I move the Second Reading of the Bill. The subject of railway re-organisation has been under constant consideration for over a year, and has been tentatively discussed several times in the Dáil. Deputies will, therefore, need no assurances from me that before arriving at the solution of the problem embodied in this Bill every aspect of the matter has been given long and patient examination.
The main elements of the problem can best be explained by reference to the White Paper prepared for the information of Deputies in considering the Bill. The railways dealt with in the main provisions of the Bill are those wholly within the Saorstát, and the White Paper gives such particulars as are necessary to understand the general position of those undertakings to-day. These railways fall into two groups, the baronially guaranteed lines which are shown in italics in the White Paper and what I may call the main line companies.
There will be found in the White Paper particulars of all the railway companies wholly in the Saorstát dealt with in the Bill, of their capital and of their net earned income over a period of years beginning in 1909. This net earned income is not quite the same as the net revenue. To obtain the latter figure there has to be added the payments made on account of baronial guarantees, and, in the years before 1913, other minor adjustments would require also to be made. Railway accounts were placed on a new basis in 1913. But the particulars given in the White Paper will enable Deputies to appreciate with sufficient accuracy the fluctuations over a long period of years in the earnings of railway companies.
It will be seen that from 1909 to 1913 the annual net earned income rose constantly. The 1913 figure is the peak figure, and it has not been reached since. British Government control covered the period from January, 1917, to August, 1921, and since that date the annual net receipts have fallen very considerably below the 1913 figure. The main cause of the fall was, of course, the damage and destruction caused during the times of trouble in this country, and it is the fact that since British Government control ceased, the railway companies have not had a normal year. For the payment of the usual dividends in 1922 and, to a less extent, in 1923, the sums paid to the companies by the British Government in compensation for control have had, in some cases, to be drawn on, and there is not very much of those sums left.
It is impossible at present to say what the annual net revenue of the companies would be in a normal year. But the results of 1922 and 1923, even when full allowance is made for reductions in traffic and losses due to damage and destruction are such as to raise doubts whether the railway system unless radically re-organised, could with reasonable charges yield its shareholders the returns they received in the past. Working expenses have increased enormously since 1913, and the efforts made to reduce them in recent years have, for one cause or another, not produced great results. It is true, of course, that the rise in working expenses has been accompanied by a very considerable increase in freights, but the possibilities of recoupment in this way have obvious limitations. Diminished traffic must ultimately result from increases in rates, and in any event, it is universally agreed that the present level of railway rates in this country is unbearable. Rates must be substantially reduced, but some doubts have been expressed as to how far this can be done with justice to the interests of railway stock-holders. The view which the Government takes on this point will appear when I come to deal with the detailed provisions of this Bill, but I may say that the Government anticipates that the radical changes for which the Bill provides, if operated with energy and ability, will amply secure the interests of shareholders.
Turning now to the baronially guaranteed railways, Deputies will find in the White Paper a table giving details of the guarantees in respect of dividends in 1913. Briefly, the position of these railways is that the baronies in which they are situated are in law liable for a guarantee of the dividends on the paid-up share capital, and also for any losses on working that the lines may incur. From the Table in the White Paper the manner in which the guarantees operated in 1913, can be seen. The total amount necessary to pay dividends on the paid-up share capital is £50,648. Of this amount, the Great Southern and Western Company guarantees £1,960 per annum in respect of the Tuam and Claremorris Line. The remainder, viz.: £48,688, is a liability of the baronies subject to their right to recover from the Treasury an amount equal to one-half of what they pay under their guarantee up to a maximum of 2 per cent. on the capital of the railways. Translated into figures this means, as shown in the Table, that the Treasury has a maximum liability of £20,586 and the baronies of £28,102 per annum.
In 1913 neither party had to meet its maximum liability. Some of the lines made a profit and the liability of the baronies in that year amounted only to £21,298. This sum was subsequently reduced by some £6,500 received from the Local Taxation Account under a provision in the Local Government Act, 1898, whereby that account is made available for relief of the railway rate to the extent of one-half of the amount by which that rate exceeds 6d. in the £.
