There was some discussion last night as to the number of decisions that could be given on the series of amendments Nos. 18 to 27a which with the exception of Nos. 21 and 24, which are out of order, deal with a major issue. If amendment No. 18, which was formally moved last night, were withdrawn, it would simplify matters. Amendments Nos. 19 and 20 are alternatives to the "establishment date" proposed in the Bill. They might be discussed together, but only one question could be put which would dispose of the operative date. Amendments Nos. 22, 23 and 25 are interrelated and will all be governed by the decision on No. 22. If this amendment is defeated, amendments Nos. 26 and 27 cannot be moved, as they are consequential on Nos. 19 and 22. As there is a separate point on amendment No. 27a it may be moved, though it would, if adopted, require to be redrafted.
Transport (No. 2) Bill, 1944—Committee (Resumed—Amendment No. 18).
I ask leave to withdraw amendment No. 18, which was moved last night. The discussion on that matter can be taken later.
It will emerge on amendment No. 22.
I move amendment No. 19:
In sub-section (1), paragraph (a), lines 18 and 19, and in paragraph (b), lines 32 and 33, to delete the words "establishment date is" and substitute therefor the words and figures "6th day of February, 1942, was".
The purpose of amendments Nos. 19 and 20 is that there should be recognition of the fact that at some date, either in 1942 or 1943, notice should have been given to the stockholders of the Great Southern Railways that proposals for the introduction of legislation in regard to the company had reached such a stage that they would be advised, either by the chairman of the company, or possibly by the Government, that they should be careful in disposing of their stock. In my opinion, they should have been advised as to withholding any selling of their stock, on the ground that the Government were contemplating certain changes with regard to the company's financial foundation, and until it was clear what these proposals were, they should not be influenced by suggestions or by rumours that might have been abroad at that time. There were certain dates on which the Government should have given such notice.
On February 17th, 1942, the Government issued an Emergency Order taking complete charge of the railway company. From February 24th they wiped out the old board of directors and put in a chairman to whom extraordinary emergency powers were given. They made him practically a dictator of the whole railway company and its machinery. They deprived the previous directors of office and appointed a chairman. No meeting of the board could be held unless the chairman was present, and no decision could be arrived at by the board without his concurrence. They decided that the chairman would be paid out of the revenue of the company, and that his remuneration would be a matter for the Government to decide. Generally, the regular conduct of the affairs of the company was left in his hands. The action of the Government at that particular time had implications, and while the Minister and others may argue that it was too soon to make any statement, as the intention with regard to legislation may not have been clear, nevertheless, in the particular circumstances under which the chairman was appointed, there were implications there, from the Government point of view, and from the chairman's point of view that, in my opinion, warranted the shareholders being advised to hold their stock until the Government had made a pronouncement of one kind or another regarding the railway company. If it is thought that February, 1942, was too early, then we come to February, 1943. In the evidence given before the tribunal of inquiry into stock transactions and in the report now issued, it was shown that, on 6th February, 1943, a memorandum was addressed to the Minister by the chairman of the company in which he pointed out, among other things, that a seven-year plan should be adopted and a statutory company formed with a capital of not more than £10,000,000, with only one kind of stock bearing a low rate of interest, which would buy out the existing shares, with the general idea that ultimately all public transport would come under the control of the new company. The report discloses on page 26 that the Minister lost no time in considering the memorandum submitted by the chairman of the company, and, on 27th February, 1943, he issued a memorandum with certain tentative conclusions at which he had arrived as to the lines of investigation into the proposals. These conclusions suggested the formation of a company of £10,000,000, the acquiring of the Great Southern Railways and the Dublin United Transport Company and that, during a seven-year period, the additional capital required by the company to accomplish the reorganisation of the concern and to modernise and standardise equipment should be guaranteed as to principal and interest by the Government.
In February, 1943, if not in February, 1942, there was a strong case for the holders of Great Southern stock having been advised by the Government to hold their stock, pending further and complete disclosure by the Government of its attitude. The memorandum of February, 1943, also asked that the company should be given power to raise their rates, or at any rate the Minister was asked by the chairman at the end of February, or the beginning of March, 1943, for permission to increase the rates. It was suggested that these rates ought to be increased by at least 20 per cent. The view of the chairman was that an increase of 20 per cent. in railway rates was necessary and in his report to the shareholders on 3rd March, 1943, at the general meeting the chairman stated:—
"You cannot now provide out of future revenue the money necessary to make good the failure to provide for renewals in the past, and there is no reason to think that the railways can—no matter how much you ask for the services rendered—pay dividends on existing capital. There therefore must be a reconstruction of the capital, and what is ultimately agreed to be the value of the stockholders interest should rank equally with, and carry whatever guarantees are given to those subscribing new capital."
At that time, we had the Minister coming to the conclusion, with the chairman, that reformation of the capital was necessary and certain values should be assigned to the then existing stock. We had the chairman making a speech which might indicate to the shareholders that their stock was not very valuable, so that, if not in February, 1943, when the Minister was coming to these conclusions, in March or May, 1943, when the Minister gave permission for the increase in rates looked for, there should have been a statement such as I suggest.
If it did not come in May, I submit that there is evidence in the report that it should have come in July. If the Minister was not clear enough in his mind in May that he should make such a statement to the shareholders, the Department were becoming clearer in their minds with regard to their intention to do something with the financial side of the company by June. On page 27 of the report, it is stated that to the memorandum which was passed to the assistant secretary the secretary added a further memorandum, dated 14th July, 1943, in which he discussed the possibility of offering the existing shareholders bonds in the new company, or, as an alternative, cash, which would avoid any suggestion of confiscation and recalled the reduction of capital in 1933 and the reaction to it. But the secretary came to the conclusion that compulsory conversion was inevitable. That memorandum was submitted to the Minister on the same day, July 14th, 1943.
If they were not clear in July that a warning ought to be issued to the stockholders, there is another date, 30th September, 1943. On page 29, the report says that the assistant secretary again met Mr. Reynolds on 30th September, when there was some discussion as to the amount of proposed capital which the assistant secretary thought too high. Finally, a figure of £20,000,000 was suggested and provisionally accepted by Mr. Reynolds, who, it was agreed, should go away and draft a scheme for reconstruction. This was the first time the figure of £20,000,000 was suggested as the capital of the new company.
Further down the page, the report shows that on the 7th October, 1943, the Minister approved of the scheme for submission to the Government, subject to the assent of the Department of Finance. If we turn to the schedule issued with the report of the amount of purchasing which went on, we find that for the four weeks following the week ended 25th September, which are included in the ten weeks' period shown separately on page 13, the amount of stock bought per week, definite proposals having been made public on October 25th, went higher than it ever went before.
In two of these weeks, 13,565 ordinary shares were purchased, and in the weeks ended 9th and 23rd, the number purchased was 14,203. The total of preference stock purchased in the weeks ended 9th, 16th and 23rd October was, respectively, 22,004, 25,240 and 25,794 and of guaranteed preference in the same weeks, 40,239, 20,382 and 25,061. For debenture stock in the same three weeks, the figures were 35,900, 48,877 and 58,011, so that in the weeks immediately following the decisions which appear to have been taken in the Department on 30th September, there was very substantial buying of stock, and when it was apparent that, over the period from the end of August, there was substantial buying, it ought to have been impressed on the Government that something was happening in the way of rumour or suggestion of one kind or another among the public that something was proposed with regard to the railway company and its finances, and they ought to have intervened to save the stockholders, about whom they express so much concern at other times and in other ways, from being jockeyed by rumour, fright or anxiety into disposing of stock which definitely, as must have been known to the Department and to the chairman at the time, was to be secured in a substantial way by Government proposals.
We feel that a very serious injustice will be done to people who parted with their stock in circumstances which we consider were avoidable. I have not got the increases for the various months, but when we hear of the increases that have taken place, say, from the early part of 1942 up to now, as a result of the publication of the proposals of the Government, we realise that a substantial wrong has been done to a large number of stockholders who parted in ignorance and perhaps fright with the stock they had.
I, therefore, move that the people who should be given any compensation or should be given any stock in the new company should be the people who possessed stock at the time the Emergency Order was issued by the Government which wiped out the old board and put a Government-nominated chairman in control of the company. I suggest it must have been in the Government's mind that they were going to follow up that by action with regard to the railway company somewhat along the lines they are now proposing.
I think, in view of the many remarks made by the Minister expressing concern with the ordinary shareholders, that some consideration along the lines set out by Deputy Mulcahy should, even at this late hour, be given them. The Minister suggested yesterday that I did not seem to pay due regard to the interests of the shareholders. I do not profess to have any particular regard for shareholders as a general body, but it would seem to me that whatever lack of concern I may have for ordinary shareholders, the Minister has set a pace that even I cannot keep up with. His record started off in 1933 when he slashed the interests of the ordinary shareholders by 90 per cent. and now, following upon the activities of last year, he has left them helpless and derelict in face of the tremendous change which has taken place in the concern in which their interests lie.
There are more than financial questions involved in this issue. One of the things I would like to have placed before the House, in addition to a statement of the actual capital of the companies, is a statement indicating their effective ownership. We have a habit of taking it for granted, when we speak of the shareholders of companies such as the Dublin United Transport Company and the Great Southern Railways Company, that we speak of a large body of persons who, in a democratic way, are effectively able to control the concern in which they have money invested. Anyone who has followed the activities of a large industrial concern knows that that is not so, and that the effective control lies in the hands of a small group. My feeling is that, despite the report of the committee of inquiry, what has been taking place during recent years in our State is a consolidation, a tightening of the grip, of a small financial group over our two main systems of transport, the Dublin system and the national system, as embodied in the Great Southern Railways Company, both road and rail sections. I am fearful that what we are giving effect to in this Bill is not merely a technical or a financial reorganisation of transport, but we are clamping down in an effective manner a monopoly on the whole transport system and that monopoly will be in the hands of a very small group. That may not be the position, but we have very few figures to lead us to a contrary view.
