are dealt with in the ordinary way in his Department.
Objectors may appear, and one does not know whether the objectors will be very competent to formulate their objections. They may be very poor people, and they may not be equipped in such a way as to put their case effectively. The publicity part of the question is perfectly all right, but what I am suggesting is that there should be a possibility of discussion in both Houses, so that representatives of the ordinary people will have an opportunity of expressing their views. It is true, as Senator Hayes has said, that a motion can be tabled under the Standing Orders, and no doubt if that motion is tabled in this House, it will be dealt with expeditiously, but that is far from being true in the case of the Dáil, and the Dáil, I submit with all respect, is the more representative House. Its members are elected directly by the people. They know the views of the people and the conditions under which they are carrying on business. May I say that a motion tabled in the Dáil in 1942 has not yet been reached? It is still on the Order Paper.
It could not be. There have been two elections since.
I am aware of that, but notwithstanding the fact that there have been two elections, there are still motions on the Order Paper which were placed there in 1942. I do not suggest to the Minister that this is the best type of amendment, but I was hoping that, if he holds the view which I thought he held on the last occasion —that it was his desire to provide for discussion in regard to certain matters —an amendment could be framed which would ensure expedition when dealing with motions relating to matters of this kind. That is done in other cases. For instance, if there is a motion tabled to annul an Emergency Powers Order, that motion is taken out of its place, in the Dáil, at any rate, and is dealt with within the next 21 days on which the Dáil will sit. I was hoping that something similar might be done in this case, and that if a motion were put down to query any transaction of the Minister, which formed the subject of a report made by him, that motion would be dealt with expeditiously. That is the only point I am making in regard to the amendment.
May I say that I have been cut to the quick by Senator Duffy's suggestion that we have not made ample provision for persons of limited means who may desire to question orders made by the Minister in relation to charges? The whole argument for the change which we have made is that the existing provision, which provided an independent transport tribunal, was much too costly and that people did not avail of it. We are proposing to substitute a system which will be equally effective and which will cost nothing. Any interested party may apply to the Minister for a revision of the schedule of maximum charges, the classification prescribed by order, or any of these other matters. It need not cost him any thing except the price of the stamp which he puts on the envelope. I am not even sure if it is necessary to put a stamp on the envelope. It is open to the Minister to refer that application to the advisory committee, in which case there may be a public hearing involving the publication of the application, but as I think in 99 cases out of 100 these applications will deal with trivial matters they can be satisfactorily adjusted with the management of the company without reference to the Committee. The 1924 Act prescribed that all such applications should go to the Railway Tribunal but, as I have said, in practice 99 out of 100 were satisfactorily adjusted in consultation with the management of the railway company concerned. That will be the procedure in relation to trivial matters and it will be only when larger matters arise, when there is a definite public interest affected or the possibility of a conflict of interests between specific parties, where, for instance, a county council, the council of a county borough or a harbour authority is concerned, that the public inquiry envisaged by the advisory committee will ordinarily take place.
It is however, obvious, I think, that Senator Hayes was unfair in his remarks about Senator O Buachalla, because it is undoubtedly true that the existing system in regard to the control of rates is altogether too rigid. As the House is aware, the Great Southern Railways Company had standard charges prescribed for it by the Railway Tribunal. It could not alter these charges except to a very limited extent without a further application to the tribunal. We are proposing to substitute for that rigid system a more simple system of maximum charges with a simple classification arrangement and it is intended to give the company greater freedom in competition than it has been allowed to enjoy previously.
May I again point out that all we desire to achieve by the amendment is that each year there shall be laid before each House of the Oireachtas a report of the transactions that have taken place so that each House will have an opportunity of discussing them? That is all we are asking the Seanad to agree to.
I think the Minister sees the object of the amendment, but I do not think he is going to reveal all he sees. We are merely asking for an opportunity to co-operate with the Minister on the question of railway policy. We want an opportunity at least once a year provided by some report on which we can discuss railway policy generally in Parliament. Will the Minister address himself to the principle and not to the details, because if he wants to recognise the principle, the rest will be easy? The Minister says "No", and he is getting support from an unexpected quarter under our new Fascist mentality. He says that Parliament is not going to be consulted, that it would be a cause of grave disaster, and I gathered from Senator Buckley that Parliament should not have any function in this matter. You appoint a Minister, you give him plenary powers, and you support him on general policy. But there are other questions like rates, services and all kinds of matters which will require ventilation. The Minister should surely realise that we are entering a new phase altogether. We are giving the Government a monopoly, and we feel that there should be some means— the Minister can devise the means if he accepts the principle—by which Parliament should have an opportunity once a year to discuss railway policy in general, and it should not be left merely to the putting down of a motion. Will the Minister say when Parliament will have an opportunity of discussing railway policy outside a specific motion?
On the Estimate for the Minister for Industry and Commerce.
The Minister's Vote in the Dáil gives that opportunity, but when will the Seanad have an opportunity?
On the Appropriation Bill in the Seanad.
That is the only opportunity, on the Appropriation Bill?
May I say that under Section 27 the audited accounts of the company will be laid before both Houses of the Oireachtas.
And the report of the auditor.
And on that it will be in order to have a general discussion on railway policy?
No; there will have to be a motion. Any matter of administration affecting the Department of Industry and Commerce can be raised in the Dáil on the Estimates and in the Seanad on the Appropriation Bill. If it is desired to raise the matter on some other occasion, it would have to be by way of motion.
I would support this amendment if I believed that it was in any sense necessary, but I think that there is a certain amount of misunderstanding in connection with this matter. I completely disagree with the attitude of Senator O Buachalla, because I feel that, although I want to see reasonable facilities provided for the discussion of policy in connection with railway or transport matters, which this amendment is proposing to effect, it simply cannot be done under the machinery suggested in this amendment. I should like to see some machinery set up by which the Dáil or the Seanad could promptly discuss matters that they might consider should be discussed promptly, but you cannot bring Parliament together to discuss certain things, which you want to have discussed, on a certain date, except on some important Constitutional issue, and that would be very unusual. I realise that Senator O Buachalla wishes to have a prompt discussion on something that is necessary to have done quickly, and I would be in favour of that, but I do not see how it can be done, and I do not see how any Parliament could bind itself to do that except, as I have said, in a matter of grave Constitutional importance.
Yes. There are, of course, certain matters which Senators would want to be dealt with promptly, and the object of this amendment is to see that the Oireachtas shall be enabled to discuss these matters promptly, but there is no machinery by which that may be done. While it might be very desirable that there should be a prompt discussion on such matters, there is no way of achieving it in an Act of Parliament.
Is there no way by which a report or Order may be dealt with?
The Orders will be available in the Library. Orders which are made will be available, when made, in the Library.
But that does not dispose of the matter we are discussing.
It does.
So far as this House is concerned, I would say "yes", but in the case of a motion tabled in the Dáil, as the Minister is aware, it may take many months, or even a year, before the motion is discussed.
Would Senator Duffy take my word for it that there is nothing which we could devise to put into this Bill which would compel the Dáil to discuss, or even consider, a motion on, say, a Thursday, which had been put in on the previous Monday? There is nothing that we can do in this House to bring that about. What Senator Duffy proposes cannot be done, unless you wish to put the Minister in the position that any Order he makes will not be operative until it has been approved by a Resolution of both Houses of the Oireachtas. I take it that Senator Duffy does not want that. If that were to be the case, then the Minister, if he wanted something done, would have to put down a motion for discussion in Government time in the Dáil, and then, of course, it would be discussed; but Senator Duffy, it would appear, does not want that here, and, if he does not want that, there is nothing that he can do here that would effect his purpose. It is quite impossible.
Apart from a motion which might be concerned with the management of the railways, is it not always possible, in accordance with the procedure of the House, to table a motion under which transport may be discussed and which will necessitate the attendance of the Minister here to answer points made in the course of the debate?
You cannot compel the Minister to come here.
Of course, you cannot compel him.
I quite understand that, but my point was that, following the etiquette of the House, the Minister might be expected to attend.
Yes, of course, but you cannot make him.
On this section, I want to draw the Minister's attention to one of the most difficult forms of legislation which you have here, and that is legislation by reference. I do not blame the Minister for the form in which this section is drafted, but somebody, somewhere, is to blame, and I suggest that, not merely is it not a saving of paper, but that it is a matter of pure indifference. Now, in Section 8, I notice that under the various sub-sections a number of clauses of the Companies Clauses Consolidation Act, 1845, and the Companies Clauses Act, 1863, are embodied in this Bill, but on looking at later sections I find that Section 55 of the Bill modifies the Act of 1845 with regard, say, to the keeping of an address book. Then, the IX Schedule of the Bill introduces a considerable number of amendments to these standard clauses, which are carried into this Bill. I concede and entirely agree with the idea that standard clauses should be introduced here, but when you have standard clauses modified in a Bill and when, again, you have certain words taken out and other words inserted, I suggest that it is almost impossible for anybody except the experts to understand it.
The Senator will understand, I am sure, that if we were to embody in this measure all the clauses of the Companies Clauses Consolidation Act, 1845, which would be applicable, to this company, as well as all the clauses of the Railways Clauses Act, 1863, which would be applicable, we would have an enormous document, and I submit that it is desirable that we should avoid special steps of that kind when it is really intended that the provisions of standard Acts, designed to achieve specific purposes or to regulate specific activities, should apply to this company. What is intended here is that this company should act in accordance with the Companies Clauses Consolidation Act and the Railways Clauses Act, with the modifications set out. That is the purpose of Section 8. The matters dealt with in the sub-paragraphs mentioned there are in relation to the things contained in the Bill. Except where we have made special provision in the Bill, the Companies Clauses Consolidation Act, 1845, and the Railways Clauses Act, 1863, will apply to this company, and it is desirable that that should be so. Part V of the Railways Clauses Act, 1863, was designed to lay down all the provisions which would operate when two transport organisations were amalgamated. It has been standard law ever since, and by the incorporation of Part V of that Act in this Bill we make part of this Bill all these things relating to the transfer of liabilities, the rights of staff, and so on and so forth, that were contained therein. It is desirable to do that because, again, Part V of the Railways Clauses Act of 1863 has been interpreted and applied by the courts over a long number of years. In connection with a number of points that may arise in connection with it there is a recognised judicial decision which makes its meaning clear, and it is Part V of that Act that we are incorporating in this Bill and making part of this Bill, with all its consequential provisions.
I am glad to have an opportunity of referring to this section, because many members of the Dáil had difficulty in understanding its effect, and a number of amendments were proposed to make it clear that the liabilities of the dissolved companies were transferred to the new company, and that the staffs were transferred, that those staffs when transferred would have the same salaries and the same rights as they have at the present time, and so forth. All those things are provided for by the incorporation of Part V of the Railways Clauses Act, 1863, which, as I have said, was designed to lay down the standard provisions which would operate when two statutory transport undertakings were amalgamated. In this particular measure, by the incorporation of the Companies Clauses Act and the Railways Clauses Act, we are following the practice of previous railway legislation. The Railways Act of 1924 did not in fact incorporate Part V of the Railways Clauses Act, 1863, but one of its sections provided that any amalgamation scheme which was approved under the 1924 Act must incorporate Part V of the Railways Clauses Act, 1863. It is the same procedure which has been followed throughout the years, and it was decided to stick to that procedure on this occasion.
I am very much obliged to the Minister for the explanation he has given, and I agree with the view that standard clauses are there to be incorporated. My difficulty is in regard to a clause which is amended, let us say, in a Schedule to a Bill of this kind, when certain words are taken away and other words substituted. As a matter of convenience for everybody, particularly as the ordinary citizen will be concerned with this legislation, I do think that in practice where it is necessary to amend a standard clause, the amended clause should be inserted in the body of the Bill.
There are certain things that would appear in the articles of association of a company which do not appear to be in this Act, and I was wondering where they are included. One of the things which appear very obvious is that in the next section you give Córas Iompair a seal. How is the seal to be affixed? So far as I know there is no Table A in the other two Acts as there is in the 1908 Act.
The 1845 Act contains the provisions which are applicable to companies incorporated for the carrying on of undertakings of a public nature, but only undertakings of that kind, not ordinary commercial companies. It covers matters such as the holding, registration and transfer of shares, the rights of mortgagees, procedure at meetings, the duties and powers of directors, the making of bylaws, the recovering of damages and things of that kind. That Act of 1845 does not apply to the ordinary commercial undertaking. It applies only to companies carrying on public undertakings.
I did not intend to raise the matter at this stage, but on another section I was going to ask practically the same question as Senator Sweetman. I suggest to the Minister that quite a number of small matters which arise in the formation of a company are missing from this Bill. I put an amendment down partly to raise this very point. Under ordinary company law, it is not necessary to make a provision that the shareholders cannot, against the directors, vote themselves a dividend. If you had Table A of the Companies Act it would be quite unnecessary to make any such provision. I am not a lawyer, and I have not all the British Acts since doomsday; I do keep the Irish ones, but I was not able to get a copy of either of these two. It may be that somewhere in those Acts there is a proviso which means that the directors must recommend a dividend before it can be passed. That is the ordinary practice. I cannot find it in this Bill. I mention that now as an illustration of what is in my mind. The matter should be very carefully gone into to ensure that the directors of the new company are to have a workable document to take the place of the articles of association. I should not like to be a director of a company which had to take as articles of association this Act, plus the Companies Consolidation Act of 1845, plus the Act of 1863, because from time to time you want to pick up your articles of association and see how a particular matter is covered. If you had to go through all those, it would simply mean that you would hand the thing over to some of the staff and be dependent on what they told you. That is not good practice.
I move amendment No. 2:—
In sub-section (4), paragraph (b), line 52, after the words "for that purpose" to insert the words "by agreement".
The purpose of that amendment is very obvious. Without the words "by agreement", I think it is possible that the company could acquire land compulsorily and decide that they wanted to put up a hotel there. I know that that is not intended by the Minister, and my view on that is rather borne out by the insertion of the words "by agreement" in sub-section (2).
