At any rate, it was evident that the Deputy had some such idea in his mind. I think it is wrong to presume that if we were to drop this Bill now and say that there would be no legislation, there would be that drop in the value of the shares in the company that Deputies seem to assume, because let it be remembered that that company, for a year now, has had the benefit of good financial management, good financial management which was reflected in the accounts of the company last year, and that fact is well known to everyone who holds shares in the company or might be interested in acquiring them. I do not know when this tribunal is going to report. Frankly, I confess that when I moved the motion to establish it last November I thought that we would have the report by February or March at the latest. Whether or not it will report at an early date, I could not say, but I think that in so far as there is nothing in this Bill which issub judice, and nothing on which the tribunal may report which can affect the merits of the Bill as legislation, the amendment moved by Deputy O'Higgins is completely irrelevant, and I think it is quite obvous that it was just a political manoeuvre and was moved for the purpose of extending and strengthening the whispering campaign that is proceeding amongst the public in relation to this matter, and to support a suggestion that the Government is rushing this Bill through for some ulterior motive, either because they want to facilitate people who have been dealing in railway shares, or to make certain appointments, as has been stated here previously, before that report could be published.
In this connection I should like to say something that may be a matter of information and of interest to the Dáil. The chairman of the Great Southern Railways Company, Mr. Reynolds, came to me yesterday morning and asked me to drop the Bill. His reasons are purely personal. He is not a politician. He has never been a politician, and, therefore, has never been the victim of a "smear" campaign, as the Americans call it. Those of us who have had that experience are not so much inclined to be perturbed, because we know from our experience that when the truth comes out it rebounds, and rebounds with boomerang effect, on those who started the campaign. Now, we are not dropping the Bill. I am satisfied that it stands as a good measure for the future direction of our transport services, irrespective of the personalities who were responsible for its framing, or who will be subsequently responsible for its operation. I am asking the Dáil to consider this Bill on its merits as a Bill, and not to allow themselves to be diverted by side issues such as are raised in the amendment moved by Deputy O'Higgins. It was stated that I did not give enough information to the Dáil concerning the Bill when I was introducing it. There was circulated with the Bill to Deputies a printed memorandum explanatory of its provisions, and there was also available to them the report of the Transport Tribunal of 1939, which contained a wealth of historical and statistical data, giving a clear picture of the situation with which this Bill was designed to deal, and my opening speech outlined the considerations of policy based on those facts which moved the Government to introduce this measure.
I assumed that Deputies wished to know what policy the Government had in mind, and what considerations led it to recommend these particular proposals. There may, however, be need to supplement the information I gave then. Some of the queries put by Deputies were relevant queries, and I am going to answer them. I spoke for one and three-quarter hours when introducing the Bill, and I did not want to overload my statement with any statistical information which Deputies might be able to procure otherwise. I think, however, many of the requests for information arose out of a complete misunderstanding of the measure. If a company is constituted under the Companies Acts, it is not unusual to bring it into existence with an authorised capital considerably in excess of the capital that will in fact be paid up to finance the business of that company. That practice of having a higher authorised than subscribed capital is devised usually to enable a company without difficulty to finance an extension of its business or to deal with the much more usual contingency of its original estimate of capital requirements proving unduly low. The memorandum of association of the company is drawn widely to cover all the activities which the promoters of the company think desirable in connection with the undertaking. Everybody who is familiar with companies constituted under the Companies Acts knows that that is the usual practice.
This company is not being constituted under the Companies Acts, but the same procedure is being followed. We are bringing it into being with an authorised capital which will be substantially in excess of the paid-up capital on which it will begin operating. Section 9 of the Bill, about which Deputy Cosgrave addressed some queries to me—and I think some other Deputy in that Party also queried me in that regard—is the equivalent of the memorandum of association of a company formed under the Companies Acts. It sets out the purposes for which the company is brought into being, but it does not necessarily indicate that the company is going to engage in all the activities mentioned. It is not, for instance, going to engage in aviation services. It could not engage in aviation services unless it was authorised to do so under the provisions of our Air Traffic Acts. If Deputies will get that picture of a company starting with an authorised capital which represents a sum substantially, as I have said, in excess of its subscribed capital, and with a memorandum of association which indicates all the activities in which it might sometime engage, but which do not represent the immediate intention of the promoters of the company, it will help to get rid of some of the difficulties which seem to beset Deputies in relation to this Bill.