It would have been helpful if, in the course of his submissions to the House, the Minister had indicated exactly in whom he has vested control of the Great Southern Railways and what has been the effect, as regards that ownership, of the transactions in stocks and shares that have taken place since January, 1943. If we did discover that the small shareholders, over whom tears of blood have been wept by the Minister, have lost whatever control and power they had previously, and that this power and this control are being exercised by a small group, then I think not only in the interests of the shareholders, but in the national interest, we would have to take a more serious view of the position. Although the actual turnover of stocks and shares, according to the report of the committee of inquiry, was only 10 per cent. of the nominal value, that, added to what these groups already possess, guarantees them the effective control and enjoyment of all that we propose to give them in this Bill.
As we know from experience of limited companies, there is no need for a group to control 51 per cent. of any company in order to be the dominant and deciding factor. Very often, by a process of arrangement and understanding and proxy, a holding of 20 or 25 or 30 per cent. is sufficient. When we have, in addition to that, a turnover of 10 per cent., then we have got to the position where the control has become cast-iron and we are dealing no longer with a body of small shareholders, but with a group of very powerful individuals who will reap the benefit of any legislation we pass here.
The argument may be advanced that it would be a complicated and difficult matter to rectify what has happened, but when we take into account the dates set down by the committee of inquiry, such as the date of the speech of the chairman of the company, 3rd March, 1943, and the dates of the replies made by the Minister in this House to questions addressed to him, coupled with a history of the activities behind the scene between the officers of the Department and the railway company, we can see that on some particular date, if the interests and the welfare of the shareholders were any concern of the Minister or the Government, then on that date some warning should have been given to them that they should pause and not enter into any dealings to get rid of their interests in the railway company, but to wait and see what developments would take place. I do not think that would be an exceptional thing to expect of any Government that professes to have an interest in the welfare of these men and women.
We are told that one of the bases for the financial structure and the system of control by directors is concern for the shareholders and their financial interests. We are, therefore, entitled to ask why was not that concern shown in a more effective manner so as to preserve what little interest these shareholders had in the company and prevent it being taken away from them by people who seem to have a wider knowledge and experience of how to make money on the stock exchange? I am aware that, during this period that has been the subject of inquiry, many of the ordinary shareholders suffered a grievous financial loss. Perhaps they were foolish in getting rid of their interests. Perhaps they had not the ability and wisdom to draw the conclusions which other gentlemen seem to have been so facile in drawing. At any rate, they unloaded whatever interest they had at a very considerable loss. If we are, as we are supposed to be, concerned not with the large, well-protected, financially powerful group of individuals, but with the ordinary man and woman who have invested their small life savings in this company, and who, according to the Minister, have experienced a very bad period when they had no return on their investments and another period when the nominal value of their investments was cut by 90 per cent. now, when the sun is starting to shine, the least we might have done was to see that it shone on those who had gone through the hard period and not on those who had taken advantage of the rapid change in the circumstances of the company, and of the change in the policy of the Government towards the future of that company.
I feel that this whole group of amendments here does embody a very important principle, and, as an ordinary matter of equity, the small shareholder should have been given some indication which would have protected him against this tidal wave that has over-swept him. Even now, we should try to find machinery that would set a limit behind which those men and women could be protected. In so far as those who invested in the stocks and shares are concerned, their particular interests could be dealt with in the form set down in some of the amendments, namely, through consideration by the High Court or some other judicial tribunal, which would estimate what financial interest they may have in the shares, and what loss they would suffer if the effective ownership were transferred to the original owners at an earlier date, before those pessimistic speeches of the chairman of the company upset their hopes.
On the group of amendments which I presume are open for discussion at this moment——
Amendments Nos. 19 and 20 are open for discussion. The other points will arise in discussion on Nos. 22, 23, 25, 26 and 27. Nos. 19 and 20 deal with the question of date.
On the question of date, this resolves itself into a question as to who are to be regarded as registered holders for purposes of stock in the new company or for purposes that they themselves have described on various occassions as compensation for holdings that at one time were owned by certain people and are now owned by certain others in this company. I put down March, 1943, because that is prior to the date on which the chairman made that speech. It is to be noted that the tribunal of inquiry which was set up has definitely found that there was abnormal buying, and their comment on that is that prior to the chairman's speech at the annual meeting on March 3rd there was very little movement in those stocks. The judicial report then continues:
"This speech was generally regarded as gloomy and had a very depressing effect on the market. Some holders proceeded to get rid of of their stocks and this occasioned some activity and a sharp fall in prices. On the 24th March, Mr. Davin in Dáil Eireann addressed a question to the Minister arising out of the chairman's speech and, following the Minister's reply, which was non-committal, prices again fell slightly. There was little activity or fluctuation for some weeks, but prices recovered somewhat in May. On the 26th May the Minister spoke on the Estimate for his Department and, following his speech, which was not regarded as encouraging, prices fell again and the market remained slack for some time. We were informed by some of the stockbroker witnesses that during this period, the precise date being left in uncertainty, the stock exchange considered suspending all dealings in the company's stocks until the position became clearer."
As a result of this long inquiry, we find in the narrative matter which leads up to the decision that purchases were abnormal in the period under consideration, and it is put down, first of all, to the chairman's speech on 3rd March, 1943, and to a few statements made by the Minister. Each of those things caused prices to fall slightly, and then we are told that the stock exchange considered suspending all dealings in the company's stocks until the position became clearer. Over the page, in the report, the other side of the picture is presented:—
"From August onwards the dealings in the company's stocks were described to us as ‘absolutely abnormal', ‘a boom', ‘absolutely hectic', ‘inexplicable', and such seems to have been the general opinion on the stock exchange."
It then goes on to say that stockbrokers suspected each other of having information. In any event, there was a definite inflationary boom period, in which certain people, who might now be proprietors of what appeared to be very sound holdings, sold some of them at a very low price and others at fairly high prices considering the earlier levels that had been maintained. The Minister was called upon to answer in regard to this matter, and his answer as given here in the report—a particular phrase to which I call attention —is that the dealings in the stocks were neither extensive nor abnormal. All the witnesses from the stock exchange flatly denied that, and there is a rather long-winded reference to the matter on page 12 of the report, which winds up with the particularly good descriptive phrase that—
"the figures supplied to the Minister as to the comparative volume of business done in 1942 and 1943 upon which he based his reply to Mr. Cole's question appear to have been compiled under a complete misapprehension as to the true significance of the particulars from which they were prepared and to have little or no relation to the actualities of the situation. They were described by some of the broker witnesses as ‘completely illusory'".
In any event, whatever the public had to go on, those remarks of the Minister and the chairman—two people who would have been expected to be in the know; two people who, as people of responsibility, would have been expected to advise the stockholders as to the exact position of their holdings—came much later in the year. We find the Minister's reply to a Parliamentary question, about which the most extreme bona fides is expected, criticised in that fashion—that it had little or no relation to the actualities of the situation, and that his figures, as described by some of the broker witnesses, were “completely illusory”.
In the course of the inquiry, when two members of the stock exchange were called upon to give their evidence, the chairman, whose evidence came first, was asked as to whether it would not have been possible, following the statement made by the chairman to the meeting, when negotiations with regard to an approach to the Government were in progress, to have a warning issued by the chairman of the company, who was in the know, to the stockholders, asking them to retain their holdings as negotiations were in progress, the outcome of which, of course, could not be prophesied.
The chairman of the stock exchange said he thought that could be done, but it might be unusual. When the secretary was called upon to give evidence afterwards, the opening question to him was as to whether he had heard his colleague's statement, and whether he wished to take away from or add anything to it before giving special evidence of his own. He said there were two matters to which he wished to refer. One was the particular description his colleague had given of the boom period, which he described simply as "abnormal". The secretary put on a few descriptive adverbs to that—"absolutely exceptional", I think he said. What he said regarding the second suggestion— which he wanted to disagree with—was that it can be described as unusual in normal circumstances for the chairman of a board to advise his shareholders to retain their holdings because it was certainly unusual in practice, but he said there were no such unusual circumstances as that. For instance, I think he gave this example. When there were two companies amalgamated, or a company reconstructing its financial background, or in particular approaching a Government for aid, then it was not unusual, but perfectly usual and normal, for a member of the board to warn stockholders that they should not part with their holdings, or at least give some idea of the value that should be put on them.
In this country there is a significant example, not so many years ago, where that practice was followed. There was a time here when considerable speculation occurred in D.W.D. shares and the chairman of the meeting on one occasion told his shareholders that the price of their shares was, ruling by the market of a particular date, in the region of 3/-. He said, in fact, they had large stocks of whiskey and had obtained an actuarial calculation as to the value of the shares then ranking at 3/- if the market appreciated, and the actuarial calculation was 13/-. The chairman then announced that, of course, there were other developments about which he could not prophesy, but if they eventuated successfully there would be a further rise in the share values. At any rate, there was a clear hint by the chairman of that company to the shareholders that the shares that would appear from the market quotation to be worth only 3/- were worth 13/-. I am giving the figures to the best of my memory and they may be very far removed from the actual figures, but the gap is a significant matter and it was at least as big a gap as I have indicated. He told these people they should hold on, and at least any person who sold in the interim sold with a warning by the chairman of the company based on the actuarial calculations that the shares were at least worth a good deal more than they would appear to be worth in the market.