During British control the baronies generally were not called on to pay more than they paid in 1913, and it would not be easy to determine exactly what the results of working the baronial lines were under control. Since control ceased in 1921 the position has been very different. The group of baronial railways mentioned in the Table actually made a working loss of approximately £107,000 in 1922. According to the law, therefore, the baronies were liable in 1922 not only for their maximum contributions to dividends, viz., £28,102, but also for a further £107,000 to meet losses in working. 1922 was, of course, an abnormal year, and in 1923 the loss on working fell to approximately £30,000. But even in that year it will be seen that the liabilities of the baronies were nearly four times as great as their actual net payments in 1913.
Needless to say, the baronies have not met these liabilities, and I do not think they have been asked to. The lines have kept open by using their share of the amounts received as compensation for control from the British Government, but these amounts are approaching exhaustion, and under the present system, some at any rate, of these baronial lines cannot go on much longer.
The essential features of the problem we have to consider, therefore, are these: The main line system in its present form is doubtfully remunerative, even with rates much higher than the trade of the country can bear, and the smaller lines have no prospect of continuing except by imposing burdens on the baronies which the baronies could not reasonably be asked to sustain. That is the problem briefly stated; it is obviously not a simple one, and it is certainly not one to be disposed of by a phrase.
Fortunately, it is a problem on which much light has been thrown by Commissions, Royal and other, that have examined it at intervals. All of them arrived at one agreed conclusion, that the Irish railway system was the victim of too many independent managements, and that it plainly needed concentration of control. The experts differed as to the best form of control, but that it should be unified as far as practicable they were unanimous. It has often been remarked that the mileage of the whole railway system of Ireland does not amount to that of one of the old trunk line systems in Great Britain before 1921, in which year much larger groups were formed, and the task of managing the whole of the Irish system has, with some exaggeration, been represented as a light and agreeable part-time occupation.
At the beginning of our investigations it was left to the main line companies to submit any proposals they had to make with regard to the first obvious step to be taken, namely, the elimination of redundant managements, the Government expressing a leaning towards unification, but indicating its readiness to consider with an open mind the railway companies' views on the matter. The companies spent some considerable time on discussions between themselves, and the Government showed considerable patience in awaiting the result so that it could not be charged thereafter, with thrusting any theoretical devices of its own on the practical men engaged in the business.
From the outset the Government indicated that it was not prepared to force on any of the lines operating both in the Saorstát and the Six Counties any arbitrary divisions of their undertakings at the boundary. Had those lines voluntarily made proposals for re-organisation consistent with the public interest of the Saorstát the Government was fully prepared to give them every consideration. But it was and is convinced that any proposal to divide those undertakings into two parts at the present boundary, involving as it would the formation of two new companies, one in the Saorstát and one in Northern Ireland, with all the complications of a revaluation of shares and division of stock and equipment, and another adjustment all over again when the boundary is finally determined—involving, possibly, when Ireland attains to her inevitable unity, the entire reversal of all these adjustments—would neither be good business, good politics, nor good sense. None of these companies have come forward with any proposal to alter their present position, and under the circumstances that exist to-day, the Government does not intend that they should be forced to adopt such a proposal. It is not in any sense necessary to a sound re-organisation scheme for the railways situated wholly within the Saorstát.
After a number of months the discussions between the companies bore some fruit. A provisional agreement was arrived at between the Great Southern and Western Company, the Midland Great Western Company, and the Cork, Bandon and South Coast for amalgamation, and they were joined shortly afterwards by the Cork and Macroom Company and the Cork, Blackrock and Passage. Accepting the view that companies crossing the boundary could not at present be amalgamated with the companies wholly in the Saorstát, this provisional agreement provided for all the larger companies of the Saorstát except the Dublin and South-Eastern Company. As it was all along obvious that the larger companies would have to be made responsible for the baronially guaranteed lines, the companies' discussion of the position had by this time practically, resulted in the conclusion that all lines wholly within the Saorstát should be amalgamated, the position of the Dublin and South-Eastern Company alone remaining undecided.