That sub-section relates to the acquisition of transport undertakings, and I am not so sure that the words were necessary there. They were put in for the purpose of reassuring the Dáil upon the point as to the powers it was proposed to confer on the company. In this case I do not think it could possibly be held that the provision confers upon the company the power of compulsory acquisition. It is certainly not so intended. I have consulted with the Parliamentary Draftsman, and he is of opinion that there is no likelihood of the Act being interpreted as conferring upon the company the power of compulsory acquisition.
It is intended that this section be the same as the memorandum of association of an ordinary company. But the memorandum of association has not statutory effect; this has.
I do not think it could confer on the company the power of compulsory acquisition without the insertion of a lot of additional provisions as to how the power was to be exercised.
As long as the Minister has looked into the matter, I am satisfied.
Would the Minister explain to me, in regard to sub-section (3), what is the point of the words "notwithstanding any enactment"? What enactment does he visualise there?
It might be that there are provisions in some of the private Acts under which certain railway companies are operating which would prejudice the disposal of these undertakings to other transport concerns. I think also that the question of the transfer of road transport undertakings under the 1933 Act would arise. Again, I am not clear that companies operating road services would have power to sell them to other transport operators without legislative authority.
In connection with sub-section (1) (a), "to operate transport services", I should like to know if it is complete enough to cover the extension of existing services? Would it be better if it were worded "to provide and operate transport services"? I am picturing the possibility of the development of subways in a city like Dublin in which the question of definitions might arise. "Transport services" means transport by railway, tramway, inland navigation, sea, air or road. I suppose that a subway would be a railway or a tramway, but I am wondering if the definition is complete or if it would be necessary for the company to seek fresh powers?
There is simply no question about the power of the company to provide new lines. Section 10 states what the company may do, if legally empowered to do it. Air transport is mentioned, but, in fact, we have passed another Act which controls the operation of air services and prevents anyone operating such services except under licence. While this company would be empowered to operate air services if they got a licence, the section would not authorise them to operate air services without a licence.
Mr. O'Donovan
There is provision for the abolition of lines. Are they amply covered for the establishment of new lines?
Yes.
Mr. O'Donovan
That is the only point I want to raise. It seemed to me that the clause was not clear.
Section 10 deals with the purposes of the company; it does not deal with any special power given to the company for any particular purpose. It sets out the purposes for which the company was formed.
Within the meaning of the words in sub-section (1) (a) "to operate transport services" would the promotion of a service between Galway and Aran be within the power of the company?
Yes, and there are other provisions in the Bill by which the company may be required to provide services which they are not providing at the moment.
Mr. O'Donovan
The company has power to provide as well as to operate.
I will have the point examined, but I do not think there is any doubt as to the power of the company to extend its services. One of the provisions of the Bill enables the company to be required to extend its services.
There is one point- I should like to make in regard to this section. Wide powers are conferred on the company to acquire property, and it appears to me that if at some stage the company were to have a small portion of its unissued debentures available, a situation might arise where in fact the company would not have the money to acquire these services. I take it that what is intended in that situation is that the Minister would come to Parliament and ask for authority?
It would take a lot to convince us that the company had not got into that position by bad management. We are telling the company that they must do the job within that limit of capital expenditure. If circumstances should arise in which it would be impossible for them to do so, or if they were to embark on some vast new development, such as the building of subways, additional capital would be required, but that would require new legislation.
I move amendment No. 3:—
Before Section 14 to insert a new section as follows:—
14.—(1) Notwithstanding the limitation contained in paragraph (b) of Section 13 of this Act it shall be lawful for the dissolved railway company at any time before the establishment date to issue on specially favourable terms an amount of ordinary stock not exceeding one million two hundred thousand pounds in nominal value. This issue shall be available for subscription only to persons who sold debenture and other stocks of the dissolved railway company between the third day of March, 1943, and the twenty-third day of October, 1943.
(2) No one person may subscribe for a larger nominal amount of the additional ordinary stock created under the foregoing sub-section of this section than is represented by the difference between the price at which that person sold his holding or holdings in the dissolved railway company and the stock exchange value of such holding or holdings on the twenty-third day of October, 1943.
I put down this amendment in order to have a discussion as to whether or not some compensation should be made, if it is legally possible, to those shareholders of the Great Southern Railways system, especially to those who had the misfortune to sell between the critical dates of March 3rd and October 23rd. I think it will be generally agreed that the stockholders of the Great Southern Railways have had a rather thick time, a bad time, during the course of the past twenty years or more. I would not like to go so far as to say that they have had a raw deal from the present Minister, but certainly the deal they have had from the present Government, and from its predecessor in office, leaves something of a legitimate complaint, and a certain sense of grievance on the part of the shareholders as a whole.
Those who had the good sense or foresight to hold on to their stocks in the interval between March 3rd and October 23rd had the satisfaction of seeing their interest appreciating very substantially in capital value, and ought for that reason to be grateful to the Minister for having revised, to some extent, the public policy which had contributed to the depression of the capital value of their holdings.
On the other hand, those who had the misfortune to sell between March 3rd and October 23rd, after having hung on in many cases for years, got off the band wagon just before the train was about to arrive at port, if I might be allowed to mix my metaphors. All this amendment suggests is that if the existing ordinary shareholders, or those shareholders who in due course will become owners of the common stock of the new company, feel disposed to reach out a helping hand to these unfortunates who got off the wagon too soon, and to put them back on more favourable terms than are offered to the general public, they should be legally empowered to do it.
I have here a graph showing the movements of ordinary shares and I think that if the Minister will cast his eye over it, he will agree that those who sold are deserving of very special commiseration. Terms could be offered to secure compensation for this unfortunate class of stockholder. Various attempts were made to secure that those who successfully speculated in the stocks of the Great Southern Railways Company should in some way be deprived of their gains. I read a lot about it in that debate, and I must agree that the Minister made a very good case for the impossibility of getting back in that form, from the successful speculators, any of the swag with which they had got away.
It seems to me not to be practical politics to secure compensation at the expense of the successful speculators. I know that it is equally not practical politics to suggest that the taxpayer should contribute from the public purse, because the Government is very reluctant to dip into the taxpayer's pocket for purposes of this kind, and, from a House like the Seanad, which has practically no financial power, it would come ill to suggest that the Government should use the public financial resources in this kind of way. Therefore, I regard the idea of compensating these people at the expense of the taxpayer as out of the question. Consequently, the only possible source of compensation that remains depends on the generosity of their former colleagues as stockholders, if those stockholders feel disposed to be generous. That is entirely a matter for themselves. All the House is concerned with is to make it legally possible for the stockholders of the Great Southern Railways Company, between now and the established date when that company will be merged in the new company, to extend this helping hand of sympathy and consideration to their former colleagues who got out at a bad time.
This proposal to be generous at the expense of the existing ordinary share-holding interests in the Great Southern Railways Company has been considered by the principal officials connected with the Great Southern Railways Stockholders' Protection Association, and has received their enthusiastic approval, so that I am not speaking entirely for myself when I say that this is a proposal which should be favourably and sympathetically considered by the House. So far as I can understand, the present position is that, even if the existing share-holding interests in the Great Southern Railways wanted to make concessions on these lines to those who sold at a bad time, they would not have the legal power to do so. I want this Bill modified in such a way as to give them the legal power to create a new issue of ordinary shares to be available for subscription on specially favourable terms—something less than their present stock exchange value— only to those unfortunates who sold between the two dates I have mentioned.
I think that we ought to give the Great Southern Railways stockholders the legal right to be generous with their own property, if they feel disposed to be generous with their own property. After all, one of the elementary rights of private property is the right to be generous with that property and I think that, under the law as it stands, or even under the law as it will be modified by this Bill, the future owners of the common stock in the new company will be, in a legal sense, the ultimate proprietors of the company. We ought to recognise their right of legal ownership to the extent of allowing them to be generous at their own expense, if they feel so disposed, in the interest of their former colleagues who sold at a bad time. The degree of generosity which they may feel disposed to exercise in that behalf is entirely a matter for themselves. It is not for us to dictate to what extent they should be generous or, indeed, whether they should be generous at all. It is for us merely to give them the legal power to be generous if they feel so disposed.
The additional issue of £1,200,000, nominal value, of ordinary stock would not in any way add to the commitments of the taxpayer, because the common stock of the new company will not be, in any sense, guaranteed by the taxpayer. Therefore, the taxpayer is not in any way concerned as to what the total amount of common stock in the new company will be. The only effect of adding to the total amount of common stock in the new company would be to diminish by some small amount the present stock exchange value of the existing stocks which, in future, will be converted into common stock of the new company.
If only a small amount of new ordinary shares were issued, as proposed in the amendment, the effect on the stock exchange value would be almost negligible. In drafting this amendment, I made a slight mistake in arithmetic. I said "not exceeding one million two hundred thousand pounds in nominal value". Actually, what I have in mind would have been achieved if I had said "not exceeding five hundred thousand pounds in nominal value" of ordinary stock. Therefore, my amendment might be considered as if £500,000 were substituted for £1,200,000.
Let me illustrate how the proposal would work by giving a concrete case. My own case will do, if I may put it that way, although, in fact, I am not one of those people who sold Great Southern Railways stocks between March, 1943, and October, 1943. I had the misfortune to buy £100, nominal value, of ordinary stock of the Great Southern Railways Company in the year of grace, 1929, and I paid £24 or thereabouts for it. In due course, that £100 nominal stock was written down—in 1933—to £10, and dividends, of course, disappeared during most of the intervening years between 1932 and the other day. That £10, nominal value, of ordinary stock was worth in March, 1943, at the current stock exchange quotation, about £1. After October, 1943, the stock exchange value of my holding of ordinary shares rose to, shall I say, £6. If I had sold my holding at the lowest price—£1—in March, 1943, I should have lost in cash value, by not holding on, the difference between £1 in March and £6, shall we say, in October.
In other words, I should have lost, in cash value, the sum of £5. This amendment proposes that I should have the right to acquire on specially favourable terms, to the amount of £5, nominal value, ordinary shares. Even if the stockholders of the Great Southern Railways Company in an excess of generosity should give me that £5 of stock, nominal value, for nothing, I should still have obtained by way of compensation something having a cash value equal only to half the cash value I had lost by selling in March rather than in October. If they make me pay something for acquiring that £5 additional, nominal value, ordinary shares, to that extent the degree of real compensation diminishes. So that the amount of compensation, even on the most favourable terms possible under this amendment, is equivalent at the maximum only to half the cash value lost by people who sold at the worst prices in 1943 as compared with the value of their shares in October, 1943.
I do not know in the least whether the stockholders in general would be disposed to act on the terms of this amendment if it were to become law. All I know is that their organised association—the Stockholders' Protection Association— through its principal officers, has indicated sympathy with the general object of this amendment, and I should hope, if it were to become law, that the proposal would be favourably considered and that the company would exercise its legal power under this clause. It would be an act of generosity and good-will on the part of the less fortunate stockholders of the Great Southern Railways Company in favour of their less fortunate comrades, and, if their former colleagues were required to pay something—but something less than the present stock exchange value of the ordinary stock— for the privilege of getting back to the band wagon, it would bring some additional capital, by way of ordinary stock, to the company, for which it would, no doubt, be able to find a use. The most important point, I think, is that, if something along those lines were done it would serve to remove a certain sense of rankling injustice which poisons the atmosphere around this whole question of the railways. It would help to sweeten that atmosphere and to give the new transport policy a more favourable send-off than it is likely to obtain if this rankling sense of injustice still remains. I wish well to the new transport policy, and I should like to provide for the possibility of something being done which would be a generous gesture in the interests of the wounded soldiers of this whole transport campaign. Finally, it would help to emphasise the fact that, in essentials, the Great Southern Railways Company and the new company are privately-owned corporations, because they would be allowed, to that extent, by law, to be generous with their own ownership. I hope that for this and other reasons the House will give this amendment its most favourable and sympathetic consideration.
This may not be a good suggestion, but it at least is a novel one. Senator Baxter is, I understand, going to raise the problem of the stockholders who held their stock too long and who now see that the market has fallen and that they will only be able to realise lower prices than those they might have got some weeks earlier. I presume that Senator Baxter is about to suggest that the Minister should enact legislation to secure that the stockholders who sold early should "divvy up" to help the stock owners who held too long. People make the same mistakes about goods as about shares. Some people sell and some people hold, and is it to be suggested—that the Government should introduce legislation and that the cattle dealer who sold well should be asked to "divvy up" in order to compensate those who did not sell well——
Ah no, you are mixing your drinks now.
——or that the Government should do something for shareholders that it has no responsibility for doing in relation to other classes?
The Government announced that new legislation was going to be introduced. It was announced in March, 1943; it was reaffirmed in the Dáil in May, 1943. It was affirmed again during the course of the election campaign in June, 1943. That is what the public knew, but there were, of course, many stockholders of the company who had a vivid remembrance of the previous efforts of this Government in the devising of transport legislation, legislation which had the effect of slashing the nominal value of their shares, a course which we considered advisable at the time, but not advisable now, and who visualised the new legislation as meaning the artificial writing down of the nominal value of their stock. They were given no suggestion, however, that the legislation would be on those lines. The only announcement made was that legislation was contemplated and that in so far as transport required new capital it would have to be secured by Government guarantee.
People have dealt in railway shares on and off for many years, but the great majority of those who buy railway shares buy them to hold them. Ninety per cent. of the holders of every class of Great Southern Railways stock have never shown any interest in stock market prices; they bought to hold and they continued to hold irrespective of fluctuations in the market price of their holdings. The Tribunal of Inquiry which was set up to inquire into transactions in this stock last year reported that even in the boom period, to which Senator Johnston has referred, the majority of those who bought shares bought them to hold them and that there were only a few speculators in regard to a small proportion of the shares. By speculation I mean buying shares with the intention of selling them again when they thought the situation was favourable. If we are going to legislate to provide compensation for those who made the mistake of holding——
I am not asking you to compensate.
You are proposing that the other stockholders should compensate them, that those who did well should compensate those who sold wrongly?