What was the procedure adopted in connection with this company? The chairman opened the ball on the 3rd March, 1943, in a long speech from which I propose to quote some extracts. If they are not sufficient, I will try to supply any gap, if my attention is drawn to the matter. After asking how the railways could be operated efficiently he said:
"Do you realise that for every two miles run by a steam engine, it was necessary to run one mile in marshalling and shunting?"
That was the greatest joke ever made.
The chairman continued:—
"Do you know that trains were running on inferior fuel and were hours behind and that they lost many more hours because they were operated over a large section of single track lines? Very often turf had to be handled twice because trains could not, for technical reasons, be run on another section of the system. The rolling stock is largely obsolete and the real problem during the year was to meet the transport needs of the community at any cost."
He then went into the matter of labour and said:—
"In the days when the railway served the community with that high standard of efficiency which is always necessary to produce profits, wages were low and the cost-of-living index figure was unknown. To-day the wage content is so high that even if railways were modernised the country could not afford a transport system which needs some 15,000 workers to operate it."
He then went on to pass a few further comments which certainly would not arouse any enthusiasm in the shareholders. With regard to trade union restrictions, imposed on this body of 15,000 operators, or some parts of them, he then said:—
"The 1943 revenue is already considerably down."
I want to mark that phrase:—
"The 1943 revenue is already considerably down."
He was speaking on the 3rd March, 1943, and dealing with part of the revenue of the year, two months of which had gone by. He continued:—
"The position in 1943 will be that for every £ of gross revenue earned the workers will receive 13/-. That is an impossible position and although the trade unions have been warned they have decided to take all they can get at the moment, even though by so doing they will disemploy hundreds and as time goes on, thousands of their fellow workers."
There was a definite hint there with regard to the rolling stock being obsolete and the railway workers were gouging whatever they could out of the depleted revenue, with the warning that, if this went on, not merely hundreds but thousands of the employees would lose their employment. He said:—
"I hope I have succeeded in making it clear that obsolescence and the excessive number of workers required to operate the system have brought the railways to a time in the history of transport in Ireland when they can no longer compete with road services."
There was this chilling phrase:—
"I do not suggest that the country can do without railway services altogether."
I should say that shareholders listening to his speech at that point would have thought about selling for whatever they could get, because it looked as if the chairman contemplated the disappearance of the railways as a system of transport over the country to a considerable extent. He says then:—
"There must be a reorganisation and whatever portion of the railway remains as part of a transport system must be modernised and efficient. Rail and road services must be co-ordinated so as to give the community what is best and most suitable in each for its needs."
A little later, he spoke of the point that railway companies do not make allowance for depreciation:—
"It is not the practice of the railways to provide for depreciation."
When we in this House discuss this phrase, we are apt to leave it at that —"do not provide for depreciation". Mr. Reynolds gave the other side of the picture and stated what is allowed instead—a system of renewals:—
"When, after amalgamation, intensive competition from road services, very often unfair, had to be met, the company found itself unable to earn enough to provide for renewals and this has resulted in the obsolescent state in which the railways find themselves to-day."
We did definitely say they never had allowed for depreciation—that is not railway practice—but there is the other matter, the renewals, to be attended to in lieu of depreciation, and that minimum of renewals could not be done by this company because of the intensive competition and as a result they are in the obsolescent state in which we find them to-day. Here is another chilling phrase:
"You cannot now provide out of future revenue the money necessary to make good the failure to provide for renewals in the past and there is no reason to think that the railway can—no matter how much you ask for the services rendered—pay dividends on existing capital. There must, therefore, be a reconstruction of the capital of the company and what is ultimately agreed to be the value of the stockholders' interest should rank equally with and carry whatever guarantees are given to those subscribing new capital."
That again was a definite indication to any shareholder that his capital was going to be very drastically and very largely written down. Then there was the amazing phrase that "no matter what is charged for the services rendered, no matter how much you ask, there is no reason to think the railways can pay dividends on the existing capital."
At a later point, he said that he was going to ask for an Emergency Powers Order allowing them to increase rail rates and charges. Ordinarily, that would be done before the Railway Tribunal, but this time he was simply going to apply to the Minister for an Order and hoped to get it. Then, lest any shareholder might get one little heartbeat of comfort from his speech, he said:—
"Unless there is a decided improvement in the supplies position, this will do no more than enable us to make ends meet, the future payment of dividends depending entirely on the success of the proposals for reorganisation."
That was his opening remark on this whole matter. The next in the field was the Minister. He is referred to in the report of the Tribunal of Inquiry, page 10. When Mr. Davin addressed a question to the Minister in Dáil Eireann arising out of the chairman's speech the Minister's reply was noncommittal and prices again fell slightly. It goes on:—
"There was little activity or fluctuation for some weeks, but prices recovered somewhat in May."
There is then a reference to the Minister's speech in May on the Department Estimate, and it says:—
"Following his speech, which was not regarded as encouraging, prices fell again and the market remained slack for some time."
In May what the Minister did say was this:—
"The railway company is making a loss now and the anticipated revenue of the company for the present year will not meet its working costs."
Mr. Reynolds spoke in March and referred to the couple of months of the railway revenue, the records of which he was able to see, and said it was down in comparison with the previous year. The Minister's speeches in May, and presumably his reference to the loss, must have some relation to a later period than that to which Mr. Reynolds referred in March. But in May, whatever date the Minister's mind was fixed on, he said the railway company was making a loss and that "its anticipated revenue for the present year would not meet its working costs". In a speech during the election at Inchicore, in June, the statement was, if anything, worse. He said:—
"The Great Southern present earnings, even during the war, are insufficient to pay the working expenses. Even the increased rates will not cover the deficiency in full."
That is June. I presume that during all this time the Minister, who is a responsible man, was getting information from the railway company as to how their revenue was going and that these remarks were founded upon some information supplied to him by the railway company. But certainly, up to June, the situation is that even the increased rates "will not cover the deficiency", the deficiency being the inability of the railway company to meet its working expenses.
Finally, we come to the point when in October, in a famous circular, Mr. Reynolds again addressed the shareholders and once more declared that the company's rolling-stock was obsolete. He added to it this precise phrase: "New buildings, plant and machinery will be needed." He said: "The reorganisation of the permanent way, the stations and the yards will call for the expenditure of large sums of money." Here again is a reference to the state of the physical assets, the property of the shareholders, certainly of the debenture holders in the company. Up to that point, Mr. Reynolds has certainly said the rolling-stock was obsolete and later on he declared that the permanent way, new buildings, stations and yards were all requiring expenditure of large sums of money. Mr. Reynolds also talked about the revenue being deficient in comparison with the year before. The Minister in his speech, both in May and June, simply said, this railway cannot go on; it is not making enough to meet working expenses. And, lest anybody should have taken comfort from the new Order giving power to charge increased rates and fares, Mr. Reynolds said he did not believe, no matter what was asked, that the service that was to be rendered would earn sufficient to pay dividends and the Minister said that the anticipated revenue would not meet the working costs. In June, he said that the increased rates would not cover the deficiency in full. It all wound up with the circular addressed to the shareholders on the 25th October, Mr. Reynolds simply confessing to the shareholders, in this vivid phrase, "we want new money." He said there was no reason to believe that the public would subscribe it. In fact he put it positively—"The public will not subscribe the additional capital required."
Remember, that is October. Say, possibly, there was a lag of a month; say that no revenue for October was before the chairman of the company when he made that announcement on the 25th and that the October, November and December revenue still had to come in. He, at least, had nine months of the railway working and he had three months of the working with the increased fares. What do we find? At the end of the year the 1943 accounts disclosed that the amount provided for renewals and maintenance exceeded the average of the previous five years by about £600,000 and that after providing for that extra maintenance the profits of the company amounted to over £600,000. The man who said to his shareholders that there was no reason to expect, no matter what was asked, that the railway can pay dividends on its existing capital, succeeded in the year in which he made that statement in paying a dividend in every class of the capital.
There might be some excuse for a man speaking in March, not knowing how the railway system was going to work out. There might even be some excuse for a Minister, speaking in this House on an Estimate, when less than half the year had gone, saying the deficiencies in the working expenses will not be met in full. There might even be some excuse for a Minister, in the middle of an election, addressing a crowd at Inchicore, telling the workers that their livelihood was in jeopardy and that even the new rates would not enable the deficiency to be met. But what excuse is there for a man who has all the controls and all the information through his office, on the 25th October, telling his shareholders nothing except that large sums were going to be required for permanent way, stations, yards, locomotives, and winding up with this phrase: "The public will not subscribe the extra money we want?" Without any extra money—because there has been no extra money put into this concern—we find that the next year, but based on the revenue for the year 1943, a dividend is paid in every class of stock with, I think, some arrears, the amount provided for renewals and maintenance is over the average provided for the previous five years by £600,000. When that is done, there is £600,000 left for the provision of this dividend.
The way in which company directors address their boards and the way in which prospectuses are framed has been the subject of inquiry in the courts in many cases. The most notable one has been the Royal Mail Steam Packet Company case in which Lord Kylsant was sent to jail for including in a prospectus a statement that was found in the end to be false in a material particular. In a foreword to an account of that case this statement occurs:—
"A man who issues a prospectus is endeavouring to sell an interest in his own concern to the public and no salesman traditionally cries ‘stinking fish'."