I have been asked what the additional capital will be used for. Apparently some Deputies expect me to bring forward specific plans for the construction of new railway lines, new stations and new railway engines, and attach to each such item the estimated cost of construction to the total of the £6,500,000 which represents the difference between the paid-up capital and the £20,000,000 which is the full limit of the capital liabilities which it can at any time undertake. That is not the intention of the Bill. The comparison made here by Deputy O'Higgins between this Bill and the Electricity Supply Act was completely fallacious. The Electricity Supply Act was introduced to authorise the construction out of public money of a single construction job in relation to which full plans and detailed estimates could be produced. Whether the detailed estimates that were in fact produced informed or misled Deputies is a moot matter that we need not debate now, but there can be no comparison between the legislation necessary for such construction work and the type of legislation we are now discussing. I am asked what experts were consulted. It is not a matter for technical experts at this stage. The future of our transport is now a matter for decision upon questions of policy. When the questions of policy are decided, when that policy is being implemented by the creation of an organisation empowered and equipped to carry out our decisions, then it will be for that organisation to get whatever technical experts are necessary as well as to utilise the services of the technical experts whom it has employed in designing new equipment, in determining new methods of working, and in coming to decisions on new buildings or other constructional projects necessary for its work.
Let me try to get the financial provisions of the Bill clear to the Dáil, because it is quite obvious that they are not clear. That may be my fault. I should have perhaps dealt more fully with them in my introductory speech or in the explanatory memorandum circulated to Deputies. Let me begin by saying that all those Deputies who spoke about £20,000,000 of public money or £13,500,000 of public money being paid over to the shareholders of the Great Southern Railways Company or of the Dublin United Transport Company, were completely wide of the mark. Not one penny of State money will be paid over to the shareholders. There is no proposal in this Bill to take any sum whatever from the public Exchequer to pay anybody. The State is undertaking to guarantee the principal and interest of the debentures that are issued by the new company. It is not expected that the State's guarantee will be called upon. Unless we contemplate a situation in which public transport services of all kinds will disappear, the capital invested in this undertaking cannot be entirely lost.
Many Deputies spoke as if it were intended that Coras Iompair Eireann should confine its activities to railways. It is a transport undertaking charged with the responsibility of providing any and every kind of inland transport that the business development of this country requires. It is not anticipated that any circumstances could arise which would involve the State having to make good its guarantee of the principal of the sums secured on the company's debentures. It is not expected that the State guarantee in respect of interest due to the debenture holdings will have to be implemented. Let me make some reservation in regard to that statement in relation to the war period. Nobody can foretell what may happen during the war period which may bring about a complete cessation of transport, and consequently a cessation of the company's revenue but, in circumstances approaching anything like normal, the revenue of the company should be more than sufficient to meet the debenture interest, even if we assume that it is not possible to increase the net revenue over and above the average earnings in the years between the enactment of the Railways Act of 1924 and the beginning of the war.
Some Deputies queried the provisions of the Bill which empower the Minister for Finance to pay out of the Central Fund any money that becomes due in respect of the guarantee of interest on the debentures. It is quite clear that when this Bill empowers the Minister for Finance to give his guarantee in respect of the interest payable on debentures that payment must be made if and when the guarantee falls due.