This transport legislation has been brewing since 1939—in fact since 1938. In 1938 we set up the Transport Tribunal. The need for new legislation was recognised then and as a preliminary to the preparation of any legislation we set up a tribunal of inquiry. Since then everyone concerned with the railways and any railway stockholder who had any interest in the affairs of the railways knew that a situation had arisen that called for new legislation. But there have been extraordinary fluctuations in the market price of these shares since then. Some people bought and some people sold. In respect of the guaranteed stock the highest price reached this year was still lower than the price reached in years before the war. In respect of ordinary stock the highest quotation in 1937 was £34; by 1940 it had fallen to £8. In respect of preference stock the highest quotation in 1937 was £46; by 1940 it had fallen to £9 10s. 0d. In respect of guaranteed preference, in 1937 the highest quotation was £72 10s. 0d.; in 1940 it had fallen to £20. In respect of debenture stock, the highest quotation in 1937 was £88; by 1940 it had fallen to £54. Everybody who sold their stock in 1937 thought they were doing a good thing, thought they were doing good business. As the market fluctuations week after week showed a continued fall in the prices of that stock they were satisfied that they had done good business. Those who sold, sold voluntarily. They sold because they thought it was in their best interest to sell.
No doubt not every one of those who were holders of these stocks and who sold them during any of these years were solely concerned with future prospects of the undertaking. There may have been shareholders who, having backed a loser last year, decided to realise their holdings and pay the bookmaker, so to speak. It will be a windfall for all these people if the Legislature is to come along now and say: "We are going to compensate you for what you lost in selling your stock last year, whether you did it under a wrong impression as to the legislation that was forthcoming or for some other reason." I think that is preposterous. I think people have bought and sold stock in railway companies and in many other concerns since stock markets were opened and will continue to do so until stock markets are closed. Some of them will make fortunes and some of them will lose fortunes. If we are to establish the principle now that there is an obligation on the Government to compensate those who backed the losers it would involve a series of Acts to make provision for that purpose or else the imposition of an obligation on the lines suggested by Senator Johnston—to have the other people compensate those who made the wrong decisions.
So far as there may be any suggestion that the movement of prices on the stock exchange last year was manipulated that I think has been completely disposed of by the Tribunal of Inquiry which was set up and which has since reported. I think that tribunal has completely demolished the suggestion that there was any manipulation, any misuse of information or any improper disclosure of information. The House must remember that these were the allegations that were made by certain irresponsible people, allegations that information had been improperly disclosed or used. These allegations were fully investigated and completely disposed of. The people who made the allegations were given an opportunity to substantiate them, but not one of them was able to produce a single iota of fact when put upon their oath on the witness stand.
I doubt if there was in the history of any country such a complete demolition of a case to which such importance was attached by important political interests. I suggest that in all decency we should let the matter die now. I take it that there is behind this amendment as behind similar amendments in the Dáil an attempt to keep it alive. There can be no basis whatever for the suggestion that those who sold their stocks last year should be compensated for whatever notional loss there may have been in consequence of that sale, except it is contended that the Government did something which compelled them to sell, and that suggestion is completely contrary to fact. The facts are on record in the report of the tribunal
I have not much sympathy for the stockholders who sold their shares between March and October, 1943, but I have certainly a good deal of sympathy for the ordinary stockholders of the railways whose shares were at one time cut down from £100 to £10. I should like to ask the Minister would be consider a proposal on the lines suggested by Senator Johnston so that something in that way might be done for registered stockholders who owned shares in 1934? The shares of these people were cut down from £100 to £10 each, and if some recompense on the lines suggested by Senator Johnston were provided for these people, it would be merely equity.
I merely desire to ask one question arising out of what Senator Counihan has said. As I understand it, the ordinary stockholders of the Great Southern Railways Company received no dividend for 15 years. I am wondering how they lost anything by having the nominal value of their stocks cut from £100 to £10 since they got no dividend anyway.
I regret profoundly the attitude adopted by the Minister in his reply. I deliberately framed this amendment in such a way as to avoid any of these emotional complexes that made the atmosphere of the other House so electric during the discussion of this matter. I deliberately avoided any accusation of the Government as having been in any way responsible for the proceedings on the stock exchange that excited so much public interest during the last 12 months. The Minister has attempted to answer my argument as if it had been an argument in favour of the contention that the Government should compensate these people, or that the Government were responsible for the losses of these people. I neither argued that the Government were responsible for the losses that these people had suffered, nor yet that the State should in any way compensate these people for these losses, and yet the Minister in most of his reply has answered me as if that had been my argument. What I tried to emphasise was that the shareholders in general, particularly those who sold their shares between the critical dates, had a very unfortunate experience; that the present stockholders of the Great Southern Railways Company might conceivably have a certain sympathy with those former colleagues of theirs who sold at the wrong time, and that they might feel disposed to make a generous gesture on their behalf to enable them to come back into the company on more favourable terms than would be open to the general public. I regard it as an essential attribute of the private ownership of the company that they should have the right to be generous in that way if they felt so disposed. I must insist on this amendment being fought out to a conclusion, because it seems to me to contain the fundamental principle: have the stockholders of the Great Southern Railways Company the right to be generous to their former colleagues or not? Are they the proprietors of the company or not? I think the Minister's answer is not at all satisfactory, and I should be glad of some clarification of these points.
I confess that I have great difficulty in understanding the purpose of the amendment, because the thing asked for by Senator Johnston is already within the ambit and power of the existing shareholders of the railway company. He asks in effect that the shareholders should be generous. There is nothing to prevent their being generous at present. There is nothing to prevent the shareholders giving some of their shares as a present to those people who sold out at what, as it is now realised, was the wrong time. There is nothing to prevent their giving some of the increased stock exchange value of their shares to these people if they so desire.
Under Section 19, the company has power to issue further common stock. May I ask the Minister if they can issue such stock at a discount?
They can issue stock up to the limit of £4,000,000—roughly about £500,000 more.
Can they issue it at a discount, because if that is so it would to some extent——
I do not think they would succeed in getting it subscribed at par having regard to the present stock exchange value of the shares.
Have they power to issue at a discount? If the Companies Acts apply I do not think they would have. Otherwise they might issue a certain amount at a discount.
It is unlikely that that power would be availed of.
I believe they have not legal power to issue any additional common stock—certainly not between now and January.
The Great Southern Railways Company has no such power. I spoke on the amendment as I did because I thought I heard Senator Johnston say that he proposed the amendment in this form because it would be out of order if he proposed an amendment which imposed any charge on the Exchequer. I think there would be no justification for a proposal to impose any such obligation on the company and it would also be completely wrong to enable the company to issue any new common stock for any purpose other than the provision of better transport facilities. My whole objection to the amendment is that there could be no basis for it at all except the contention that the stockholders who sold stock were wilfully misled during the period.
I was not making that case.
If that is not the case, there is no case at all.
Is the Senator pressing his amendment?
I should like to press it further even if I be in a minority of one.
Senators in favour of the amendment will please rise in their places.
Professor Johnston rose.
The amendment is defeated. Senator Johnston will be recorded as dissenting.
I move amendment No. 4:—
In sub-section (1), page 11, to delete lines 33 to 37, inclusive.
The section, in its early stage, provides that the holder of a stock certificate in the dissolved company, who delivers to the secretary of the company the certificate or certificates of such stock to be cancelled, shall be entitled to receive a new certificate in exchange, in substitution for that which he is surrendering. Now, it is rather difficult to understand the latter part of sub-section (1) of that section, which goes on to say that until the time of the substitution—that is to say, until the substitution of a new stock certificate for an old one—the old certificate will be deemed to be a certificate of the company. That presents certain difficulties in certain respects. Take, for instance, the case of a certificate for £100, 4 per cent., guaranteed preference, of the Great Southern Railways Company. Under the Bill, two certificates will be issued in substitution for that certificate. Part of it would be debenture and part common stock, and I have great difficulty in seeing how the latter portion of sub-section (1) of Section 15 can be reconciled with the general tenor of the Bill. What exactly is meant by this phrase "until substitution"? Does it mean that there is likely to be a considerable delay between the time that the old certificate is surrendered and the new one issued? If not, it seems that there will be no obligation on the holder of an existing certificate to surrender it at all. He can be quite careless; he can cling on to it indefinitely, and his old certificate will be deemed to be a certificate of the new company although, in fact, the values may be completely altered. I submit that there is something missing in connection with the latter part of sub-section (1), and the only remedy that appeared to me was to delete the words mentioned.
I am sure that Senators are aware that it is obvious that there must be some delay. The establishment date in the Bill is 1st January, and it is only on or after the 1st January that there will be a company with a secretary able to issue certificates of stock in that company. That substitution of new certificates for old, it is quite obvious, cannot be all done in a day or so. There will be some period of time before the process will be completed, and these words in the sub-section are intended to enable the holders of stock in the existing companies to undertake transactions in these stocks, if they so wish, during that transition period. That is all. The period, naturally, will be as short as the company can arrange, but it would be unfair to prevent these stockholders, by reason of our not making this provision, from disposing of their stocks in whatever way they wish, during that transition period, and the deletion of the words proposed in the amendment would not meet these difficulties.
Nothing would arise under the Schedule until the 30th June, when interest becomes payable. Of course, there will be the question of a person who wants to mortgage his holding, to borrow money on it, or do something else with it, but there ought to be a time limit.
But, if we put a time limit, what will we provide? If we put a time limit, will we say that after that time nobody will be able to effect the substitution?
No, but say that after 1st June existing certificates will not be valid.
Yes, but that might involve people in a substantial loss. In fact, it may be years before some of these shareholders may turn up with their scrip, and we are providing that at any time they turn up with their scrip they are entitled to get shares in the new company for it.
Yes. It might be years before some people would turn up with their scrip.
This whole section enables the company to create further stock, and I would have liked the Minister, on the Second Reading here, to have given us in a little bit more detail what purposes he has in mind for the use of the additional moneys that are going to be available under this debenture stock. I think that the Minister's line of country is rather that he is not going to bind in any way the management of the company, but I would suggest—whether it is proper to raise the matter now or on the section dealing with the State guarantee I do not know—that when the State is guaranteeing the additional stock to be created, the State, and therefore the Houses of the Oireachtas, should have some say in advance as to the purposes for which the money will be spent, because it appears to me that the estimate of the purposes of the additional moneys involved has been made in a very rough-and-ready way. So far as the public can see, there has been no reference to the amount to be raised or the purposes for which it will be necessary. I think it was the Minister who accused somebody of having a bee in his bonnet about electrification.
Well, I have almost a worse bee in my bonnet, and that is whether this money will be necessary for electrification or purely for the reinstatement of unsatisfactory steam locomotives, or whether the railways are to turn over to Diesel oil, or anything of that nature. Of course, it is obviously a matter of detail for the management to decide whether they are going to have, shall we say, two or three engines or something like that; but on the big problems of whether the railways are going to be run on Diesel oil, with the complete scrapping, therefore, of the present plant and the provision of new plant, or steam being scrapped and electric motion being brought in—if that is why new stock is necessary, then I think that some sort of indication should be given to the House before they are asked to provide additional capital. As I have said, I am not sure whether I should have waited to raise this matter on Section 18.
It is quite correct that there has been no detailed estimate of new capital expenditure to be undertaken by this new company. We fixed a limit of £20,000,000 to the capital liabilities they could incur. They start off with £13,500,000. They could, in fact, therefore enter into new capital liabilities to the extent of about £6,500,000, subject, however, to the consent of the Minister for Industry and Commerce in respect of each issue of new debenture stock, which will involve also his approval of the purpose for which the money will be spent. By that I mean that there will be an obligation on the company to show that the expenditure will produce a new revenue sufficient to meet the new interest charges that will arise, and to improve the financial position of the company. It is recognised that the Great Southern Railways Company could not get new capital except with the assistance of a State guarantee. It is recognised also that a considerable amount of new capital expenditure is necessary if their whole system is to be modernised and improved generally. There will be substantial new expenditure required upon rolling stock and similar equipment, and probably on station buildings to make them suitable to modern needs; and, having regard to the circumstances created by the war, there will probably be considerable expenditure upon road stock also. To what extent new debentures will have to be issued in order to provide capital for those purposes cannot very clearly be estimated. Clearly, the company will endeavour as far as possible to meet all that new expenditure out of existing resources or new revenue which may accrue to it by reason of better management after the war, but to whatever extent it may be necessary to incur new capital expenditure we are empowering them to do it within that general limit.
Some members of the Dáil tried to draw a simile between this proposal and the proposal for the construction of the Shannon scheme. There were detailed plans and estimates of costs for that one construction project submitted to the House. The plans may not have been adhered to, and the costs may not have worked out as estimated, but there was nevertheless available to the Dáil a considerable amount of information as to the work to be done and the estimated cost of that work. This, however, is not a single construction project. It is the carrying on of a business undertaking which will have to enlarge its activities in many respects, and certainly replace a great part of its existing capital. One cannot sit down and blue print now the new works it is going to construct or the new equipment it is going to acquire. I think it would be wrong for the company to decide now the form of traction it would use in the future, or the best type of equipment for its purposes. It is reasonable to assume that, during the war, there has been considerable development in other countries in the design of locomotives and rolling stock, and full inquiry should be made as to what those improvements are and what would be their suitability in relation to the circumstances of this country before decisions are taken. Clearly a decision by the board of this company that a particular design or type of locomotive or carriage should be utilised would be a very important decision, because one of the aims of the management will be to endeavour to arrange as complete a standardisation of equipment as possible. Therefore, once a decision is made in favour of a particular type of equipment or a particular design of carriage, it will be a decision which will affect the fortunes of the company for good or ill for a number of years to come.
Clearly, at some stage the company will have to decide upon the nature of the equipment it is going to acquire or construct. I think, however, it should not decide that now in the absence of more complete information than it is possible now to obtain as to the technical developments that have occurred in other countries during those war years. I know that the company contemplate sending some of their technical experts to other countries for the purpose of inspecting the equipment in use or the equipment being designed by engineering firms in those countries, with a view to getting similar equipment constructed here.
That may involve in some cases the acquisition of patent rights or certainly the utilisation of designs that are private property. It may be that the company will be able itself to adapt to the circumstances of this country the equipment designed for the circumstances of other countries. I am sure that they have on their staff people who are quite capable of effecting that adaptation of existing designs to the special needs of this country. But all that lies in the future, and we are merely ensuring by this legislation that the company will have the means of acquiring the capital necessary to finance that work if and when it is decided upon.