What were these statements except a cry of "stinking fish", four times repeated, and made by the two people who were at the heart of this concern. They said "this concern has no future, we cannot even make our working expenses, and even the increased rates will not allow it to be done," and persisted in that cry of "stinking fish" until the 25th October, and then, two or three months later, they solemnly declare a dividend in every class of the stock, while providing £600,000 for renewals and maintenance more than had been provided in the average of six or seven years previously.
Taking the Minister's phrase the other day that he wants to be fair to the shareholders, let us be fair to them. Let us be fair to the real shareholders. Are we going to give this guarantee or Government pledge of finding them their money, if the company cannot find it out of revenue, to the people who, oppressed by these statements, made by these two responsible and knowledgeable people, sold their shares and after they had sold, or while in process of selling, there emerged a situation which has been described by witnesses and set down in this guarded report of the judicial inquiry as "absolutely abnormal,""a boom,""absolutely hectic,""inexplicable"? Some months later, the Minister on the best advice he can get, on the compilation of figures given to him, tells this House that dealings in stock which were described by witnesses in that way, were neither abnormal nor extensive. Stockbroker witnesses said that these statements of the Minister were definitely illusory.
What was happening during all this time? Did the Minister know that there was an improvement in the company's revenue? I should imagine, if he did, he would have told all about that. Did the chairman know? The chairman made a very distinct statement in March. He said the revenue was down for a couple of months in comparison with the corresponding couple of months in the previous period. Surely the public can certainly see that one-tenth of the shareholders were jockeyed out of their holdings— their property—when that circular was issued on the 25th October, as late a date as almost the end of the tenth month in the year in which, eventually, all classes of stock got a dividend, while a bigger provision was made for renewals and maintenance than ever was made before. Surely, the possessors of that property, who sold at that particular period, are entitled to some explanation. I wonder if there was not a greater number of such people involved in those days than those described in the tribunal report as one-tenth. At any rate, they did it, and I think that these people are entitled to an explanation.
Now, when it comes to the question of shares, I have to turn to another aspect of this matter. There is another and rather peculiar side to the picture that has been presented here. The Minister, in the last couple of days, on at least a few occasions, said that whether the assets are wasted or wasting is not a pivotal matter: that even with wasted or wasting assets you can make revenue, and that there were things in the background of the organisation which would give hope to the railways. Where is that hope held out to the shareholders? I can find no single remark there which conveys to the shareholders that, although their stocks are a bit out of date, and so on, it may be possible to do something for them because they have a really good company in the background. I can only describe that as a mortuary card notice. It is heavily ringed with black, and there is not gleam shining through. All these people have been referred to, in effect, as not being able to help us to make our working expenses. There is, however, a change in the House now, dealing with the same thing, and again I want to refer to the words of a famous economist, known as Mr. Hartley Withers, who wrote a book called Stocks and Shares. One part of that book has often been quoted by people in connection with the floating of companies. He said:—
"All prospectuses should be scanned in a spirit of jaundiced criticism and with the most pessimistic readiness to believe that they are speciously alluring traps laid by some designing financier to relieve the reader of some of his money. No allowance should be made, and the benefit of the doubt should never be given to the prospectus. In fact, a large number of them are quite reasonable propositions put forward by quite honest men, but when they are of this kind they will, or ought to, stand the most sceptical scrutiny, and when they are not it is a service to the community at large to put them as quickly as possible in the wastepaper basket."
And this is a phrase to which I want to direct the Minister's attention, as being in some degree descriptive of this company which was described, in the year 1943, as lying prostrate:
"When they arrive by post, or thrust themselves on your attention in the columns of your newspaper, your first instinctive thought should be that here is somebody wanting your money, and that he may be a descendant of Dick Turpin throwing back to his distinguished ancestor and practising brigandage in a more modern and much less attractive form."
The Minister comes into this House in the last couple of days and is now presenting the rosy side of the whole picture: We should give money to these shareholders; we should give the moneys that he wants us to give to the Great Southern Railways Company and to the Transport Company because, as he said formerly, the company was in a hopeless condition. But look at what has happened in the meantime. I want the House to consider the attitude of the Minister in his present mood as being what has been described by Mr. Withers as practising brigandage on the public. Whatever the case may be, however, I want to ensure that there will be some method of calculation as to value. Whatever the sum may be—and I am not speaking now of the type of people who were referred to yesterday as "fly-boys" who make money on stock exchange transactions; I am speaking of people who owned these shares, people who were, and who must have been, swayed by the statements that were made-I want to ensure that there should be some proper method of calculation as to the value of these shares at the time. Other statements were made besides those to which I have referred, but there certainly were not statements made which were calculated to lighten the gloom of the statements I have quoted. I certainly think that the stockholders who have been done out of their shares will have reason to complain that this House has no sense of justice, having heard a responsible Minister make the statements that he has twice made, and also having heard the statement that the Minister's nominee made to the railway company at that particular time—the statements he made carrying his pessimism as late as up to the 25th October of that particular year. These stockholders will say that this House has no sense of justice if, having considered these matters, we proceed to deal with the whole question as if the Minister and Mr. Reynolds never spoke on the matter.
I say that we have responsibilities— that this House has a responsibility— because the Minister, speaking as a Minister of this House, did tell these shareholders that their property was nearly gone, even as he told the railwaymen themselves that their livelihoods were in jeopardy; and his nominee, in even more detailed terms, carried on these very gloomy prophecies up to as late as 25th October, 1943. I have mentioned the end of March. Operations were carried on up to that period, but I take it that March, being the end of the financial year, would be the last period. In view of what I have said, I think that we should reinstate those people in the position they were holding. I am sure that the point will be made to me that these people got money and, therefore, what do I propose to do about them? I propose to let them have it. I am not in a position to suggest what would be completely equitable from the point of view of these people, but, judging from the number of people who have written to me, I know that, in addition to the reduced purchase price which the majority of these people got for their shares, through selling at that particular time, they have also lost by not holding on in respect of the shares that they did not hold on to up to the end of October, 1943. It appears to me that if those people were to be allowed to keep the money that they got by selling on the stock exchange, and be allowed to get the dividends accruing, it would be found that they have not gained anything at all, but rather that they have lost. I have not calculated the amount over a sufficient number of cases to enable me to give a real example, but that is the best number I can get, and in such cases I suggest that these people should be dealt with in the way I have suggested.
The speech made by Deputy McGilligan was designed to divert the attention of the Dáil from the real issue arising from these amendments. The proposal put forward by Deputy Mulcahy, linked with the proposal of Deputy McGilligan, is a direct consequence of the allegations that were made here in the past: that certain people, who had engaged in transactions concerning stocks of the Great Southern Railways Company, had indulged in these transactions because they were aware beforehand of the Government's intentions in regard to the reorganisation of the company. I think these amendments were framed at a time when the Party opposite were hoping or expecting that the report of the tribunal would be different from what it was. Now that the tribunal has reported, and reported in the most emphatic manner, that there was no foundation for the allegations made by Deputies opposite, surely it is time that this campaign stopped.
Am I to take it that Deputies opposite are not accepting the report of the tribunal? That is the implication to be read into these amendments and into Deputy McGilligan's speech. Not merely were these allegations made in the Dáil but they were made throughout the country, made in the most flagrant manner at public meetings during the general election. Many people heard these allegations made. People were no doubt influenced by these allegations, people who will never learn that the tribunal which investigated the allegations and before which these Deputies were brought on oath, reported that not a single one of them was able to depose to any fact which constituted direct evidence of any disclosure of information. There are many people who will never know that that was the tribunal's report, that that was the result of the evidence of these Deputies who made these allegations so glibly in the past in the Dáil and during the election campaign throughout the country.
It is true these allegations were made. It is true that a campaign which was a disgrace to the political life of this country was carried on by many Deputies and ex-Deputies of this House. Is one of them going to apologise, now that their allegations have been completely exploded? Surely honesty and public decency require some withdrawal from some one of these Deputies or some representative of these Deputies? The tribunal's report was as specific as a report could be. They do not merely say that the allegations were not proven. They do not merely advert to the inability of the Deputies who made the allegations to produce evidence to support them. They report that they had fully investigated every single aspect of the matter and found, as a fact, that there was no disclosure of information, no improper use of information, that no person purchased shares of the Great Southern Railways Company by reason of information improperly used or improperly disclosed. That is now the fact as established by a judicial tribunal which carried out an exhaustive investigation. Is that fact going to be accepted or are we going to have a continuation in another form of the rotten allegations which were bandied about so frequently during the election campaign? I suggest that it is now the duty of the Deputies who were associated with that campaign to express their regret for having participated in it and to withdraw the insinuations they made, which affect the honour of individuals, and if they are not going to discharge that duty, I suggest their retirement from public life is overdue.
Having established as a fact that no person purchased shares of the Great Southern Railways Company by reason of any improper use or improper disclosure of information, is there a case now for amending this Bill in the manner suggested for the purpose of penalising persons who acquired these shares during the past two years or during the past year according to the form the amendments take? Many people acquired shares of the Great Southern Railways Company during that time—some by purchase, some by gift, some by inheritance, some perhaps on the surrender of securities for loans. In a multitude of ways the shares passed from hand to hand. People bought these shares as an investment and still hold them. It is these people who purchased these shares as an investment, who acquired the shares by inheritance, who acquired the shares in legitimate ways, whom the Deputies opposite are proposing to penalise. If there were speculators, people who purchased the shares in order to secure an appreciation of the capital value when the market price of these shares rose, they have sold out and they are not affected by the amendment. The enactment of this amendment will not cause them to lose any of their gains and would in no way diminish the profit they made. It is those who did not speculate, those who purchased for investment purposes, those who acquired the shares by inheritance during this period, whom Deputies opposite are trying to penalise, not because they wish to penalise them but because they hope to keep alive the rotten campaign with which they were associated during the last three or four months.