Therefore the provision in the Bill is that the Minister will pay such interest forthwith out of the Central Fund, but every penny he pays to the company in respect of that guarantee becomes a first charge on the revenue of the company. Every penny of this money must be paid back by the company out of the revenue earned within the year following, and if it should fail to repay the amount advanced by the Minister in the ensuing year, then the money will be voted by the Dáil. The Dáil will be asked to vote the money at that stage, and at that stage the Dáil can avail of the opportunity to discuss the circumstances which led to the necessity for the Minister for Finance making good his guarantees and decide what measures should be adopted to prevent a repetition of these circumstances or what amendment of the legislation would recommend itself to Deputies.
Some Deputies appear to have an incomprehensible difficulty in understanding the difference between the proposed guarantee of the interest on the debentures and a subsidy to transport. The purpose of giving a State guarantee in respect of the debentures of this company is to ensure that it will get money for capital purposes at a lower rate of interest than it would otherwise be able to obtain it. In other words, it is a scheme to cheapen transport, to reduce the charges that transport must bear and, consequently, to enable either reduced rates to operate or better services to be provided. But it is intended that the transport facilities to be provided will be sold at economic rates, that the rates will be so fixed as to recover for the company the whole of the cost of providing those services, plus the interest which the company is liable to pay. As I understand a subsidy arrangement, it is one in which transport is sold below cost, sold at less than an economic price, the difference between the actual charges in operation and what would be economic charges being made up by the taxpayer. I am against subsidised transport because I believe that subsidised transport would be inefficient, because I believe that it would, in the long run, prove costly transport—costly to the community as a whole—and because this country cannot afford to have a costly transport service if we are to secure the economic development in the post-war period which we desire or if we are to promote our competitive efficiency in international trade.
The basis upon which this Bill is founded is that the task of transport reorganisation must, in the first instance, be a matter of financial reorganisation. The whole purpose of this Bill is to rearrange the finances of our transport undertakings so as to reduce the interest charges which our transport services have to bear and to permit that new equipment to be provided which will enable a reduction in operating costs to be effected. We know that the old company could not provide new equipment because it could not raise any new capital. It is impossible for the Great Southern Railways to raise capital without Government assistance. If there is to be Government assistance, as is proposed in this Bill, in relation to the new company, then we can use it to secure that the company will in future get its capital at a lower rate of interest and, consequently, effect a substantial reduction in the overhead charges upon the company's revenue.
We are trying to do for the transport of the country, as a whole, what has already been done for the Dublin United Transport Company. Deputy Dillon referred to the Dublin United Transport as an undertaking that had always been profitable. His memory is very short. Not more than 10 years ago the position of the Dublin United Transport Company was worse than that of the Great Southern Railways. If, since then, there has been a substantial improvement in the position of the company, it has been due, not to anything done by this House, but to the good management which the company provided for itself. As a result of that good management, the position of the company has continuously improved. In the year 1935, the Dublin United Transport Company was in a position in which it had to face the redemption of stocks in 1939, for which it had no money and no prospect of obtaining money. Since then, by good financial management, there has been made available from the revenue of that company £1,400,000 for redemption of the obligations to which I have referred and for the reorganisation of the undertaking. The wages paid to the employees of that company—I refer now to the basic wages and I do not take account of the bonus permitted under an Emergency Powers Order— were increased since then by no less than 24 per cent. There has been set aside out of revenue a sum now totalling £80,000 to provide pensions and other benefits for the company's staff.
All that has been done while maintaining unchanged the rates of charge for passenger transportation. So far as I have been able to discover, the Dublin United Transport Company is the only urban transport organisation in this part of the world which has not increased its rates since the war began. We are introducing this Bill in the belief that what good management and good financial organisation have done for the Dublin United Transport Company can be done for the new company which will result from the merger between the Dublin United Transport Company and the Great Southern Railways. We believe that there is ample scope for a similar reorganisation of the finances of the Great Southern Railways. We are starting the new company off with a reduction of interest charges amounting, roughly, to £110,000. By provision of a State guarantee in respect of the company's debentures, we can immediately reduce the amount payable in interest to that extent. We can provide for this company the additional revenue available from the Dublin United Transport Company, which has paid, in the past, 6 per cent. on its preference shares and 6 per cent. on its ordinary shares, the interest obligation in future being only 4½ per cent. There will be the further revenue representing the amount now paid by that company in emergency excess profits duty.