It may be that the company will never issue the whole of the new debenture stock which is contemplated in the Bill; that it will be able to finance a large part of that reconstruction work out of current revenue or reserve funds at present available, but we fix a reasonable limit over and above the capital liabilities with which it will start off, and we say: "You may increase your liabilities within that limit, and that should be, in our opinion, adequate to meet all reasonable plans for reconstruction which may be decided upon".
I am extremely relieved to hear the Minister on that. The reason I raised the point was that a good many people felt that the fact —I want to make it perfectly clear to the House that I am not casting any aspersions whatever on the proposed chairman—of appointing Mr. Reynolds as chairman meant that a decision had been taken in favour of Diesel, because it is generally believed, how correctly I do not know, that Diesel is his idea. It was precisely because I thought that any decision at the present time as to the method of traction to be adopted on the railways for the future would be disastrous that I raised this particular point. But I would just take the Minister a shade further on what he has said. If the company want to raise debenture stock they will have to—or, whether they will have to or not, they certainly will —go to the Minister for Finance for a guarantee. If the purpose for which they want that money were, for example, to be that they wished to cut out steam altogether and transfer the railway transport to Diesel or to electric traction, I do think it is desirable that the Minister should have an understanding with us now that there would be some method by which both Houses would be consulted.
We are giving the Minister for Finance carte blanche to guarantee additional stock, and, if that guarantee were to be used to switch over the whole transport of the country, there ought to be some method of consultation. You could not incorporate that provision in a section of this Bill, but if a major change, such as transferring the entire transport system to Diesel or transferring it entirely from rail to road, were to be made, there should be some method by which both Houses would be consulted, instead of merely presenting them with a fait accompli, when the only remedy would be, as the Minister said here on the Second Reading, to throw out the Minister.
The Senator will appreciate that it would not be possible to establish the Houses of the Oireachtas as a sort of court of appeal on a purely technical question, and that is the only question that could arise here. The procedure would be that the company would apply to the Minister for Industry and Commerce. He would have to be satisfied that the proposals were in accordance with the transport policy of the Government. Before giving his consent, he would have to get the consent of the Minister for Finance, who would be concerned with the effect on the financial position of the undertaking, which would mean that the company would have to show that the new capital expenditure would either so expand the company's revenue or so lower its operating costs as to be fully remunerative in every sense, that is, sufficient to enable the revenue of the company to be expanded so as to offset the new charges that would arise as well as to amortise the capital that would be replaced by the new equipment. On the question as to whether one type of locomotive or one method of traction should be used as against another, I propose to leave that entirely to the technical management of the company. I think that, subject to their being able to show on paper that the costs of operation are such as to produce a real economy, or to show that there would be a real expansion of the company's revenue, it is up to them to decide on the best method of working. In any case, the company has that power at the moment, and I do not think we should submit this new company to any greater restrictions.
The Minister, in considering that matter, will also bear in mind the question of charges to the public?
Oh, certainly. There would have to be a real improvement.
There might be a technical improvement. The buses, for example, might be a technical improvement in some way over trams, but they would also be very much dearer for the people who have to use them.
Yes.
Senator Sweetman has introduced a very interesting aspect of this whole transport problem. I had intended to refer to it on the next section, but now that it has been opened, it is better to dispose of it. I regard it really as the major problem which the Minister is trying to tackle. I have to confess to feeling some surprise at the statement of the Minister, because I had no idea how the figures in the section were arrived at at all. The Minister, I thought, had been presented, somehow, by the chiefs of the transport organisation as operating at the moment, with some approximate estimate, based on what they thought they would have to do with regard to the reorganisation of our transport system, and from what he says now, that was not the case.
They did not produce an estimate; they produced an outside figure. They said it should be possible to effect this reorganisation with the expenditure of new capital to an outside limit of £6,000,000 or £7,000,000.
The Minister has given us figures. I was surprised when I heard it put like that, and wondered if we were making a proper approach to this transport problem at all. It depends entirely on what you mean to do, but are the people in charge of transport quite clear as to what they mean to do? I remember driving with Dr. Meyer Pieter, who was one of the experts on the Shannon scheme, and having a conversation about electrification and what they had done in a small area in Switzerland, where £11,000,000 had been spent on electrifying the railways. Senator Sweetman, has raised that aspect of the problem and the Minister has not made any reply. I am not asking him to make a reply, because, apparently, that is something that has to be studied and examined, but it seems to me that any plan for the reorganisation of transport in this country has first to take into account the shape we are going to give the country's policy in the future —the kind of production in which our people are going to engage.
For instance, what occurs to me is this: are we going on with our beet, wheat and turf schemes along the present plan? My colleagues say they do not know. I do not know if the Minister knows, but I suggest that it is vitally important, in any consideration of his plan for the reorganisation of our transport, to come to a definite conclusion on these major aspects of our production policy, because it must determine the amount of money we are going to spend on new arms of our transport organisation. When the Minister put the case as he put it here, I had to confess that we have got only a very short distance in our study of the whole question of the reorganisation of our transport system, and while there is a terrible necessity for its reorganisation to-day, it would be much better to go carefully and slowly for a bit, until we are quite clear as to the sort of activities in which our people will engage in the future. If we do not do that, we may lose a considerable amount of capital in getting a type of equipment which would not suit our purposes in the future.
I do not know if the Minister is prepared to make any comment on that line of thought, but it seems to me that talking of transforming our railway system by having Diesel engines instead of steam engines may be just beside the point. If our present methods of supplying our needs ourselves are to be the major share of our people's effort in the future, we may not be as deeply concerned about our rail transport as about our road transport, and it might quickly become the strongest arm of our whole transport system. While the Minister has given a certain amount of information, it seems to me that he has failed to reveal the full story, and it is very difficult to know if we have a transport policy at all.
I would like to be clear on one point arising out of the Minister's statement. I understood him to say that in technical matters the decisions would rest entirely with the technical people in the employment of the company?
Within the limits of Government policy. If I may interrupt the Senator, there are naturally considerations of national economic policy which will determine the Government's attitude. The Electricity Supply Board may, at some future date, tell us that they propose to generate electricity by a particular method. To that the Government may say that such a method would leave us dependent on outside sources of fuel, and that, therefore, there must be alternative methods of production, even on non-economic grounds. Even though the method proposed by the board might be the cheapest in normal times, it might not be suitable because of certain risks. The same thing would apply in the case of this company.
The Government would not attempt to dictate to the company on technical questions, but if there were considerations of general policy which would appear important to the Government then it might be necessary to direct the company to solve its technical problems within the limits of the general conditions laid down for it.
That is, roughly, the point I was interested in. The technical people in the service of the company will be influenced by Government decisions, and if it occurs to the company that they are able to save £100,000 a year by some method or other, the job of the technicians will be to secure that saving, irrespective of national results. I am anxious that the Minister would not merely apply his own political view to the problem because he also has at his disposal technicians who would be able to advise him of the wisdom or otherwise of any proposal coming from the company.
I move amendment No. 5:—
In sub-section (3), page 12, after the word "approve" in line 31, to insert the following proviso:—
Provided, however, that it shall not be lawful to create or issue for the purpose of redeeming substituted debenture stock any new debenture stock at a rate of interest exceeding three per cent. per annum.
This is the section which relates to the redemption of debenture stock. The House will understand that there is a limit of three per cent. to the interest which it would be lawful for the company to pay on substituted stock, that is to say, approximately £10,000,000 of new stock which would be created and exchanged for the existing stocks of the two absorbed companies would bear interest at 3 per cent. It occurred to me that under the powers conferred on the company by this Bill, it would be permissible, no doubt with the sanction of the Minister for Finance, to issue a considerable number of new debentures for the purpose of paying off the substituted debenture stock and that, in fact, depending, of course, on the trend of the market, it would be possible to issue the new debentures bearing interest at four, five or even six per cent. and to use the proceeds for the purpose of redeeming the 3 per cent. stock. The Minister will probably say —no doubt he means what he says— that the Minister for Finance will interpose his authority to say "no", but I think it ought to be written into the Bill as an indication to the company that the State is not disposed to facilitate the raising of new debentures at a higher rate of interest for the purpose of redeeming existing debentures bearing interest at 3 per cent.
Personally, I cannot conceive the circumstances under which the company would propose that, or in which the Minister for Finance would agree to the issue of debentures at rates higher than 3 per cent. for the purpose of paying off debentures bearing interest at 3 per cent. I cannot even visualise the circumstances under which such a proposal would take shape. First of all, it would be a very foolish step for the company to take. They would be issuing new stock bearing interest above 3 per cent. for the purpose of redeeming stock at 3 per cent.
Which seems to be absurd.
It does not appear so to me.
I do not think the company would propose it, or that if they did the Minister for Finance would agree.
I do not think the proposal is absurd at all. There is a very important principle which has arisen, incidentally, on this amendment. There is an obligation on the company to redeem the substitute stock in 1960 for cash. Senator Duffy visualises the possibility of the raising of debentures in substitution of the existing 3 per cent. debentures. Of course, you cannot place a limitation on the rate of these debentures. Cash is required. The debentures must be issued at a price at which the public will buy. If rates have gone higher, they will have to be issued at market prices in order to provide the cash necessary to redeem the substitute stock. It is absurd to place any limitation on the interest rate that may be necessary if—this is the important point—a new lot of debentures are going to be issued to provide the cash to repay the substitute debentures.
Or for any purpose—if the new debentures are designed to raise cash for any purpose.
I am concerned at the moment with the question of redemption. It actually applies for any purpose. If you want cash you must issue debentures at the market rate. The question will arise also on Section 22, and I find it hard to separate my arguments. Is it the intention of the Government that these substitute debentures shall be redeemed out of profits, or is it intended, if the profits are inadequate, to raise other debentures outside the Act to provide the necessary cash? We have never been clear about that. The explanatory memorandum issued by the Government said nothing, and we want to be clear as to what is in the Minister's mind on this whole question. I assume it is the hope and intention of the Minister that these debentures will be redeemed by 1960 out of profits. That raises a very wide issue of transport policy. In their origin, these debentures are the fixed capital of the railway company. They have been raised to provide a fixed capital in the shape of rolling stock, tracks and whatever it may be, and it is totally outside the ordinary finance to expect profits to pay off fixed assets. Yet that appears to be the policy involved. I will have to come back to it again on Section 22, but, in the meantime, I would like, when the Minister is dealing with it, if he would say if it is intended that no fresh issue of debentures shall be raised to pay off substitute stock.
It is intended that the substituted stock will be redeemed out of profits. The company may for that purpose utilise reserve funds of various kinds, just as they did last year when they called upon reserve funds to redeem these subsidiary stocks mentioned in another section of the Bill. I would not agree that it is contrary to sound financial practice to redeem debentures out of profits. I would say that the fixed assets of an undertaking should be represented by ordinary capital, and debenture capital should be raised only for temporary purposes, and with the ultimate intention of utilising profits for the purpose of repaying that loan, because that is what debenture stock represents—a loan secured on the fixed assets created by the ordinary capital. It would appear to be much sounder financial practice to aim at the redemption of loan capital out of profits than to use loan capital for the purpose of creating fixed assets.
The intention is to get rid of the substitute debenture stock out of the revenue of the company earned between this and 1960, and to have a situation in 1960 in which the company will have redeemed its debentures and have its ordinary stocks plus any new debentures that may have been issued under the authority of the Act in the meantime, and not redeemed before then.
I want to deal for one moment with the Minister's general statement—that it is better to finance an undertaking out of common stock than out of a debenture issue. It may be better, if you are starting afresh, but, in this case, you have to go back to the origin. How was the company financed? It was partly financed out of irredeemable debentures and partly out of common stock. The general theory that debentures should be used only for passing capital does not apply. Debentures were in the nature of common stock, and were applied to fixed assets, and now the Minister is acting on the theory that the debentures should not be put into fixed assets.
These are very important considerations, but I cannot accept his general statement in all cases. Remember that these were irredeemable debentures, and it is only in this Bill, or Act, that we are now making them redeemable. They were used as fixed assets and it is absurd to say that now they should be regarded in the nature of temporary borrowings to be repaid out of profits. However, that is another matter with which I am going to deal on Section 22.
One point was, I think, misunderstood by the Minister. Let us assume that the company find it necessary to issue only £1,500,000 in new debentures for the purpose of reconstruction and development of the system during the next 15 years. I do not give that as a firm figure. I mention it merely as an example of what is in my mind. Fifteen years hence, there will still be available to the company £5,000,000 of new debentures which this Bill authorises them to issue. There is, of course, the difficulty that they must get the sanction of the Minister for Finance but he will be also in this difficulty—that, in 1960, the company will require to redeem the whole of the existing debentures, amounting to £5,000,000. They must be redeemed in cash. Assuming that the company has not in reserve any money with which to secure the redemption of the debentures, they will apply pressure to the Minister for Finance. He will have to yield and give them power to issue £5,000,000 of new debentures on which they may have to pay 6 per cent. They may use the proceeds of these debentures to redeem the then existing debentures. Assuming that 6 per cent. is the rate payable on debenture stock in 1960, I take it that the market price of the then existing debentures would be £50, so that, actually, the £5,000,000 they would borrow would pay off——
If they were to be redeemed in 1960, the market value would not be £50.
In any event, there is no doubt that it is open to the company, in certain circumstances, to borrow money, within the limit of £6,500,000, for the purpose of redeeming the substituted debenture stock. That new debenture stock is not redeemable.
It may be.
There is no obligation to redeem.
It may be made redeemable upon such terms and conditions as are determined at the time.
We do not make provision for its compulsory redemption, so that, in 1960, you may find that you have £6,500,000 of debenture stock which may not be redeemed for a very long time. That will interfere with the finances of the scheme, as we see them now.
Even if we were to assume that the company would find itself in the position of having to issue the balance of its new debenture stock to get the cash necessary for this purpose, there would be no point in putting in an amendment which would limit the company to issuing this stock at 3 per cent. Nobody knows what market conditions will be then.
They might get it at 2 per cent.