I should explain that the Dublin and South Eastern Company had made itself responsible for a wholly different scheme based on wholly different principles. This scheme I will deal with in detail later on. The Government, after close and careful examination, could not approve this scheme and decided that there were many good reasons in favour of and no convincing reason against amalgamating the Dublin and South Eastern with all the other Saorstát companies. Thus, I will not say by general agreement, but at any rate with the Dublin and South Eastern Company alone objecting, a scheme of unification was approved. From the beginning the Government inclined to a scheme of unification, and for these reasons: The primary object of re-organisation is a reduction in railway rates. From the figures I have quoted earlier it will be seen that the best prospect of securing this object, consistently with a fair deal for railway shareholders, was by effecting every possible economy in the management and working of the lines and by eliminating all waste and overlapping. The greater the number of units concentrated under one control the greater the possible economies. Moreover, the main lines had to become responsible for the baronial lines, and whatever burden this might mean would obviously be lightened by placing it on as many shoulders as possible. No Saorstát line could be left out of the unified undertaking if it was to take its fair share of responsibility for the baronial lines, and, at the same time, by sharing in economies, brought to a maximum by having the largest possible area for their operation, to give its users the benefit of the greatest possible reductions in rates. To leave out the Dublin and South Eastern line, for instance, would mean that the other main lines became responsible for its proper share of the baronial lines, though under the provisions of the Bill that is a small matter; the more serious objection is that the Dublin and South Eastern would then not be one inch advanced towards any possible reductions in its rates below their present level.
I have said that an alternative proposal was put forward through the Dublin and South Eastern Company. It is remarkable that only one alternative to unification has been put forward after the many months given to examining the question, and Deputies will, therefore, have only two schemes between which to decide. The alternative proposal was as follows:—
1. The Dublin and South Eastern and Midland Great Western were to amalgamate and the Great Northern line as far as Dundalk was to be joined with this group.
If the Midland Great Western was committed to the Great Southern (as was the case) the group was then to consist of the Dublin and South Eastern and Great Northern to Dundalk.
2. Running powers were to be arranged (it has never been explained how or with whom) over the Great Northern from Dundalk to Derry or other connection with the Donegal railways.
3. The group was to exercise running powers from Waterford to Limerick and Cork.
4. The other companies in the Saorstát were to be formed into a second group.
5. To round off the scheme the possibility of a railway from Bundoran to Sligo was adumbrated in vague terms.
6. So far as legislation in the Saorstát could bring this scheme about it reduced itself to a group consisting of the Dublin and South Eastern and the Great Northern up to the Boundary, competing with the second group for traffic at Limerick and Cork.
This scheme has not secured the approval or, indeed, the serious consideration of any of the companies except the Dublin and South Eastern. From the Government's point of view, it involves the splitting of the Great Northern with a ragged edge cut in 14 places at the boundary, whatever voluntary arrangements someone might thereafter make with someone else for running powers over the boundary. The group, so far as we had any control over it, would not be self-contained, and I have already given the reasons for regarding a division of the Great Northern Railway as impracticable. The group is then to compete for traffic at Limerick and Cork by running over the Waterford to Limerick railway. Now, the greater part of the Waterford-Limerick line is a single line, and the Dublin and South Eastern from Bray to Waterford is also a single line, not constructed for fast, heavy traffic. This route, which is very roundabout, could not be made an effective alternative route from Limerick and Cork to Dublin without a very large expenditure. We have not been informed as to who would provide the necessary funds, but it is not likely that the lean end of the Great Northern Company or the Dublin and South Eastern in its present financial condition, could or would do so. The Dublin and South Eastern cannot be taken very seriously in recommending an expensive scheme which it would be totally unable to carry out itself, and in which its intended partner, the Great Northern Railway, has no faith at all.
The main justification given for this scheme is that it would provide competition and so reduce rates. Now there is very little scope for competition to-day. Such competition as exists is practically limited to cross-channel traffic, and it is principally with cross-channel traffic in mind that this grouping scheme has been devised. Competition in any real sense for local traffic could not be provided by the existing railways, and to secure it new lines would have to be constructed at a very large cost.