I hope Deputies will read the report of the tribunal and read it very carefully. I hope they will not be misled by the distorted versions of the report which appeared in some newspapers. I want to express particularly my contempt of the tactics of the Irish Times and of the manner in which it presented that report to the public. Nobody reading the headlines in that paper or the sub-editor's observations on the contents of the report could have possibly understood the full significance of the tribunal's decision. These Yellow Press tactics will not commend themselves, I know, to the readers of that paper and I hope that Deputies will not be misled by them, that they will read the report for themselves and see the specific and unambiguous nature of the verdict of the tribunal.
Deputy Mulcahy says that there was an obligation on the Government and on the Minister for Industry and Commerce to tell the shareholders of the Great Southern Railways Company in February of last year that legislation affecting their interests was in contemplation. He knows, by reason of the evidence produced before the tribunal, the various developments in the plans for transport reorganisation. If he had studied them carefully he would have realised that in February, 1943, I contemplated a scheme of reorganisation which involved compressing the capital of the Great Southern Railways Company and the Dublin United Transport Company within a figure of £10,000,000. That plan would involve a further reduction in the nominal value of the stocks of these shareholders. If that plan had been proceeded with, and if I had done what Deputy Mulcahy says now we should have done, and if I had told the shareholders not to part with their shares, is there any Deputy who does not feel that Deputy Mulcahy and his colleagues would have made the welkin ring in denouncing my action? In fact, the plan which was on the books in February, 1943, was not the one which found expression in a draft Bill, that plan was modified, and modified in consequence of the examination which was given to it when it was drafted and presented to the Government.
Deputy Mulcahy quoted very carefully from the report of the tribunal or some of the quotations contained in the report. Some of these quotations are from statements made by me and made by the chairman, which are contained in the report, but I presume he knows he left out the most significant quotation in order to maintain his case that I was in default in not intimating to the shareholders that legislation was in contemplation. He deliberately ignored various statements that are contained in that report.
What are the statements?
On page 22 of the report there is an extract from a statement made by me in the Dáil on the 26th May, 1943. I quote from the statement:
"It is necessary, in my opinion, that the process of reorganisation should be begun earlier. As Mr. Reynolds intimated to the company at the annual meeting reorganisation proposals are at present being worked out and will, in due course, be completed. If it should be my function they will be prepared in the form of legislation for submission to the Dáil."
That intimation to the Dáil and to the public, that legislation affecting the Great Southern Railways Company was in course of preparation, was made on the 26th May, 1943. On the 16th June, 1943, in a statement made on behalf of the Government Party then contesting a general election, a statement that received considerable publicity in the newspapers, I stated that "the framing of the necessary legislation has begun, and if the present Government is re-elected it is expected that the general framework of the measure will be completed at an early date and the drafting of the necessary Bill put in hands." These specific declarations, that legislation was being prepared and that it was the intention of the Government to introduce it, were available to members of the public and to the shareholders of the company in May and June, 1943, and the fact that many shareholders noted these declarations, and appreciated their significance, was brought out in evidence before the tribunal.
Deputy McGilligan referred to the speech made by the chairman of the Great Southern Railways Company at the annual meeting of that company in 1943. He read extracts from it, and represented it as a speech deliberately designed to discourage the shareholders of that company as to their future prospects. He represented the chairman of the company as describing the undertaking as "stinking fish". I think these were the words he used. I do not know whether Deputy McGilligan was deliberately trying to misrepresent the speech of the chairman of the company on that occasion, but certainly the extracts from that speech which he read did not give the full purport of the speech or the meaning which the speaker intended to convey. Shareholders of the company went before the tribunal and testified that, as a result of that speech, they decided to increase their investments in the shares of the company. One of the shareholders, according to the report of the tribunal, described that speech as the best intimation that he had ever got.
He said it was a straight tip. A lot of other witnesses were asked did they regard it as such, and not one of them supported him.
That is a matter of personal opinion.
Only one man said that.
The fact is that the speech was obviously capable of another interpretation than that which Deputy McGilligan put on it, and other people did, in fact, put another interpretation on it. It is true that in March, 1943, the company had at that time earned less than in the corresponding period of the previous year. It is quite true that up to May, 1943, it appeared that the company was not going to earn sufficient to cover its working expenses. It is also quite true that in May, 1943, it became urgently necessary to increase the rates that the company could charge, and these rates were increased. When Mr. Reynolds and I discussed the position in the earlier months of that year, I did not think and he did not think that the reorganisation which he was bringing into effect would produce results as quickly as they did. We certainly had no idea that they would permit of a dividend being paid at the end of that financial year. It was not until June, 1943, that Mr. Reynolds came to see me and told me that the financial results of the company's working were proving to be better than he anticipated, and it was not until much later in the year that it became obvious that the reorganisation brought into force was producing results on a far more substantial scale and much more rapidly than had been originally thought possible.
The Dáil has been asked to consider the position of a lot of shareholders who, according to Deputy McGilligan, were "jockeyed" out of their holdings. I do not know if Deputy McGilligan used that word for the purpose of conveying the idea that somebody deliberately planned and executed the business of depriving these shareholders of their holdings, but I think that is what he intended to convey by the use of that term. We know that, despite the interpretation which Deputy McGilligan has put upon the speech of the chairman of the company and the various statements made by himself, 90 per cent. of the shareholders in the company did not part with their shares: that in respect of 90 per cent. of the total holdings of stock there were no stock exchange transactions at all. To whatever extent shareholders may have been misled, or may have misrepresented the facts of the situation, not more than 10 per cent. of them decided that they should take action to the extent of disposing of their holdings.
Let us be quite clear as to what was, in fact, the position of these shareholders. Most of the holders of the ordinary and preference stocks in the Great Southern Railways Company had been in the position described by a stock exchange witness before the tribunal when he said that they could not sell their stock. One witness said that if you wanted to sell Great Southern Railways stock you had to go out and look for somebody to buy it, and, no doubt, many of the stockholders would, in the months before 1943, have been glad of an opportunity to realise their holdings if they could, but were unable to do it.
The banks would not do it.
What does the Deputy read into that fact?
That they control most of the shareholders.
A number probably regarded it as being to their advantage that the market became active in Great Southern Railway shares and that they had an opportunity of disposing of their holdings for cash without difficulty. In any event, there is nothing which transpired in that period which would justify us now in abusing our power of legislation in order deliberately to penalise people who quite legally and with no suggestion of any irregularity came into the possession of Great Southern Railways shares during the period prior to the publication of the circular and the introduction of the Bill. I think that for the Dáil to accept these amendments would be an abuse of its power which would be completely indefensible.
Deputy Larkin appears to think that we should endeavour to secure that the benefits of the reorganisation scheme, which we are now attempting to bring into effect, should be secured not merely for the shareholders who held shares in March, 1943, or the shareholders who held shares in February, 1942, as Deputy Mulcahy proposes, but for all those who held shares in 1933. The Deputy wants us to go back over the past 11 years and eliminate from whatever benefits may be conferred by the Bill all those shareholders in the company who acquired shares since the Act of 1933 was passed, the Act which cut the value of Great Southern Railways stocks. I think that is a preposterous proposal. The Act of 1933 was justified by the circumstances of 1933. During the intervening period, there have been many transactions in the shares of that company, and it would be almost impossible to secure now that the benefit of the improved conditions, if there are to be improved conditions following the enactment of this Bill, should be diverted exclusively to those who happened to be holders of Great Southern Railways stocks more than ten years ago. I do not think that the suggestion was seriously intended. Presumably, it was just as seriously intended as the one put forward by Deputy Mulcahy or Deputy McGilligan.
The tribunal reported that there were abnormal dealings in the stocks of the Great Southern Railways during the ten weeks prior to the publication of the company's circular. I confess that when I was questioned in the Dáil before the establishment of the tribunal I stated that as far as the information available to me showed, there were no abnormal dealings in these stocks. The only source of information that I had were the company's books. The tribunal pointed out that the transactions recorded in the company's books were not necessarily an indication of the number of transactions in the stock. It is obvious, when one considers it, that there may be many transactions in the shares of a company before the ultimate change becomes recorded in the company's books. On that occasion I had no source of information open to me except the company's register, and on the date on which I arranged to have it examined it justified the conclusion that I had reached. In any event the facts upon which that conclusion was based, are given in the reply, and these facts are accurate.
It is necessary for Deputies to make, in their own minds, the distinction which the chairman of the company made in his speech between the railway undertaking of the Great Southern Railways Company and the company itself. It is quite true that, in the financial year 1942, the railway undertaking did not earn sufficient to pay all the working expenses and charges associated with that undertaking, taking debenture interest as a charge upon the revenue. The company's road undertaking did earn revenue which, added to the total revenue derived from the railway undertaking, permitted of the payment of the debenture interest, even though it was not possible, as the chairman said, to make a proper appropriation for maintenance and renewal of the company's assets.
Did he, in his speech, say: "We have road resources on which we can rely."