They might but, if the market price were 4 per cent., the company could not get the capital at all. We had to face that problem in relation to the State guarantee. The Bill provides that the company may issue debenture stock carrying varying rates of interest, but the State guarantees only 3 per cent. interest. The alternative course was to authorise the company to issue its 3 per cent. debentures at a premium or at a discount. The objection of the Minister for Finance to that course was that it left indeterminate the whole contingent liability he was undertaking. Therefore, we adopted the device in the Bill, which authorises the company to issue its debenture stock at varying rates of interest, as market conditions may require, but guaranteed by the State only to the extent of 3 per cent. If the company has to utilise, in 1960, the balance of its borrowing powers to get cash, it will have to issue its debentures at whatever rate market conditions require.
The Minister does contemplate the possibility of having to issue this £6,500,000, odd, to redeem the substituted debentures in 1960. Where, then, is the capital to come from for new development?
I do not contemplate that. I say that it would not be contrary to the provisions of the Bill. It is not contemplated that that situation will arise. If it were found in 1960 that the company were unable to redeem its substituted debenture stock out of revenue, the Government of the day would be almost bound to bring the whole position to the notice of the Oireachtas again, because it would be quite clear that the scheme of the Bill had failed.
On that point, I take it that the Minister did not put in paragraph (b), providing for redemption by 1960, for the protection of any existing shareholder but because he wants the company to redeem by 1960. If, in 1960, despite the Minister's hopes, it is not possible to redeem, there will be only two alternatives open to the company. One would be to obtain a loan at whatever rate of interest then obtains and the other to have new legislation introduced. If the Minister brings in new legislation, it will mean that he will be altering the rights of the shareholders and that he will be guilty of a breach of faith with them——
Only if the legislation were introduced for that purpose.
If the legislation were introduced for the purpose of getting debenture holders to take anything but cash in 1960, once this Bill is passed, that would be a breach of faith.
Yes.
I suggest that the Minister must face the possibility that profits, or sales of other assets to which he referred, will not be sufficient to provide for redemption in 1960. If that were so, the company would have to raise the money or the Government would have to provide them with the money or there would have to be a breach of faith. I do not think that the Minister wants a breach of faith. If the Minister had not his nominee as the dictator of the company, I could understand his putting in that provision to force the company to amortise capital which would have gone out of date by that time. But the Minister has a means of carrying out public policy through the chairman. The Minister can ensure, through the chairman, that the company carries out what he wants. He can get him to see that sufficient is put aside in good years to meet the redemption of those debentures. I suggest to the Minister quite seriously that, by adopting the method of using his nominee to put aside sufficient moneys to redeem the debentures, he would achieve exactly the same results as are aimed at without the possibility of the company having, in 1960, to go into the open money market and borrow at a much higher rate of interest in order to implement the undertaking given in this Bill. I do not think that the Minister, or any Minister, would deliberately be guilty of a breach of faith with the debenture holders.
There must be redemption of the full amount in cash then, however it may be done.
By leaving paragraph (b) in the Bill, the company may have to pay a much higher rate of interest than 3 per cent. It might, of course, get off with a lower rate of interest, which would be all to the good. But the retention of this provision will not achieve anything which the Minister could not achieve by getting the chairman to carry out Government policy.
One of the justifications for having a Government nominee as chairman of the board is the financial obligation which the Government has undertaken in relation to the undertaking. There is more involved in this than merely seeing that there is a proper allocation of the surplus revenue to this purpose; there is the direction of the whole business so as to produce a revenue which can be allocated to this purpose. That, amongst other things, is the function of the chairman. We want to ensure that the company will not go ahead in a free and easy manner with the idea that, if the undertaking cannot earn enough to meet those charges, the taxpayer will make the amount good. Our aim is to ensure that the taxpayer will not have to make any such amount good by securing that the undertaking will be run efficiently and that charges will be fixed at such a figure as will cover expenses and meet interest obligations.
In view of the fact that it is the chairman who will have to do with that, what is the necessity of putting in this provision? The only effect is protection of the shareholders, which the Minister himself says he does not want to provide for.
The purpose is to create a situation in which all the capital represented now by rolling stocks, stations and equipment which will have to be scrapped or completely modernised, will be amortised within a reasonable period. With that equipment, when scrapped, will go the capital liability it represents.
That is the basis on which we say the company is to conduct its business. If it decides to undertake new capital expenditure it issues new debentures. If it effects modernisation we think that the old capital liability must disappear. We think it is possible to do that and if it is not done the purpose of this Bill will not be fully realised. Both Houses of the Oireachtas could then consider the matter.
I am not arguing about that at all, but if clause (b) was completely deleted could not the Minister get it done just the same?
It is necessary for the purpose of the guarantee. It is desirable that the dividend liability of the State should be clearly measured, and we measure that liability both in respect of time and amount by fixing these limits.
It seems to me to be obvious to everyone here, and to nobody more so than the Minister, that if the taxpayer does not make up this money the users of the railway will, so that it does not matter.
Not necessarily.
I suggest it is the same people who pay the taxes and use the railway. There is a sum to be provided which I have endeavoured to calculate at £1,300,000 a year that must be provided by the users of the service or by the taxpayer or both.
On Section 17 I have grave misgivings as to the obligations contained in that section.
An Leas-Chathaoirleach
We are on the amendment, Senator.
I will come to that, but I have great misgivings as to the obligation to redeem at par in cash certain debenture holdings before the 30th June, 1960.
An Leas-Chathaoirleach
We are still on the amendment. We will come to the section when that has been disposed of.
On a point of order, I suggest that it is practically impossible to discuss the amendment without discussing the section also.
An Leas-Chathaoirleach
Very well. I have no objection provided the House understands that we are discussing them together, and that the discussion will not arise again on the section itself.
As it stands, the company is bound to repay certain debenture claims by the 30th June, 1960. It might be that in order to do so the company would have to borrow fresh money in the capital market in order to repay these redeemable 3 per cent. debentures. It might very well happen that the State, or the company as guaranteed by the State, could not borrow at less than 4 per cent. The company in the situation in which that would occur might have to repay 3 per cent. redeemable debenture stock and would have to borrow from the investing public 4 per cent. debenture assets in order to do it. I think the obligation to have to repay that money by that date is a most dangerous one, because it presupposes that the rate of interest on gilt-edged securities will be continued at the present artificially low level of 3 per cent. Nobody, of course, can prophesy what that rate will be in 20 years' time, but the present low rate of borrowing by Government and other institutions having a high degree of credit is artificial. It is the result of the rigging of the capital market in Britain and in the other United Nations. That has brought down the rate of gilt-edged securities to a low level which may not survive in four or five years and cannot exist in 20 years' time. The company may have to borrow at 4 per cent. or maybe more, and I think it is undesirable that we should include in this Bill an obligation to pay debentures which possibly could only be met by the company borrowing at a higher rate of interest than they are prepared to pay.
What is the Minister's view in regard to policy? In making provision for the interest which capital has to carry and payment for the other services which have to be met out of transport organisation, can he say when arriving at these classifications and his charges for the classifications that they will all be arranged in such a way as to carry this burden both of interest and of cost for the service given by all the people engaged in the transport system? Will that be the policy of the Minister? Because he in the last analysis is the person who is going to determine charges.
Transport of all kinds will have to be sold at an economic cost.
Sold at an economic cost, but we are not quite clear what that means. You can sell transport to me at a cost which will encourage me to accept and purchase, but will the payment which I make cover all your all-over costs—interest charges, payment of labour and so forth?
The Senator cannot have it both ways. Either we can determine the cost at which we want to sell transport and make that price effective or else—which is more nearly correct—sell at a price the public is prepared to pay. In practice the transport company can charge what the traffic will bear. It cannot charge any more than that, and it has got to try to keep the operating costs so restricted that the charges the traffic will bear will be the economic price of transport.
I would implore the Minister to deal with this whole question of debentures. The only people you are safeguarding as far as I can see are the debenture holders. There are more important considerations involved in this, and it may be very embarrassing for a company out of profits or new stock to have to redeem its debenture in 1960. All through this discussion the Minister has made me uneasy, and what makes me uneasy is the question of what the traffic will bear. There are economic costs, but once it is examined in its reality surely it is not fair in arriving at them to charge out of profits a sum that is going to redeem what in the nature of things is fixed capital.
No.
That is what is intended. I understand that it is to provide out of profit sufficient redemption for the £10,000,000 debenture. If that is the case and that charge is a factor in arriving at economic costs, what about the users of the railways? Is not the life blood of the whole system cheaper rates in the interest of the community as a whole? That seems to be the last thing we are thinking about. We are thinking about dictatorships, shareholders and provision for the amortisation of debentures, within a certain number of years. Why cannot the Minister leave the question of the redemption of these debentures open for the present, and let us see how the company prospers? There would be nothing unsound in that. It would be in the interests, I suggest, of the users of the railways, and the only people who would be prejudiced at all—and, I suggest, not unjustly— would be the debenture holders. After all, these people had not redeemable stock before, and you are now giving them a redeemable stock.
The Senator has got a wrong idea when he says that these debentures are represented by fixed assets. In fact, I should say that when the accounts of the Great Southern Railways Company are put in the same form as the accounts of the Dublin United Transport Company now are in, it will be found that the capital represented by these debentures will appear largely as goodwill, as in the case of the Dublin United Transport Company, where they amounted to 60 per cent. of the total. That is the type of asset that should be got rid of, and got rid of as quickly as possible, although, of course, it can be said that the Dublin United Transport Company has a revenue capable of remunerating the whole of its capital. There must, however, be a balance in this matter of what is meant by assets, and the balance would be represented by old equipment that has got to be more or less replaced by new equipment as early as possible, and I would say that charging rates for transport sufficient to cover the replacement cost is quite a legitimate arrangement, since by that means the company will be enabled to provide better transport services.
It seems to me that the Minister, in talking about the economic cost, is not distinguishing between economic transport cost and economic social cost. That is not quite correct, and I am afraid I could not agree with that. However, perhaps this is not the proper section of the Bill on which to deal with that matter. It might be better to deal with it when we come to the question of maximum charges. I would, however, say this to the Minister. There is no reason why the Minister would not get exactly what he has just stated. He wants to get that by clause (b), and it would have just the same effect to achieve his policy in my way, and would not leave the risk of the State being in the awful position in 1960 of having to put up the money. I would earnestly suggest that the Minister should leave this question open. He has the powers, and he is obviously going to get powers under this Bill giving him an absolute say through his chairman. He can say what amount in each year will be devoted to this matter of debentures. He can say that none will be given in one year, because it was a bad year; and then, again he can say that another year is a good year, and therefore, half the sum will be devoted to that purpose; but the chairman will not decide any problem of magnitude without consulting the Minister, and, if the Minister would do what we suggest, he would not leave himself or the Minister for Finance, or a possible successor to the Minister for Finance in 1960, with a sick headache.
It would appear that the capital investments of the new transport company are in a different position in relation to these debentures?
No. With regard to what Senator Sir John Keane said, I suggested that any commercial company could utilise its ordinary capital for investment in fixed assets and that it is bad practice to have fixed assets represented by loan capital. I would say that loan capital should be utilised for passing purposes and that, just as a shipping company might have its ordinary capital invested in lairages, stores, a head office, and so forth, it might borrow money to build a ship on the understanding that the capital would be repaid when the ship ceased to have value.
These were redeemable debentures.
Yes, but the original capital investment in the railway company was very much more than the nominal value of these stocks. It was over £26,000,000, and the original capital subscribed on ordinary shares and preference shares went into permanent way, railway stations and fixed assets—I mean fixed to the ground—and the debenture stock was used very largely for the purpose of acquiring passing assets, such as railway engines, carriages, and so on, which had only a limited life and which, at the end of that life, have to be replaced by new equipment.
I wish to challenge the general statement that this stock was not in any way earmarked to apply originally to any form of asset. All that was meant was that it was to have a prior charge on all assets, but to say that, by some notional fiction or other, it had to be attached to the replacement of engines or trucks, and so on, is absurd. It was used for the permanent acquisition of land, station buildings, and so on, and it was only in the case where you had a prior lien on all assets that such was the case. The easiest realisable asset in that way would be the rolling stock, but there was no distinction in use in the application of that debenture stock as distinct from the common stock.
One or two points occur to me arising out of this discussion, and I should like to put them before the House. It is important that we should distinguish between debentures and capital, and I think the Minister is right and wise in stressing that difference, which is accepted by all accountants, between debentures and capital.
No.
It is not accepted at all.
Again, as to railways, and the question of differentiating as to the forms in which they spend their money, railways follow the system known as the "double account" system which has been followed by law. In one section of that account is set down what is known as the permanent assets. We have to recognise that there is a difference between debentures and ordinary capital, and it is recognised by all accountants that debentures should be used only for purposes of a temporary nature and should be liquidated as soon as possible. If that is what the Minister desires in this Bill, I agree that he is right. What seems to be troubling the people who have spoken so far is that an effort should be made to redeem these debentures out of income between this and 1960. I think that that seems to be the difficulty. Well, I must say that it does not worry me in the least, because I am one of those who believe that with an overhaul of the railways, and with competent management, they can be made to pay their way. We all have experience of companies that got into very low water and we were almost convinced that these companies could not make good, but other people have come along, taken over these companies, and within no time at all have brought them to a high pitch of success. My colleague, Senator O'Dea, as well as myself, put money into industrial concerns—at least two of them—which did not make good under a particular management. Other people told us that they would make good if they were under different management. Eventually, they did pass to other management, and we know that they did make good. I think we all realise that that is a common experience, and I am convinced that with proper management, and given a certain amount of freedom, this company will provide an efficient transport service, without inflicting any hardship whatever on the community, and that, on the contrary, it will be able to redeem these debentures, and that will redound to the interest of the company and the transport services as a whole.
I rise to suggest that we might consider the amendment, and it does not seem to me, taking the amendment as it stands, that there is any provision whatever in the Bill for the creation of debentures for the purpose of redeeming other debentures. I, therefore, think, that being the case, that it would be absurd to put this amendment in. There are about 100 things in the debate in connection with which I should like to rise, but I should like to keep to the amendment.
In regard to this amendment, I want to say that we are dealing here not with the kind of company that Senator O Buachalla has mentioned. We are dealing here with a monopoly.
No, not at all.