Suppose the Government were to accept the view that the proper method of re-organising the Irish railways was to adopt this scheme for creating an intensified competition for cross-channel traffic, what would be the result? Someone would have to spend large sums of money on doubling and strengthening the South Eastern line and the Waterford to Limerick line. Else the competition would not be effective; the Dublin and South Eastern Company to-day has the right to run over the Waterford-Limerick line, but it prefers to the exercise of that right a payment of considerably less than £3,000 a year. How would a return on this great expenditure be obtained? Not, obviously, from cross-channel traffic; that is to be carried at reduced competitive rates. Local traffic, for which there is little or no competition, would have to pay-and pay through greatly increased rates, the present charges being barely sufficient to yield the ordinary dividends and a great deal of fresh capital having by hypothesis been spent on which a return must be obtained. The disparity between through and local rates, which is already a grievance of Irish manufacturers, would be immensely increased.
And what of the other group in the meantime? It is general knowledge that some of the most serious difficulties of the Irish railway companies arise from the fact that the substantial centres of traffic are widely distant, that the companies have long hauls with little opportunity to add to their revenue en route; in short, that there is barely sufficient traffic to go round. If, therefore, one of the two groups proposed in this scheme succeeded in abstracting any substantial quantity of traffic from the other, that other would be left with a business reduced below the existing remunerative minimum, and (if it did not sell itself to its victorious competitor) would have to make large additions to its rates in order to keep its head above water. Such additions, presumably, could not be put on to the competitive cross-channel traffic, and would have to be borne entirely by the rates for local traffic. I should add that the Dublin and South Eastern group does not propose to take any responsibility for the baronial lines —the other group is to take the whole of it.
The only remedy I have heard suggested for the obvious defects in this scheme is that they should be left vaguely for the beneficence of the big English company to remedy. We are to depend on the spending by the big English companies of large sums of money in competing against each other for cross-channel traffic while internal traffic, like Cinderella, humbly awaits the appearance, some time or another, of a fairy godmother.
Now the big English companies have done a great deal for Irish trade, and they are rich and powerful corporations. Their continued services are of great importance to Irish trade, and I was gratified to notice statements recently made in London indicating that these services would continue and be developed. There is nothing in this Bill to discourage the English companies. Their present position is maintained and protected by it. All the agreements and arrangements on the faith of which they have incurred expenditure on their Irish services remain entirely unaltered, they have ample scope for new agreements in the future. It would, however, be expecting too much of them that they should plunge into a large and unremunerative expenditure on our account, and even if they were inclined to do so the British Railways Act of 1921 contains stringent checks on any such inclination. The British Rates Tribunal will see that British railway companies do not engage in any such orgy of uneconomic expenditure as the Dublin and South Eastern would have us rely on. No Irish Government could seriously propound as a scheme of re-organisation for the Irish railways, their being dangled as a prize before rival English companies, interested in the development of one side only of our railway service. We can ensure the due development of that side, without leaving the future of the other to chance. By making the most, under Irish control, of our existing system in the way provided for in this Bill, we leave ample scope for future competition at the ports in cross-channel traffic, but such competition will be concentrated at the ports and not disorganise or complicate the internal economy of our transport system.
On this subject of competition there are one or two quotations I would like to give to the Dáil. In a book on the Irish railways, written by a gentleman who has held and still holds a very responsible position in the railway world —and who must have listened on a recent occasion to statements by the chairman of his company with much uneasiness—I find this:—
The advantages of railway competition in Ireland are greatly overrated by the public. From the nature of things it is physically impossible that effective railway competition should exist in Ireland except between a very few favoured pairs of places. Moreover, competition is, in most places, only a temporary expedient, and the keener it is the stronger the inducement to bring it to an end by compromise. Railway managers, if they are wise, will be constantly on the look-out for opportunities for terminating antagonism at competing points by some sort of mutual arrangement.
That does not encourage us to leave everything to competition between the big English companies.