I think he did. It is quite obvious that there is a distinction between the railway undertaking and the road undertaking. This is not merely a railway undertaking; it is a transport undertaking. It provides road passenger transport, road haulage services and ancillary services some, or all, of which are revenue-producing. The road transport services are extremely profitable. There were periods in the company's history in which the profits of the road undertaking were helping to maintain the railway.
Will the Minister allow me to quote from the speech the reference to the road services?
I do not think that there is anything in that speech which affects what I say, but I have no objection to the Deputy reading it.
After giving figures, the speech proceeds:
"There was a very serious shortage of fuel, tyres and spare parts and services must be restricted at once. The fuel position was such that road services might have to be suspended at very short notice. The payment of debenture interest for last year was only possible because of the net revenue derived from road services and, as they could not depend on this source for anything like the same net income as was forthcoming last year, they were left with no option but to increase rail rates and charges."
A perfectly accurate statement of the circumstances then existing. He told them that the payment of debenture interest was only made possible by the revenue derived from the road services.
And that they could not depend on receiving anything like the same amount as before.
Was that revealing any secret? Was it revealing anything which any Deputy did not know? As the responsible Minister, I went to the broadcasting station to warn the country about the transport position. Restrictions were imposed on the road transport services operated by private traders and licensed hauliers. We brought a scheme into operation in the western counties, which we extended over a large part of the country, with a view to carrying on essential services, despite diminishing supplies of petrol, tyres and parts. Was it the duty of the chairman of the company to draw the attention of his shareholders to the fact? Are we not now entitled to congratulate ourselves that the crisis which we then anticipated did not prove to be as bad as it might have been? Are we not entitled to congratulate ourselves on the fact that the problem has now eased considerably and that, instead of contracting the services of the company, we are able, to a limited extent, to arrange for their expansion? It is still true that the extent to which expansion can take place is limited by the reduced supplies of tyres and equipment but the fact that expansion has taken place is a source of congratulation not merely to members of the Dáil and the public but also to members of the company, the revenue mainstay of which was furnished by the road services.
I urge the Dáil to reject these amendments. I think that it would be iniquitous for the Dáil seriously to consider passing these amendments. I say that there is no justification whatever for them except to try to support the discreditable campaign undertaken by certain Deputies during the past three or four months. I hope that the Dáil will, by rejecting these amendments emphatically, show what it thinks of the campaign.
I want to leave aside the little red herring the Minister has drawn across this proposal and also to leave aside the Irish Times. Let us come back to the proposal before the House. The proposal is that the House take into consideration the neglect on the part of the Minister and the chairman of the Great Southern Railways Company to warn the holders of stock that proposals were in contemplation as between the chairman and the Government and that definite decisions were being set that would substantially enhance the value of their holdings. Quotations for the stock over a period were set out in a reply to a Parliamentary Question put by me on Tuesday. The highest quotations in the last week in June in certain years were given in that reply. In the year 1939——
Why commence with 1939?
I shall come along to 1940 and 1941.
Why not go back to 1937? The Deputy got the figures from 1937.
I shall give all the figures that I have here, although I intended to commence with 1939. For ordinary stock, the figures were: 1937, £34½; 1938, £20; 1939, £9?; 1940, £8; 1941, £8. No quotations were avail able, so far as the Government was concerned, for 1942 or 1943, but, in 1944, the quotation was £51. For the preference shares, the quotations were from 1937 onwards to 1944: £46, £20, £13¼, £9½, £9, £18, £14, £51. For the guaranteed preference shares, the quotations were in the same years: £72½, £50, £30, £20?, £28, £38½, £28½, £70. For debenture stock, the quotations were: £88¾, £70, £52, £44, £51?, £63, £54, £93?. The appreciation that took place in the stock from 1939, when the tribunal inquired into the railway position, up to the present is shown by these figures.
From then there has been a very substantial increase in the valuation of the stock. There was a particular rise in the value of the stock between the period which we are discussing and the period during which the information got to those with their ears to the ground. Government action in relation to the railways, the statement of the Minister and the statement of the chairman of the company all created contradictory effects in the minds of certain people. Some were clever enough to read into them that appreciation was going to take place but others were not able to read the news in that way. We get into a rather interesting period in Ireland if the Irish Stock Exchange, as far as it caters for Irish industry, is going to become a place for speculation. Normally, what we want a stock exchange for in relation to industry here is, so it would be possible for our people to put their money into industry, and yet have machinery by which, if they required money in particular circumstances, they would be able to liquefy it. In the circumstances we are now coming to, with Government interference likely to be of considerable importance in industry, if our stock exchange is going to have this effect, that people with sharp ears are able to manipulate transactions and make a living, while other people are going to lose, we should be very careful before we subscribe to that policy.
The Government cannot deal with industry in such a way as to change substantially the value of an industry and do so without any regard for the interests of those who hold stock. The Minister stated that certain pages of the report were left unquoted. There was no intention to misrepresent. We simply made a case with certain facts and asked the House to decide. If the Minister wants to go back over various statements that were quoted from the report he can do so, but he should not misrepresent things. He quoted from a statement made on page 22 of the report, where he stated that it was necessary that reorganisation should begin early. That followed a statement made on May 26th, 1943, in which he said:—
"However, the position is, as I think the employees of the railway company must know, that the whole organisation upon which they are dependent for a livelihood is in jeopardy. There is no useful purpose to be served by concealing the fact from them, that the organisation cannot be carried on indefinitely at a loss. It is making a loss and it will continue to make a loss unless the general reorganisation which the Government contemplates, and to which Mr. Reynolds referred at the annual meeting, is successfully carried out...."
That statement of the Minister did not do anything to relieve the gloom.
The tribunal refer to that in the preface.
I quoted that speech in reply to Deputy Mulcahy, when he said that no intimation was given to the shareholders that legislation was contemplated. In that speech it was definitely stated that legislation was contemplated.
I am not accepting, in such gloomy terms, that legislation was pending. What I contend is that, having reached the conclusion gradually reached, and particularly as early as July, 1943, a definite warning ought to have been issued by the Government to stockholders to hold on to their stock. The facts of the situation are plain, and no claims of misrepresentation of any kind here, or on the part of the Minister, should be taken. Persons have by the general circumstances, and by the general atmosphere of that time, been deprived of wealth that they were entitled to hold. The Minister said that some people got in, and some got out, making profits in that way. That is no reason why one part of the problem could not be dealt with satisfactorily. We are asked to decide whether, in circumstances due entirely to Government actions, persons who were able to read the signs made a substantial amount of money, while others who could not read the signs so well lost. It is a reflection on the whole way in which the Government conducted the business, and it is for this House to try to secure that people will get fair play from Parliament when dealing with business matters. This is a beginning, I suggest, of acceptance by the Government that they are completely dispensed from giving any kind of hint to stockholders of particular companies in respect of which the Government takes action affecting value. I do not think we can accept that position and that this is a clear case to which Parliament should direct attention, and make up its mind to make good the losses in some other way.
The Minister is one of the most eloquent speakers on the Ministerial Bench, and he sometimes succeeds in convincing the House that his case is a better one than any made by his opponents. In the speech he has just delivered, he tried to create the impression that the stockholders were all ordinary people, whereas the fact is—and I am sure he knows it as well as anybody else—that the big bulk of the ordinary shares, the preference and the guaranteed preference shares are held by the principal banks, particularly by the Bank of Ireland. If any evidence of that statement is needed it can be found on page 35 of the report of the Judges' Tribunal. As a result of his evidence before the tribunal the chairman of the company was reprimanded and censured by the Judges' Tribunal for selecting special people to whom to give advance information regarding his capital reorganisation proposals. He admitted in his evidence that he conveyed to His Grace the Archbishop of Dublin, information on a certain date previous to the publication of the reorganisation proposals, and that he made arrangements, which did not work out in accordance with his wishes, for the same information to be given about the same time to the Secretary of the Representative Church Body and to the Secretary of the Bank of Ireland. Can the Minister tell us the percentage of ordinary, preference and guaranteed preference shares held by these three representatives?
In so far as they are trustees, none. As trustees I think, they can only invest in debenture stock.
Is that a positive statement?
The only stock they can invest in is debenture stock.
Anybody in close touch with the working of the railway system knows that the power to appoint directors is held, in the main, by the banks, and particularly by the Bank of Ireland. I would not mind gambling that the stockholders' directors are selected mainly by the banks, and particularly by the Bank of Ireland. Surely if that is so, they must represent a big holding of ordinary and preference shares, and particularly ordinary shares, in this company. In the return on page 13 of this report, we have some very valuable information. The figures there disclose that there was an increase of 34 per cent. in the amount of shares exchanged, or, if you like, sold and bought, for the ten weeks ending October 23rd as compared with the period from January 9th to August 14th, inclusive. Can the Minister give the House any information as to what percentage of the shares sold during that period were sold by the banks as compared with those sold by individual stockholders?
I have no information on the subject except what is in the report.
Would it not be very interesting for the Minister to inquire and satisfy himself on the point? If he does so, he will find that it was the individual stockholders who were caught out and who lost in this gambling which went on. The banks have their nominees on the Board of the Great Southern Railways and these nominees are neither deaf nor blind. They can hear and see, and their job in the ordinary course would be to advise those whom they represent, the banks, not to sell at a period when they knew they would be committing financial suicide. If that is true, the majority of those who sold during that ten weeks' period were the individual stockholders who are certainly not people who would have any inside or reliable information.
I think the very reverse was the case.
These are the very people who could be fooled by the rather conflicting statements made by the chairman and the Minister in the early part of 1943.
The Deputy will be relieved to know that the reverse was the case, so far as the indications go.