We are dealing here with a monopoly of transport. The concern can charge any fares it cares to, with, of course, the sanction of the Minister in certain circumstances, but the Minister will not be in a position to review the day-to-day activities of the concern even in regard to charging. Now we are confronted with the position in which the company is burdened right away with the charge of £300,000 a year for debenture interest, and an obligation to redeem the whole of their substituted debenture stock in 15 years. The annual charge for the redemption is £547,000 a year. Now, these sums must be found. In addition the company is permitted to issue new debentures, but these new debentures, according to the statement issued to the shareholders, will be required for the purpose of modernising the system —building new railway stations, purchasing rolling stock, and probably, when the emergency is past, purchasing a complete fleet of road vehicles. One can immediately visualise the issue of £2,000,000 of new debentures. There is also an item for fixed charges. All these four items alone amount roughly to £1,000,000 a year. But the two companies that are being absorbed, in the best year they have had since 1933, did not earn £1,000,000. Their net profits were not £1,000,000. Economies may assist in making up profits, but I am afraid that these economies will not make good the deficiency which may be observable when the ordinary citizen will be entitled to have his own lorry and motor car on the road. Actually the new concern may have to face a lean period two or three years from now, and may not be in a position to make an annual provision of £540,000 for the redemption of the debentures. In that case the sum total for the redemption of substituted debentures will have to be found solely towards the end of the period. That is the situation with which the amendment deals.
May I say one word arising out of the controversy which seems to have developed between Senator Sir John Keane and myself? I think he has been somewhat misled by the preponderance of loan capital in the present capital structure of the Great Southern Railways Company. The total capital expenditure up to date on the company's system is £31,250,000. Of that £31,250,000, not much more than £9,000,000 represented debenture capital. That capital was reduced by the amalgamation in 1924. The total capital was reduced by the 1924. Act to about £27,000,000 and the debenture capital represented a larger proportion of the total. Of the capital expenditure of £31,000,000 on the Great Southern Railways system, almost £24,000,000 was the amount expended on the construction of the lines open for traffic. Some part of the balance was expended on the canal undertaking and similar fixed assets, but the balance, which was not dissimilar in amount to the total of the loan capital, was the expenditure on rolling stock and other movable assets of that kind
I move amendment No. 6:
In sub-section (4), page 12, to delete in lines 52 and 53 the words "borrow from any person any sum or sums and for the purpose of such borrowing the said Minister may", and in lines 56 and 57 to delete the words "and shall pay the moneys so borrowed into the Exchequer."
I hope the Minister will accept this amendment. Section 18, sub-section (4), says that for the purpose of providing moneys for the sums advanced out of the Central Fund the Minister for Finance may borrow, and the moneys which will be advanced from the Central Fund under the section are those which are required to make good whatever sums the company will be unable to meet out of their own resources. The amendment which has been tabled proposes to delete certain words, so that the sub-section as amended would read:—
"For the purpose of providing moneys for the sums advanced out of the Central Fund under this section the Minister for Finance may create and issue securities bearing such rate of interest and subject to such conditions as to repayment, redemption or otherwise as he thinks fit".
Briefly, the purpose here is that, instead of the Government having recourse to borrowing, the Minister for Finance himself will create and issue such moneys—such credit, because it is credit—as may be required for the purposes of the section. It may be that towards the redemption period, 1960, a very large sum of money may be needed under this section, and instead of borrowing this money it is proposed here that the Minister himself would provide it by creating State credit. I do not think there is anything very difficult, nor, nowadays, anything revolutionary about making that suggestion. Elsewhere, it has been the practice for a number of years for governments to create credits for purposes such as this. In New Zealand, for instance, the Government set aside £5,000,000 for the modernisation of railways, apart from moneys which were set aside for other purposes.
To-day, in every country engaged in war, recourse is had to what might be described as unorthodox methods of creating the necessary credits for the purposes of war. I imagine that Senator Sir John Keane and the Minister would probably consider that there is something wrong or unorthodox about the suggestion, but I cannot see any virtue in a Government going to a bank and asking them for credit or going to the Stock Exchange and borrowing money which is very often subscribed in the form of bank loans for purposes of this kind. A bank loan does not necessarily mean that the bank is lending the money of investors or depositors. It has been shown by competent authorities, including bankers themselves, that, in fact, where a bank lends money by buying securities it is, in fact, creating new money, and creating new money for the purpose of making profits. I cannot see any reason why the State, which is, after all, the security behind the bank loan, should go to the bank, or to any other authority, for the purpose of creating credit against tangible assets such as we have in the case of a railway—buildings, premises, lines, rolling stock, road transport equipment and so forth.
It seems to me that here is a method of avoiding imposing on the public, whether as taxpayers or as users of the railways, financial obligations that may, in fact, have a crippling effect on industrial recovery and on the agricultural prospects of this country. This amendment, to my mind, at any rate, was linked up with the previous one, when I talked of limiting to 3 per cent. the interest which might be permitted on new creations of debentures. I had in my mind that this amendment would follow, an amendment in which it is proposed that the Minister for Finance, on behalf of the State, would issue the credits required for these purposes at such a rate as he thinks fit.
The British Government have recently embarked on a new scheme of financing the present war. They have issued loans at 1? per cent. Actually, there is authority for saying that the cost of creating and administering the credit is roughly 1/2 per cent. People sometimes foolishly talk of costless credit. There is no such thing as costless credit, but the Birmingham Municipal Bank were able to show in an authoritative way that the cost of administration never exceeded 1/2 per cent., so that it would be quite possible for the Minister for Finance, if this suggestion is adopted, to provide the credits for the purposes of the company at not more than 1 per cent., so as to cover all the operating expenses, and even to show a profit.
I would ask him to consider this matter closely before rejecting it. I recognise, of course, that he is not the Minister for Finance, and that the question of financial policy will have to be determined, to some extent, by the Minister for Finance, but the Minister is a member of the Government and as such will have influence in shaping the financial policy of the Government as a whole. I would urge very strongly that the Minister would take account of the suggestion which is made in this amendment.
This sub-section is in standard form. It authorises the Minister for Finance to borrow for the purposes of the Central Fund if and when the obligation of making payment, because of the default of the company, should arise. I do not wish to follow Senator Duffy into the field that he opened up because, frankly, I do not claim to be a financial experts and it sounds all nonsense to me. I do not understand a word of what Senator Duffy has said. It seems to me that the State has only two means of getting money—they either borrow it or raise it by taxation. Ultimately, if the default of the company is maintained, the money required to effect payment of interest or principal will have to be provided by the taxpayers. Pending the voting of the money by the Dáil, which is the custodian of the public purse, the Minister is empowered to borrow to get the money.
I do not know what the Senator means when he talks about issuing credits. In this particular case, the Minister borrows money from people who are willing to lend it, and, in return, he gives them State security which represents their claim upon the amount of money they have loaned and the right to interest until it is repaid.
I am like the Minister—I do not understand how the Senator proposes to raise the money. I wonder if Senator Duffy had to put his scheme through how he would set about it either. But lest the impression be created that we have got a solid front in this corner of the House on the question of this Bill, I should like to dispel any such idea. Of course, the scheme which has been mentioned looks like a form of naked inflation. By some means, the printing press could be set to work and an amount of money put into circulation which could then be used in order to pay these various obligations. If that is not inflation, what is it? I do not understand it. The Senator talked of what is being done in other countries. Undoubtedly, there has been borrowing at very low rates of interest, but generally for very short terms, and I do not know if the requirements in this case would come under the heading of short-term borrowing at all.
In any case, the money has got to come from somebody if it is to have any pretence to soundness. It must come either from the banks or out of the savings of the people. This method of getting money out of a hat may represent the new order but I hope I shall not live to see such experiments lightly undertaken.
Senator Sir John Keane is very perturbed about the printing press. I wonder how the British Government has managed to finance this war.
It has paid interest.
On what? On money that did not exist in 1939? That is beyond question.
And we are getting the effect of that in high prices here.
That is another question. I am dealing with the fact that the British Government created £1,000,000,000 of money that did not exist before the war. That cannot be challenged by anybody. If the money was there, it could have been got by taxation or by borrowing from the public. It was not there. It was created by the banks simply as a bookkeeping transaction. The banks are collecting interest on it but the British Government has sufficient "savvy" to refuse to be bled white by the banking institutions. They have now limited the rate of interest to 1? per cent.
What might happen seems to me to be simple enough. Let us assume that, in 1960, £5,000,000 has to be found to redeem the substituted debentures. The Government have then what, I hope, will be a well-equipped railway system, so far as a railway system may be necessary at all. They will have a fleet of road vehicles, and I hope, roads able to carry them. There should not be any difficulty in the Government creating a security—call it what you like; even print notes but, of course, that is the last thing a sensible person would think of—which would be a token in respect of the assets passing into their hands. There would be no need, assuming this amendment were accepted, to issue banks notes, although, under existing conditions, there is no limit to the number of bank notes the Government is bound to issue and is, in fact, issuing.
Against securities.
The security is a Bank of England note, which is based on British debt. There is no security behind a Bank of England note except the debt of the British Government. If I were to walk into the Central Bank to-morrow with a Bank of England note the Central Bank pledges itself by statute to give me an Irish note in exchange. In exchange for what? Mrs. Murphy got a telegram from her husband on Monday morning. He is producing war material in England for the British Government. The telegram tells the Post Office to pay Mrs. Murphy £3. The Post Office hands her out three new notes, issued by our Central Bank, which provides her with the power to buy butter, potatoes, clothing and other requirements. What have we got in exchange? A telegraph form. Nothing else. That is all that enters this country in exchange for what we supply to the recipients of these telegrams, whether the amount be £3, £5 or £10. Is there any reason why a sensible administration would not use the same kind of machinery to issue credit here— notes, if necessary, but they are utterly unnecessary? The notes are already in circulation. All that is needed is authority to use them for that special purpose. In this amendment we enable the Government to issue, in any form it thinks fit, the credit necessary to enable the new company to repay its substituted debenture stock by 1960 and to acquire in exchange a mortgage or lien on the whole assets of the company—become the owner of the company, to all intents and purposes.
The fact that a person working in England can send British notes to this country——
Not notes, a telegram.
It is the same thing. The fact that a person working in England can send British notes here, get Irish notes in exchange and use those Irish notes in purchasing physical supplies here, while we cannot, at present, very well use those British notes to purchase supplies in Great Britain, is one of the misfortunes created for us by the war. Many of our present difficulties, both in relation to the supply of materials and the employment of workers, are due to the fact that restriction exists upon the use of English money by us to buy goods in Great Britain and ship them here. Let us recognise it as a misfortune.
That inflow of money from Irish emigrants in Great Britain has an inflationary effect. Is that a reason why we should, deliberately and unnecessarily, inflict a corresponding misfortune upon ourselves? It seems to me that is what Senator Duffy is proposing—that, because we have endured this misfortune during the war, we should continue to endure it, even though it is unnecessary to do so. In this case, the Government has to get money for the purpose of fulfilling an obligation into which it is now entering—an obligation to pay to the debenture holders their interest on the debentures if the new company be unable to do so. Let us assume that a situation arises in which the company defaults in its interest payments. The Minister for Finance pays over to the debenture holders the amount which they would have been entitled to receive from the company. To enable him to do that, he has got to get money. He can get that money by borrowing. We do not propose to prescribe the rates of interest he will pay on any money which he borrows. As Senator Sir John Keane has said, the rate may be determined by the terms of the loan. I think that the State borrows, by ways and means advances, at rates of interest as low as the rate mentioned by Senator Duffy. However, they are short-term loans. On long-term loans, the State has to pay higher rates and it has never succeeded in borrowing money on long-term conditions at as low a rate as 3 per cent. It is by borrowing the money that the Minister for Finance gets the wherewithal to make good his obligations until the deficiency in the Exchequer has been made good by a Vote of the Dáil authorising the imposition of taxation for that purpose. That is what this section is intended to do—to empower the Minister for Finance to borrow for the purpose of meeting this obligation. Even if we were to adopt Senator Duffy's suggestion, that we should get this money otherwise than by borrowing, I cannot understand why he is not requiring the Minister for Finance to pay the money into the Exchequer. He is proposing to delete those words and he does not indicate what the Minister for Finance is to do with the money when he gets it. The section says that, when he gets it, he is to pay it into the Exchequer, and I think that that is a wise precaution.
I imagine that the Minister understands quite well what is involved in this amendment. He is defending his policy very successfully, but he has no more faith in the financial policy enunciated in the Bill than I have.
I have no faith whatever in bad money.
Neither have I, but the State is getting bad money. It got £75,000,000 up to 31st December, 1943, with which it cannot buy a tin can.
The Minister knows quite well that the distinction between his proposal and mine is this, that if circumstances were to arise in which it was necessary for the State to come to the assistance of the company, then instead of going to the banks and asking for loans of money the Minister would create an instrument, call it what you like.
Where does he get the money he has to pay out?
I understand that money is merely a token.
The obligation here is to pay money.
And I want to take that out. I want to give the Minister power to issue an instrument which the recipient can take to the bank and there encash. Let it be a bond or whatever you want to call it.
Why not call it money? He prints money, is that it?
I think Henry Ford was right. He said that money was part of our transportation system, that it was for the purpose of enabling goods to pass from one owner to another. The Minister is trying to confuse the House. He is not confusing himself, because he understands it thoroughly, but he is trying to confuse the House as to the meaning of money, which in the case of the individual means cash. The meaning of money in relation to the State is totally different from that of the individual. The shopkeeper regards goods on his shelves as money. It represents trade, definite assets, with which he can pay rent, etc.
Will Senator Duffy read the Bill as it would be after his amendment? It would read "that for the purpose of providing moneys for sums advanced out of the Central Fund under this section the Minister for Finance may create and issue securities bearing such rate of interest and subject to such conditions as to repayment, redemption or otherwise, as he thinks fit." I do not see how that works to the extent of putting 3 per cent on their investments into the pockets of the debenture shareholders.
Does that deal with capital or debenture interest?
Either.
I move amendment No. 7:—
In sub-section (8), page 13, line 11, to delete the words "appointed by the Minister for Finance" and substitute the words "of 3 per cent. per annum".