This new company will, therefore, start off in a much stronger financial position than could ever have been attained by the old company. At question time to-day, Deputy McGilligan put a question which procured for him a number of figures relating to the past and anticipated revenue of this undertaking. Deputy Dillon, or some other Deputy on the opposite benches, made reference to that matter. He interpreted those figures as meaning that the net revenue of Córas Iompair Eireann would have to be increased to double the net revenue of the Great Southern Railways pre-war if it is to meet all the obligations that will fall upon it under this Bill. That statement is true only on certain assumptions. Firstly, it is true on the assumption that the whole of the authorised capital is utilised. Secondly, it is true on the assumption that the redemption of the debentures will be postponed until 1960 and that the company will pay into the redemption fund an amount sufficient to redeem in full the substituted debenture stock by 1955. Even on these assumptions, it is possible to do it, because, over and above the revenue which the company had pre-war, it will have this additional saving of interest of £100,000 and it will have the new revenue which will accrue from the Dublin United Transport Company. It is my conviction, as I know it is the conviction of Mr. Reynolds, that, by proper managerial arrangements and up-to-date working methods, the net revenue can be expanded to provide in full for the meeting of all these charges.
Let me explain, however, that it is intended that the redemption of the substituted debenture stocks will proceed from the beginning of the company. It is not proposed to leave all these stocks unredeemed until 1955. The Bill authorises the company to establish a redemption fund and to pay into that redemption fund such portion of its surplus revenue every year as it considers desirable. It is not being required to make any specific payment. It is being empowered to utilise that redemption fund to buy in its own debentures as they become available, and the intention is that these debentures will be continuously redeemed until 1955. We provide that they must be redeemed for cash at par by 1960. At that time, the company should be in the position that it will have only common stock, upon which no interest charge will be due unless profits are earned, and whatever new debentures are created in the meantime. These new debentures cannot be created without the approval of the Minister for Finance. They will be created with his approval when it is clear that the new capital will be utilised either to effect reductions in operating costs which will improve the net revenue of the company, or to provide additional facilities required by the company or in any other manner which will improve either the company's finances or the services which it gives to the people.
Many Deputies have queried the acquisition terms for which the Bill provides. Some of them have contended that the acquisition terms were too generous to the shareholders. Deputy O'Higgins and one other Deputy at least on the Fine Gael side suggested that so far as the Dublin United Transport Company was concerned they were too restricted. Deputy O'Higgins described me as putting a pistol to the head of the Dublin United Transport Company shareholders to get them to accept. Deputy Norton described me as their fairy godmother.
One of the suggestions put forward in the course of the discussion by Deputy Norton, and I think also by Deputy Dillon, was that we should acquire the shares of the Great Southern Railways Company or the Dublin United Transport Company at their market value in a particular year or over a particular period. That suggestion obviously relates to a different scheme from that contained in the Bill. We are not contemplating buying any shares for cash. We are proposing to give to the shareholders of these undertakings, in return for the shares they have now, shares in the new undertaking. There is no question of paying cash, and consequently no need to determine the cash value of these shares now or at any other time, but if it is seriously contended that we should determine the nominal value of the new shares that will be given to the Great Southern Railways Company shareholders, not in relation to the nominal value of their present shares, but in relation to the market value of these shares now or at some time in the past, it is tantamount to a suggestion that we should slash again the nominal value of the shares held by these people. Is not that so?
I asked Deputies, in introducing this Bill, to relate it to the Bill which we introduced in 1933. You cannot consider whether the proposal relating to the shareholders of the Great Southern Railways Company in this Bill are fair or unfair, and leave the 1933 Act out of account. In the 1933 Act we reduced the capital of the Great Southern Railways Company by more than half.