The Minister had no information half a minute ago.
Nor have I information as to what shares held by the banks were sold.
If the Minister now has any information, I think it should be put on record.
I am putting it on record.
Will the Minister then put on record the percentage of the shares exchanged during the ten weeks' period I referred to which were sold by the banks as compared with those sold by individual stockholders?
I have not got that information.
I would not be sorry for the banks if they lost during that period, but I have great sympathy with the individual stockholders, ordinary and preference, who had held these shares for a long period and who, for the past 12 years, got no dividends of any kind. I have intimate family friends who, under the terms of wills, were handed over Great Southern Railway shares at as high a value as £100 and asked to distribute the assets to different members of the families on the basis of that value. Some of these people got a rude shock when the value went down to £10. That is fairly common with country traders and certain classes of farmers. When the value of the shares went down, many of these people had to transfer the shares to the banks. The banks hold the voting rights and are thereby able to put their nominees on the board of the company as against the collective influence of the individual stockholders.
I was appointed a member of a select committee set up a number of years ago under the chairmanship of the then Ceann Comhairle for the purpose of revising the old charter of the Bank of Ireland. During my short period of membership, I asked for and got a good deal of information and a good deal of education regarding the inside control of the Bank of Ireland, the principal bank of this country. The same applies to a lesser extent to the other banks. When the Minister talks about shareholders' directors, I cannot help thinking that he is worrying about the interests of the banks who put these people on the board and who are the people who will eventually become the owners of the property of the two companies now being amalgamated. I am anxious to get, and should be greatly obliged if the Minister would give, the information I am asking for. If the notice is too short, I hope the Minister will get the figures and put them on the records during the later discussion of this Bill.
I want to try to get this matter down to a question of an objective type, on the basis of statements made without any imputation of motive whatever. I protest against, and characterise as completely wrong and inaccurate, the Minister's reference to my latest speech in which he said that I described the chairman's speech as a speech deliberately designed to do certain things. I do not think I used any such phrase. I certainly never intended to use any such phrase. I want to get clear away from the motives and background of anybody who spoke. I want simply to give what was said and to base my own judgment on the natural reaction of that on the people who listened to and heard these various statements. I am not saying one word about what were the motives, good, bad or indifferent, of the people who made them.
I am inclined to query, and I think I am entitled to query, the basis of information on which these speeches were founded; to ask whether that information was in fact accurate or not and if it was then accurate but has since turned out to be inaccurate, what were the changes and at what stage could the changes have been observed. The Minister has said with regard to his statement made in answer to Deputy Cole about dealings in stocks and shares that it was based on wrong information, but again let it be remembered that the phrase put upon that outside was that it was illusory.
I want to say one other thing in that connection. The Minister not merely made a reference in which he said there were no abnormal buyings and gave figures on which he based that statement—figures which have now been described as completely illusory and, I think, accepted by the Minister as such—but he went on to say there was no evidence of leakage. I think the bona fides required from a Minister answering a Parliamentary Question would have involved the revelation to this House that about a fortnight before he made that statement, he had asked for the resignation of a civil servant in this connection. The House was not told that. It is the duty of the person asking a Parliamentary Question to see that the Minister will not evade, but if there are things peculiarly within the knowledge of a Minister which seem to be called for by a question, it seems to me they should be given.
The statement was quite accurate.
Oh, yes; it can be put quite accurately—there was no evidence of this, that or the other.
That possibility was investigated at the time, and I satisfied myself with regard to it.
It is a fact which I think might have been brought to the notice of the House—that the Minister himself had caused the resignation of a civil servant to be put in because of his association with these matters. In any event, the House was not told that; we heard it later in the course of the evidence given before the tribunal. Just consider how the House was treated by the non-disclosure of that. The Minister may say he was not bound to disclose it; possibly he was not, but it emerged afterwards, and it does not do the Parliamentary system any good to find that a relevant fact like that was not disclosed and no hint of it was given. It has been accepted that it was based on information "which had no relation to the actualities of the situation" and was of a "completely illusory" nature. That can be said without imputing any motive to the Minister. I never said he wanted to mislead the House. The point is that a question was put here and it was not answered in accordance with the "actualities of the situation".
I want to get back to the chairman's statement and the Minister's references, and I want to get back to them in the atmosphere that the judges found there was no improper leakage. That does not end this matter. If there was an improper leakage you would have much more to do on the other side of this question with regard to those who were involved. I am leaving those out of consideration now. I am dealing with the people who were the proprietors and who would now be the proprietors if it were not for the bit of boom speculation that emerged. I do not care how it occurred. I am not concerned with the people anxious to buy, but I am concerned with the people who were induced to sell by the depressing statement that was made, and who possibly would not have sold if this depressing statement had not been made.
I think the dates are significant. The months rolled on—March, May, June, late October—and in those four months there were statements made which could only have a depressing effect on the stock market. The Minister says it is wrong to say that there was no reference to the reorganisation. I did not say that. I say that whatever references there were, were couched in the terms that they were going to try to reorganise a completely derelict institution, and in the meantime they were going to bolster it up by charging increased rates and fares which, as they pointed out, they did not believe would pay their working expenses. If the Minister held the view that the reorganisation proposals were going to bring about prosperity for the stockholders, I think some hint of that should have been given to them—not merely to say that there were reorganisation proposals, but to point out that "despite what we have told you about the bad condition to which the railway has drifted, there is a good future ahead of you."
I want to find out a phrase which the Minister will point to in which the shareholders were advised to hold on to their stocks. I suggest I have given many phrases which would induce the people who were shareholders to part with their shares. The Minister said that a distorted version was given of two of his speeches. Let me draw attention to the narrative way in which the tribunal expressed themselves in their opening remarks. The chairman's speech was made in March, 1943, and, quoting from the report, this is what was said about it: "This speech was generally regarded as gloomy and had a very depressing effect on the market." That is the speech which may have made reference to the reorganisation, but it was "generally regarded as gloomy and had a very depressing effect on the market." The quotation goes on: "Some stockholders proceeded to get rid of their stocks and there was a sharp fall in prices." The tribunal is not imputing motive; they simply indicate what was said and set out the consequences.
A question was asked in the House by Deputy Davin and, in regard to it, we have this observation: "Following the Minister's reply, which was non-committal, prices again fell slightly." I read that as meaning that when Deputy Davin asked his question, and there was no hint of optimism in the Minister's reply, prices fell slightly. And remember, this was after they had fallen sharply and after it was stated that the market had been depressed. On the 28th May, the Minister spoke in relation to his Department. The portion of that speech on page 23 is not the whole speech and it does leave out the part I have already read here, and which is very significant. The report gives in full the statement with regard to the great reorganisation. As the speech was given in the Irish Times on the 27th May, it read: “The present financial position of the company is very serious. The anticipated revenue of the company in the present year would not meet its working expenses.”
The tribunal quote other parts of the speech and pay full attention to the Minister's statement about re-organisation. They say about it: "Following his speech, which was not regarded as encouraging, prices fell again." The report indicates that the chairman's speech was regarded as gloomy and had the effect of depressing the market. Some people got rid of their stocks and there was a sharp fall in prices. The Minister was questioned and, being non-committal, prices again fell slightly. There was then a speech on the Estimate for the Department and it was not regarded as encouraging and prices fell again. The Minister did go further on the 17th June, when he said that earnings, even during the war, were insufficient to pay working expenses and even the increased rates would not meet the expenses in full. When the Minister was addressing the House in May we were informed that the company was approaching a situation when it could not meet the wages of employees, the cost of fuel and other expenses. There was going to be a deficiency and even increased rates would not cover that in full.
Again the Minister told us: "We must take this organisation as a whole. It is not a railway business; it is a transport business, with rail and road services." If all the road services are going to be such an immense benefit, was it not up to the chairman so to inform the shareholders, and was it not the duty of the Minister to say: "I am talking only about the railway, but there are road services as well, and they are making good"? I wish to put on record again what I interrupted the Minister to read. The chairman's speech on the 3rd March— the speech regarded as gloomy, and which had a depressing effect on the market—had a certain importance. I produce it because the Minister tries to make the point that the gloomy statement referred only to the railway. There is a statistical reference with regard to the number of passengers carried by the road services. The chairman talks about shortages of tyres and spare parts, and he also speaks on the fuel position. He goes on to point out: "As I have shown, the payment of debenture interest for the last half-year was only possible because of the good revenue derived from the road services. We cannot depend this year from this source for anything like the same income as last year, and we are left with no option but to increase rail rates and charges."
Does the Minister seriously suggest that was a hint to the shareholders to put out of their heads all he had said about the bad state of the railways? Did he mean to convey that the road services would make good all the deficiency? He goes on, in the next part of the same sentence, to say: "Normally to-day this is a case which would have to be made to the Railway Tribunal, but in the present state of things we are seeking from the responsible Minister an Emergency Powers Order allowing us to increase railway rates and fares." That is because the road traffic would not bring them in as much as before, and having said that they were going to get the railway rates and fares increased, he then says: "Unless there is a decided improvement in the supplies position, it will do no more than enable us to make ends meet, the future payment of dividends depending entirely on the success of the proposed reorganisation."
The Minister, I know, referred to that speech, and referred to his own speech in the Dáil here in May, and referred to his own speech at Inchicore in June, but he never made one reference to the chairman's circular of 27th October, and I want to get back again to that. Without saying that the chairman was deliberately misleading or anything of that kind, I simply want an explanation. On 27th October, the chairman issues this circular about reorganisation. He made great play with the large amount of money that would be required for the permanent way, for the yards, for the stations, for equipment and so on. I have given the phrase before; I am emphasising it now. He said:—
"New buildings, plant and machinery will be needed. The company's rolling stock is obsolete. The reorganisation of the permanent way, stations and goods yards will call for the expenditure of large sums of money."