This amendment deals with a very small point. If Senators look at sub-section (8) they will see that it states that the provision of money by the Oireachtas under the previous sub-section shall not exempt the company from the liability to repay to the Central Fund with interest thereon at the rate appointed by the Minister for Finance, the full amount of any advance made under sub-section (3). What I am trying to do here is to limit the interest which would be charged by the Minister for Finance to 3 per cent. I suggest to the Minister that he has some experience of fairly hefty charges made by the Minister for Finance in respect of other loans. I remember at one time a complaint was made or expressed by somebody on behalf of the Electricity Supply Board that that board was handicapped a good deal by the impositions of the Department of Finance. I do not know how true it was, but I think the Department of Finance charged the Electricity Supply Board up to 5 per cent. on their loans. We know that local authorities are frequently complaining with regard to the rates at which they can get money from the Local Loans Fund. I suggest to the Minister that though he has a function in connection with this Bill which is not quite the same as the function of the Minister for Finance, he should give his assistance by inserting in the Bill a prohibition against the charging of a high rate of interest by the Minister for Finance.
If the Minister for Finance cannot borrow money at 3 per cent., surely he cannot lend it at 3 per cent. When the Minister makes an advance to the company in order to enable it to fulfil its obligations to the debenture holders and if he has borrowed the money at a higher rate than 3 per cent., he must charge the company more than 3 per cent. for the money so advanced. Otherwise the taxpayers would be subsidising the payment of dividends of the common stockholders. If we reduce the charge by subsidising the rate of interest in advance it merely hastens the day on which the common stockholders may draw the dividend out of earnings but it would in effect be subsidising the company.
But no dividends will be paid unless the money is there.
Yes, if the State advances money to the company to pay its debenture interest, the company has to repay that money to the State at interest fixed by the Minister for Finance. If we are to fix a rate of interest lower than the Minister has paid for money he borrowed, we are lightening the charge upon the future revenue of the company. There is no reason why we should not recover from the company the full amount plus interest, which the Minister for Finance has advanced to it. If we do not do that, we are merely subsidising the company, which I think is an unnecessary procedure.
I urge the Minister to look at this from another angle. Assuming that the company is unable to earn the amount required to pay debenture interest and to make provision for redemption of debentures, they are up against this problem: the company is in default, and they borrow money from the Minister for Finance to make up the deficit. The following year they are called upon to make the ordinary provision which they are supposed now to make annually, plus the deficit from the year before, plus the interest on the amount of that deficit. That is going to be a very heavy burden, and how is it going to be met? I am concerned with this from the angle of two classes in the community. The company may meet their obligations by imposing more onerous conditions for the use of their services, either for travel or for transportation of goods. They may come down on their employees' rates of wages, lengthen their hours of work or dismiss them. These are the things which influence me and I think it is worth the Minister's while to bear in mind what is likely to happen, to stand firmly against the Minister for Finance and say there must be a very low rate of interest charged to the company for the use of accommodation. It is all right to say that the Minister for Finance cannot logically lend money to a company at a lower rate than he can borrow it, but there are many ways open to a Minister for Finance for getting money. For instance, there is a number of organisations in this country which are more or less under State control. Take an organisation like the Health Insurance Society. They have money. Government Departments have money to invest, and I notice that, in Great Britain, their investments have increased very considerably in the last five years since the war. I think the foreign investments of Government Departments increased by about £7,000,000 between 1939 and 1943. That may be good business commercially, but it may be very bad business socially. I urge that the Minister has in his power, if he wants to use it, the means of getting cheap money because he can come to the Oireachtas and have a sum included in his Finance Bill—and normally he will be including a sum—to provide this money. I think the Minister ought to take a stand against this.
To compel the National Health Society to provide the money would merely mean that we were compelling members of the society to subsidise the shareholders of this company.
Instead you want them to pay sickness benefit to unemployed railway workers.
The one thing that worries me about the section is that there is no finality. Supposing Córas Iompair Éireann is not able to pay its debenture interest, the Minister for Finance has to come along and provide the interest. He does that the first year and he does it again the second year but at some stage or other the State must come along, face up to the situation and say that Córas Iompair Éireann so far as the common stockholders are concerned has ceased to exist, and that the State is going to take it over for their liability. Unless you make some definite provision here you are merely putting off for another day a job that should be done at the moment.
I agree. If the situation arises when the Minister for Finance has to come to the Dáil and ask for money to make good his guarantee, then the whole situation would have to be reviewed by the Government. The arrangement of the sections does ensure that the Dáil will have full opportunity of considering that matter. It would not escape its obligations to the stockholders, but it could examine what steps could be taken to avoid the reception of this charge on public funds. If the situation is merely because of one bad year, due to temporary causes, such as a prolonged strike, a stoppage of trade, or some other purely abnormal reason, then that situation would not call for any drastic action if it was a reasonable assumption that more prosperous or normal conditions would return. In that case, the money is advanced to the company and the company could repay the money out of revenue in the ensuing year.
I move amendment No. 8:—
In sub-section (9), page 13, line 16, before the word "lay" to insert the following words "and in any case not later than the 1st day of June, 1945".
I have also an amendment (No. 9) as follows:—
In sub-section (10), page 13, line 33, before the word "lay" to insert the following words "and in any case not later than the 1st day of June next following such 31st day of March".
This section requires the Minister for Finance to lay before each House of the Oireachtas a statement setting out certain particulars regarding the guarantees given under the Bill in respect of the period ended 31st March, 1945. I think Senators will agree that a time limit should be imposed and not leave the matter as vague as it is in the Bill itself. In the Bill it states that the Minister shall as soon as may be after the 31st March, 1945, do certain things. I say that a time limit, the 1st June, should be put down and that that should be agreed to in order that the people who are interested in the matters which the Minister for Finance will lay before each House of the Oireachtas should be able to get these statements and not have to look for them. We should not, I think, put these matters on the long finger and I think it is desirable that we should have this time limit. I think Senators will agree with the amendment.
It is undoubtedly desirable that there should be no unnecessary delay in producing these statements to the Oireachtas. For a multitude of reasons, however, the common form of the sections in various Acts relating to similar matters appears here. The position is that you cannot fix a date. Would the Senator ask himself the question: what would happen if we accepted his amendment and the Minister for Finance did not produce his statement before the 1st June? Obviously nothing could happen. An amendment of that kind, while expressing a reasonable desire on the part of the House, could have no significance if that date is ignored. What we provide is that the Minister should do it as soon as is practicable, and that will be done. There is no use in putting in a particular date and saying you must do it before that date. It would not make the slightest difference so far as practical consequences are concerned.
And supposing he did not do it before that date there would be no obligation on him to do it at all then.
That is true. There is another important point which Senator Baxter has just mentioned, that if we were to put in an amendment in the form suggested by Senator Kyle and if the statement was not produced before that date, then it might not be produced at all.
Our view on the matter is that if we put down definitely in the Bill that it was to be done before the 1st June, it would be done. One assumes that there would be a certain amount of responsibility to see that what was laid down in the Act was done, and I for one do not agree that it should be the practice of a Government Department to be vague.
There is a great deal of experience behind that phrase: "as soon as may be."
I want to know from the Minister what is the purpose of this section. He has already got power to issue £4,000,000 common stock.
The £4,000,000 is one figure. The substituted common stock will be slightly over £3,500,000. I do not know if the company is likely to use this power, but it is desirable to have it stated in a round figure, rather than the odd number.
I think there is a lot to be said for widening the margin of the payable issue of common stock. I think £4,000,000 is a very narrow limit of common stock for a concern of this kind, especially if we have the redemption of the debentures we have been talking about earlier. It would have capital assets which on any valuation must be worth well over £20,000,000. I think that the element of common stock is too small in relation to the whole capitalisation of the company and provision should be made for increasing that element. I think also that it would give the finances of the new company a greater degree of flexibility, and diminish the commitments which the taxpayer has to assume with reference to the debentures, if it were possible for the new company to get additional capital by the process of issuing common stock which is not guaranteed by the taxpayer, rather than by the expensive process of fresh debentures. Even though the interest on these debentures is kept at the artificially low figure of 3 per cent., I should rather see the company put in a position to increase the common stock to £5,000,000 or £6,000,000, bearing in mind that no dividend is payable unless it is earned. If the company could raise that common stock on any attractive terms from the investing market which would be disposed to take a chance, it would diminish the potential burden on the taxpayer.
I should like to know whether it is possible for the company to issue common stock below par. I have been trying to look up, not very successfully, the provisions of the Companies Clauses Consolidation Act. It does provide quite a number of things in a very antiquated form which are usual in the articles of association of a company, but I have not for the moment been able to find any definite provision in regard to this point. It is usual to prevent companies from issuing capital at less than par value of the shares which, in normal conditions, would be an undesirable practice. There might, however, be cases in which it would be desirable, and if the company should, as I think it should not, be able to issue capital below par, I cannot for the life of me see why you should go to the trouble to limit it to £4,000,000, because if by any miracle —and I think it would be a miracle— the prospects of the company became so good that it could really pay off all its debentures and still be in a position to go to the public and get some money at par, I see no reason why you should prevent their doing so. I see no reason why the amount should be limited to £4,000,000.
I have not taken much part in the discussions that have taken place, because I look upon the financial provisions of the Bill as something upon which the Government has made up its mind, something which is an essential part of the whole Bill. I am not going to say more about it than that personally I think in the new company the balance is wrong, that far too large a proportion of what is the capital of the new company is in the form of debentures. I know it is a misnomer to call it capital, but, in my opinion, a certain proportion of it is in effect capital. I think that you are putting too great a burden on any board of directors and that you expect too much from the new management when you expect all that to be repaid out of profits without excessive transport charges, which is what the Minister expects. This, however, represents the decision of the Government, and I do not propose to debate it in all its aspects. That being the case, I do not see at all, while you have that provision, that there is any objection to issuing ordinary capital at par. I do not think it would be possible to get it, but why you should go to the trouble of carefully saying that it cannot be done I cannot understand. It might be just as possible to get such capital as to pay off the whole of the debentures in 1960.
I mentioned in the course of the Second Reading discussion here, and I think also in the Dáil, that I would contemplate at some stage after 1960 the Government of the day enacting new legislation to alter the capital structure of this company and to establish it on the basis of having common stock only. I do not think we should do that before 1960. It is difficult to say what is the value of the assets of this undertaking. The cost of their replacement is no guide because it is at least open to question whether we would replace them, or many of them, if they were not there now. Decisions have yet to be taken upon the extent to which the existing assets, even those in use and producing revenue at the moment, would be serviceable to the company under normal conditions. I think, therefore, we should not attempt to increase the total common stock of the company, at any rate until this 15 years' scheme of reorganisation has been completed, until the substituted debenture stock has been liquidated and the situation of the company at that stage capable of being examined in detail.
If this scheme is as successful as we hope, if the company is able to put transport upon a permanently remunerative basis, if it can liquidate the substituted debenture stock and emerge after 1960 with common stock only and a limited amount of new debentures redeemable at a later date, then I agree that consideration should be given to the proposal that the future capital requirements of the company should be financed by new issues of common stock and, if the agreement of the existing debenture holders could be secured, that their holdings should be replaced by common stock so that the total capital liabilities of the company could be expressed in terms of common stock. I do not think we could go beyond that. Apart from the problems that would arise in connection with the amalgamation scheme, I think it undesirable at this stage to attempt to assess what is the value of the permanent fixed assets of the company. It may be that changes in transport will create a situation in which the fixed assets of the company could not be valued at a higher figure than £4,000,000. I do not say that I anticipate that situation but we could not rule that possibility out of account in which case the capital structure of the company would not be unbalanced if maintained in accordance with the scheme of the Bill. Under the Company Clauses Act of 1848, Section 60, a company augmenting its capital may issue shares at or below par, if the existing shares are not then at a premium. It may issue shares at a premium subject to the condition that they should be offered in the first instance to the existing shareholders. That is in Section 58. Section 60 provides for the issue of new shares at or below par in circumstances in which the existing shares are not at a premium.
They could then issue shares at 10/-, provided they are not at a premium?
They could issue shares at or below par if the market value was at or below par. Under the terms of the Act if the market value is above par, they can also issue shares but they must first offer them to the existing shareholders.
I do not think so. The section refers to the augmentation of capital. It is not the creation of new capital. It is the issuance of shares already created.
No, it is the creation and issuing of new common stock.
I do not think so.
Section 19 of the Bill says:—
"The company may from time to time create and issue common stock so however that the total amount of common stock (including substituted common stock) created and issued does not exceed £4,000,000."
Section 13 says:—
"The capital of the company which shall be created and issued shall not exceed £20,000,000."
The position is like that of any other company who have a fixed capital and who cannot issue any shares beyond that.
Section 13 says that the capital of the company shall not exceed £20,000,000 of which not more than £16,000,000 shall consist of debenture stock and not more than £4,000,000 shall consist of common stock. Section 19 says that the company may from time to time create and issue common stock, but that the total amount of common stock created and issued shall not exceed £4,000,000. The company will be constituted with a common stock liability of about £3,500,000, but it can create and issue new common stock to the extent of about £500,000.
That is not the effect of it. The augmentation of its capital would take place if, having regard to the fact that its original capital was £20,000,000, the issue was going to make its capital £21,000,000.
I do not think so.
I think it is so. I think it is a matter of law.
It seems to me that we are speaking on different subjects. The Minister is speaking of a time when they might increase the common stock from £3,000,000 to £5,000,000.
No. I am saying that where the common stock of the company is £3,500,000 it may increase it to £4,000,000.
Then I must disagree with the Minister and agree with Senator Sweetman.
Would the Minister be willing to look into this matter between now and the Report Stage?
Very well.
And will he also consider what he has said about having the power to increase the capital? Because I doubt whether there is that power there.
I must say that I am optimistic that this new company, having got hold of the assets of two other companies at dirt-cheap prices, will be in a position to make such an amount of profit as will enable it not only to pay interest on debentures but also to pay an attractive interest on the common stock, and I should not be at all surprised if, within a few years, the common stock would go to par. If that happy event should take place, I do not see why we should not be able to make it possible for the new company to redeem debentures by the issue of fresh common stock rather than by the more objectionable method of issuing fresh debentures, or the still more objectionable method of charging excessive prices for the services of transport or reducing the incomes of railway workers. I want the company to have the power to issue more than £4,000,000 of common stock if it so be that events justify that course, and it would not prevent them doing it if we gave them the power to use more than £4,000,000, bearing in mind that they would not abuse that power. I hope the Minister will consider the possibility, therefore, of doing in the near future what he contemplates doing in 1960.
I agree with Senator Sweetman as to the legal effect of Section 19 on Section 13 of this Bill. Section 13 expressly provides that the capital of the company, which shall be created and issued in accordance with this Part of the Bill—and this Part of the Bill includes Section 19—shall not exceed £20,000,000 of which (a) not more than £16,000,000 shall consist of debenture stock, and (b) not more than £4,000,000 shall consist of common stock. Now, Section 19 provides for the creation from time to time of common stock, not to exceed £4,000,000. The marginal note to Section 19 refers to it as the creation and issue of subsequent common stock. The intention there, no doubt, was to increase the capital of the company, but having regard to Section 13, which must govern Section 19, the Bill provides that the capital of the company, so far as common stock is concerned, shall not exceed £4,000,000. Therefore, in my submission, some provision must be made for increasing the capital of the company so as to give effect to Section 19. I make that suggestion to the Minister.
Will the Minister agree to look into this matter before the Report Stage?
Yes.
The Minister, at the same time, might be in a position, when the Parliamentary draftsman has instructed him, before the Report Stage, to let us know exactly why the old and antiquated Act of 1845 was used, in connection with the provisions of this Bill, instead of the 1908 Act. The 1908 Act was introduced because the 1845 Act was found to be most unsatisfactory. Both of those Acts dealt with the same sort of thing. It is different in the case of the 1863 Act. That was an Act which dealt with railway amalgamation and is obviously different. However, after a great number of years, it was found that the 1845 Act left far too many loopholes, that the wording was ambiguous, and that it did not carry out the intentions of its sponsors at the time, and that was why the 1908 Act was brought in. I think that Córas Iompair Éireann would be in a much better way administratively if it was incorporated with the addition of the 1908 Act rather than with the addition of the 1845 Act. However, that is really a matter for the draftsman.
No, I would not agree. The Act of 1845 made standard legislation for the control of the affairs of companies operating public utilities and, so far as I know, the clauses of that Act, relating to that class of company, have not been modified since, or, to the extent that they have been modified, they are being incorporated here because the incorporation of these provisions in this Bill carries with them any amendments that may subsequently have been enacted to the provisions of the original Act; but that is the law which applies in respect of these railway companies at the present time, and as long as they operate they will operate for this company.
The Minister will agree that there are a great many sections to the 1908 Act which are exactly the same, in principle, as those contained in the 1845 Act, except that they are framed in an improved way.
Section 19 applies to additional stock—stock additional to that set out in Section 13. If that is correct, £8,000,000 worth of common stock can be issued.
No. I have the wording of Section 19 here, which says that the company may from time to time create and issue common stock, so, however, that the total amount of common stock—including substituted common stock—created and issued does not exceed £4,000,000.
What is the object of Section 19?
It gives power to create common stock up to the limit of £4,000,000.
I think there is no doubt that that is what is intended and that that is what is provided here, but there may be a certain amount of difficulty, and I would suggest that between now and the Report Stage this might be carefully examined. It may be that we are wrong, but I must admit that I was puzzled. I had not got the 1845 Act, and I rather assumed that there must be provisions covering a lot of things that seemed to me to be absent. Now, I am particularly puzzled by what seems to me to be a certain amount of ambiguity. Part II, Chapters 1, 2, 3 and so on, are partly provisions for somebody creating certain things, while others are simply what would be the memorandum or articles of association of a company, and there seems to be an ambiguity between the two. If it were a memorandum, it would say the capital of a company "is", but here it says that the capital of a company "shall be".
I am trying to avoid difficulties afterwards. Again, in relation to the same point, it is the usual thing to say what are the functions of the directors. There is nothing in this Bill to say what are their functions. It is usual to vest the whole management of the company in the directors. This afternoon I looked up the 1845 Act, and I find that is virtually so, but if I were a director I would have to take, in respect of the powers of the directors and certain other matters, the 1845 phraseology, put it in mixed with the 1942 phraseology, and out of that decide what is the legal memorandum and articles of association of the company. This is not meant to be carping criticism at all; it is meant to be helpful, and I would very respectfully suggest to the Minister that he might consider whether it would not save him and save the company a great deal of trouble if he were to take the essential sections of the Act of 1845—I am not saying you can cut the Act out; there are a great many provisions which would be required— to form a memorandum and articles of association and put them together here so that they would be complete. I think it would be clearer for everybody concerned. It really would not mean very much work, because somebody will have to do it for the company. If that were done, I think you would have a piece of legislation very much easier to understand, and easier for the Minister's own Department. It also would, I think, make the relationship of 1930 perfectly clear if that were done.
So far as the use of the word "shall" is concerned, of course it is obvious that only that verb and not "is" could be used in relation to a company which has yet to be constituted.
Then why not say "shall be" in all the other sections? That is my point. This will be an Act. It is a Bill now, of course, but it will be an Act. Therefore, you do not say that the directors "shall be" created to do so and so. Most of the provisions are those which would appear in articles of association, the powers of the chairman, and so on. It is the "shall be" which is really mixing the two together.
When this becomes an Act, then there is legal authority for the constitution of this company.
I respectfully suggest that there is nothing in the 1845 Act or in this Act to say who does it.
Oh, yes, surely.
I cannot find it; if this were the articles, yes, because the company would then be created. If it is not created on the passing of this Act, then there is no legal authority to do the creating.
This Act does it.
Then it is done immediately this Act becomes law?
It provides that on the establishment date all those things are brought into being.
By whom?
This Act provides it.
I do not think it does, and I cannot find it in either of the two. I do not want to make a carping point; I think it should be looked into carefully. Neither Senator Sweetman nor myself can find where that particular provision is.
Section 9 says:—
"The several persons who on the establishment date become, by virtue of this Part, the registered holders of substituted common stock ... shall be and are hereby united into a company and shall be and are hereby incorporated by the name of Córas Iompair Éireann and by that name shall be a body corporate with perpetual succession and a common seal with power to purchase, take hold and dispose of lands and other property for the purposes of the company."
It is not the creation of the company; it is the creation of the capital that is our point.
Then Section 14 provides for the substitution of stock of the new company for the stock of the dissolved companies.
I have not discussed the details with Senator Sweetman, but I think we are both in the position that we have had to create companies and take all the necessary steps. I am sure somebody will do it, and I am sure nobody will ask whether they have authority or not. I am far more concerned with the question as to whether there will be set out clearly and definitely a memorandum and articles of association which will be workable.
I think it is set out clearly and definitely in Part II of this Act. I cannot see what the Senator's difficulty is.
As we come to each section we will ask the Minister a number of questions, and expect him to give us the answers immediately.
Blessed is he who expects nothing.
I move amendment No. 10:—
In page 14, line 6, to delete the word "six" and substitute the word "four".
This section provides that the dividend on the common stock in respect of any year shall not exceed 6 per cent. I am proposing that that 6 per cent. should be deleted and 4 per cent. substituted. I think it will be agreed that, if the company can earn sufficient profits to pay 4 per cent. on their common stock, that would be quite an adequate return to the shareholders who own that stock. What does 4 per cent. mean? It means that in 25 years the owners of that stock will have had returned to them by way of dividends the amount of money that they invested in the company, and will at the same time own their original unit of stock. This section suggests that, if the profits warrant it, the common stockholders will be allowed 6 per cent. I do not know whether members opposite will agree with me that 4 per cent. is more in keeping with modern ideas of a return on investments, or whether they will agree with the Minister that, if the profits made by the company warrant it, the stockholders should get 6 per cent.
What the Bill proposes is that the dividends to be paid to the common stockholders shall not exceed 6 per cent. I think Senator Kyle misunderstands the position.
What my amendment suggests is that it should not exceed 4 per cent.
But there is no assurance that they are going to get 4 per cent. In fact, I am quite certain that those common stockholders would jump at any offer we might make to them to replace this section, with its limit of 6 per cent., by a guarantee to give them even 2 per cent. year after year upon their holdings. Those common stockholders of the Great Southern Railways Company received no dividend at all, until this year, for over 10 years, and there is no certainty that they are going to receive dividends in the future. I think this limitation is quite reasonable, and all the more so having regard to the obligations we are going to put upon this company. Senator Kyle must not lose sight of the fact that, over and above the necessity for providing all the debenture interest and making provision for the redemption of substituted debenture stock, the company is going to be required to provide £175,000 a year out of its revenue to finance a pension scheme for its workers. That new charge upon the company's revenue has of course diminished the prospects of the common stockholders getting a dividend at all in the near future. The company will have to expand its revenue to the extent of £175,000 before a dividend can be paid. In view of the fact that there is for these shareholders a substantial risk that there will be periods, even protracted periods, in which there may be no dividends, I think it would be altogether unfair to fix an overriding limit of 4 per cent. in the years in which the company's revenue would permit of the payment of a dividend.
I do not know that anybody here would agree that modern practice, as Senator Kyle described it, would suggest a limitation of 4 per cent. upon dividends on the ordinary shares of industrial concerns. I am quite certain that if we enacted legislation to limit the dividends on ordinary shares to that extent, there would be very little capital subscribed for the financing of industry or commerce. People can invest their money in ordinary shares or in preference shares or in debenture stock or in Government stock. They will get a lower return from Government stock than they hope to get on ordinary shares but they will have greater security. People will accept a lower rate of interest on Government stock for the sake of the greater security. In ordinary stocks they may lose their money, but sometimes they are prepared to take that risk because of the prospect of a higher reward if their investment proves to be lucky. You cannot treat ordinary shares and ordinary shareholders—those who take all the risks associated with the investment of their money in that type of security—as if they were investors in debenture stock or investors in gilt-edged securities. I think it would be most unfair to these shareholders, having regard to the history of our transport legislation and the experiences of the last ten years, to fix the maximum dividend limit any lower than 6 per cent.
I do not think I can add anything very useful to what the Minister has said except to say that if the principle of Senator Kyle were adopted generally, where would any money come from for any enterprise? Look at all that speculative enterprises have contributed to the welfare of humanity. Look at wireless, motor cars——
And slums.
——where did they all come from? They came from people taking risks and, when you talk of big dividends, look at the amounts that have been lost by the capitalists—not lost by the employees, who got their wages all the time.
But they have paid in T.B.
That is not an argument at all. It is pure prejudice to talk like that. If you expect capital to do pioneering work, risks must be taken, as they have been taken in the past, and taken alone, by private enterprise. I do not want to get into a long debate on the merits of private enterprise, but if you are going to get private enterprise, you will not secure it on a maximum of 4 per cent. interest. I want to ask the Minister a question about priorities.
I am very much worried about the priorities of profits. There will be a profit pool of some kind. Who is going to allocate the priorities of these profits? Is it going to be the Minister in the last resort? The directors will have the first say, of course, but if the chairman, on the instructions of the Minister, does not approve, he will say so. Are these unfortunate common stockholders to have no say at all in the allocation of these profits? You will have several claimants—some, perhaps, entitled to greater priorities than others.
First on the list of priorities I place the user of the railway, the community generally, who should have cheap rates. After the fixed charges which come first, are the poor users of the railways. Then I should say, depreciation and replenishment, the keeping of stock in proper order, and then the ordinary shareholders. I am not concerned as to which is the exact order, but who is going to decide the order, because I am going to say something again about the enormous charge of debentures on the profits. But, leave aside debentures. Of course, the first priority will be the tax and that will take a nice whack. Having got the tax taken off, who is to decide on the merits of the various claimants to the remainder?
I think the thing that is thoroughly objectionable in this section is the fact that the dividend is limited to 6 per cent. Why have any limitation at all on the dividends of the common stockholders? The fact of that limitation existing, even though they are not likely to rise to 6 per cent. in the near future, does tend to depreciate the value of the common stock and these people have been through pretty bad times. Many of them have been owners of common stock at a time when their nominal holdings were ten times as much as they now are, so that 6 per cent. is really equivalent to 6 per cent. of what they held before 1933. I do not think that is a very luxurious rate of dividend on a capital investment that originally amounted to over £10,000,000. Very little capital would have been forthcoming for building railways in the last 100 years, if people had foreseen that they would be limited to 6 per cent. and even that low amount begrudged to them by the representatives of labour.
I want to ask one question: Is there any definition in the Act of the meaning of the words "only out of profits of the company applicable to the payment of dividends"? Is there any definition as to which are the profits available for dividends?
I was going to suggest that from the time Senator Sir John Keane broke away from this wing, he has moved very rapidly to the Minister's side of the House in his arguments. But I do not think he is assisting the Minister in the arguments he has used. He talks about pioneers. There are no pioneers involved. This is a question of substitute stock for the most part. The company's issue of common stock is limited to £4,000,000 and of that £4,000,000 about £3,500,000 will represent substitute stock. The pioneers are dead. These are their successors—the people who hold stock on which no dividend has been paid since 1929. These are the people for whom the Senator wants at least 6 per cent. I notice an interesting list of priorities in his speech—first, debenture interest, then provision for redemption of debenture and next, the poor users of the railways.
I never put redemption of debentures second at all.
It is not so in the Act.
Very well, we will reverse the process. Debenture interest first priority——
No.
I am speaking of the Senator's argument. In his list of priorities, debenture interest was first, and second came the poor users of the railways. I do not know if he is distinguishing between the rich and the poor users, but I thought that the emphasis was on the word poor. The ordinary shareholders are next in priority and then the redemption of debentures. But there are 20,000 workers employed on the railways and transport services, and they do not come into the Senator's list of priorities at all. That is a remarkable omission because it does express the manner in which the Senator's mind is working and we know exactly where we are—everything else before the fellows who run the railways get anything. I move to report progress.
Has there been a decision as to what time this Bill will be taken to-morrow?
First business.
There was a suggestion that if the debate were to be prolonged the House might meet at 11 o'clock.
That cannot be decided now.
It was not suggested to us.
Nor to me.