He winds up by saying that the public will not subscribe the capital.
The 27th October is an amazing date, because the year had at least three-quarters, call it ten-twelfths, run by that time, and when the revenue for the year was disclosed it was found possible to pay a dividend on every class of stock, and to set aside this amazing sum, over £600,000 in excess of the average for renewals and maintenance. Is it possible that on 26th October the chairman did not know of the good prospects before the railway company arising out of the revenue for that year?
Where is that in the circular?
That is what I want to know. Is there a hint of it in the circular? Is there a hint that a good situation has developed? I am asking the question, because if it is there I want to have it pointed out to me. If it is there, I am seriously in error.
I think from the point of view of the chairman it is lucky that there was no such reference, because it would only accentuate the suggestion that he was boosting the stock at the time.
Either there is or there is not some reference to the good position of the company.
Why should there be? The statement that the public would not subscribe capital was true, and it is still true.
There was no reference to the amazing revenue that was coming into the company at that time, unless of course we assume that all the earnings were made in the last couple of months. That is a possibility, but I do not regard it as a likelihood.
The bulk of the earnings is made in the last half of the year, anyway.
Is that an explanation?
No, but it is true, as the Deputy knows.
Was there observable an amazing tendency towards better conditions when that circular was sent out? The whole insistence in that circular is on the deplorable state of the buildings, the plant, the machinery, the permanent way, the stations, the yards, the rolling stock. I do not know what more in the way of depreciation could have been said about the company than was hinted at in that circular. Yet, as I say, within a few months it was found that the situation was so easy that all those moneys could be paid. I have got no explanation of that circular. While a big amount of those holders were jockeyed out of their shares—I use the phrase again: I use it as meaning that they were induced to sell; I am not talking about people wanting to induce them; they were in fact induced to sell, because of those depressing statements—as between August 21st and October 23rd, remember that a considerable further amount of the property changed hands in the period from October 30th to November 20th, which is the last date up to which this account is made.
I do not think the Minister will disagree with me when I say that anybody selling or buying at that time, would have had regard to that circular of October. I suggest that we have a duty to those people who were made to sell; that there was no explanation given of the pessimism which was displayed. There was nothing in the way of optimism. The people were simply told that there were reorganisation proposals on but there was no hint as to whether they might be successful or as to the revenue that would be derived if they were successful.
The whole burden of complaint at the time was: we require new capital, and that new capital we cannot get. We require that new capital for the stations, the yards, the rolling stock, and all the rest of it. No new capital was found, and yet we have had those results. Up to date, no new capital has been subscribed. For months after this Bill goes through, no new capital will be subscribed. The whole demand there was for new capital, and the complaint was: the public will not give us the money; therefore, we must, so to speak, look to this shuffle and change-over, and then we will get a Government guarantee. Meanwhile, without a penny having been advanced on foot of a Government guarantee, the situation apparently has changed. I think the public as a whole are entitled to some sort of clarification of that position. Certainly, the unfortunate people who were in possession of those stocks and who sold them up to the 25th October are much more entitled to some explanation.
Would the Minister just put himself in the position of the ordinary individual, subject to ordinary human emotions, who read those statements, and who held some of those shares. He goes into conference perhaps with some other members of his family who hold shares, and they read the speech of the chairman in March. Then they get one very much later in the year, one which could disclose some change in the company's position if a change had occurred, and they put both together. They look at where the chairman, in the earlier speech, said that no matter what they ask for the services rendered they cannot pay dividends on the capital. Then they look through the October circular for some phrase to counter that, and I suggest that they find none.
Looking at those statements from the man at the heart of affairs, who would not have sold under those circumstances? Certainly, who would not have sold when there is a brisk bit of buying going? A whole lot of people were in the market to buy at the time. Would not the Minister confess that he would be subject to very definite feelings of rage, feelings that he had been tricked out of property, if within four or five months he found that every share held by anybody in the company was getting its due reward, and that what the chairman said could not be done—to make up out of future revenue the money to make good the failure to provide for renewals in the past—was to some extent being done? I think if the Minister were the owner of those stocks, and he were asked whether it was equitable to give him back the old holding or let his position be taken by somebody who would buy, I think his answer would be that he was not defending a case here in the House. I am speaking from the angle of those people who regarded themselves as having certain rights. What was the effect of those statements on any balanced mind? It was such as would make them sell. The Minister is the one person who says the chairman's speech of March could be regarded as highly satisfactory. One man said he regarded it as a direct tip to buy and after he had left the witness box the other witnesses were questioned until the judges were tired as to whether each particular witness would agree with that interpretation; and nobody was found, as far as I can remember, to back that statement.
Deputy McGilligan is representing the position of these shareholders as that of people continually watching the stock market prices of their shares. He goes further: he endeavours to create in our minds a picture of shares that were of steady value and that suddenly began to fall in value and then appreciated again. I think the fact which must be made clear is that nine out of ten of the shareholders of the Great Southern Railways, so far as statistics show, have no interest in stock market values at all. They bought their shares for the interest and dividends they would get on them. They hold those shares irrespective of fluctuations in market values, and no appreciation in values induces them to sell and no fall in values forces them in panic to get rid of their holdings. That is what the statistics show.
Even in the period of 1943 following the increased activity in the shares prior to the publication of the circular, and even subsequent to its publication when the full terms of the proposed reorganisation scheme were known to everybody, nine out of ten of the shareholders showed no interest. Only 10 per cent. were concerned with stock market transactions. It is also necessary to remember that the market values in Great Southern Railway shares have fluctuated considerably in the course of the past ten years. In the case of one class of stock—the guaranteed preference—the highest point reached in 1944 was lower than the highest point reached for those shares in 1937, when there was no question of a Government reorganisation scheme. It was merely a matter of the public's appreciation of the possibility of the company continuing to pay the guaranteed interest. The ordinary shares which in 1937 were valued at £34 fell in something like four years to £8. Again there was no question of legislation. It is true that the company had paid no dividends; it is true that the directors were very perturbed at the possibility of their concern never paying any dividend and that the Government were making inquiries into the situation and contemplating legislation; but these fluctuations in value may have induced some shareholders to dispose of their shares and may have induced other people to buy shares.
I do not think there is any obligation on us to take cognisance of the fact that some sold and others bought. Each makes a different appreciation of what the future of the company may be. We have Deputy McGilligan asking to-day that we write down the stock to suit one class of the people, those who considered it better business to sell the shares, and to penalise those who came to the conclusion that it was better business to buy shares. On every occasion since 1937 that shares were sold, somebody bought them. In 1937 somebody bought the shares of the Great Southern Railways at £34 per share. Three or four years later, they found that those shares for which they had paid £34, had a stock market value of £8. Are we going to compensate those people for miscalculations as to the possibilities of the company? In 1937 somebody sold shares at £34 and, four years later, when the market price was £8, they congratulated themselves on their astuteness and judgment in getting out of the stocks a few years previously. Are we now going to make up to them the loss that they incurred by not holding on to those shares longer, by selling in 1937 instead of 1944?
I think it is obvious that we cannot attempt to deal with matters of that kind. People will use their judgment in the purchase of stocks and shares, just as they do in the purchase of cattle, clothes and other commodities. Some people buy cattle at the wrong time of the year, and others sell at the right time of the year. While we sometimes have had, in the past, suggestions from members of the Dáil that individuals should be compensated for their lack of judgment or errors in calculation, we have never accepted that plea, and I do not think we should accept it in relation to shares of the Great Southern Railways.
I want to disabuse the minds of Deputies completely as to the history of the finances of the Great Southern Railways in 1943—certainly to remove any impression that the statements made concerning the financial position of that company at any time in that year were in the least bit misleading. When the chairman spoke at the annual meeting in March, 1943, the company was in a very serious financial position. Its revenue for the two and a half months of the year which had passed was below the revenue for the corresponding months of the previous year. Its financial outlook was that it had paid debenture interest, not out of the earnings of the railway system but out of the profits of the road undertaking. It seemed improbable that the road undertaking could be maintained on the same basis during that year. In fact, if my recollection serves me aright, in April, 1943, all the long distance buses had to be withdrawn, and road goods services were seriously curtailed. They were restored within a matter of three or four weeks, fortunately; but the fact was that the fears of the chairman in March, 1943, were fully realised in a matter of a few weeks. In May, 1943, when the question of the increase in fares was under consideration, it was also true that the company, on the basis of its experience up to that date, did not appear likely to earn its working expenses during the course of the financial year. Subsequently, however, the conditions improved.
It is true, of course, in any year, that the bulk of the company's revenue comes in the second half. Deputy McGilligan appears to query that, but everybody knows that the passenger traffic is at its peak during the holiday season—July, August and September—and the goods traffic is at its heaviest after the harvest, when the grain and beet—and the turf, under present conditions—have to be moved. In fact, it is at this time of the year that the priority regulations made by the Government in relation to goods traffic on the railways become operative, and that the company is unable to provide wagons and other equipment to carry all the traffic offered to it.
Arising out of the increase in traffic in that year, arising out of the reorganisation which had been effected under the new management and which had become effective after that year, there was a very substantial increase in the company's revenue and a very substantial increase in the net revenue, which permitted of the allocation for depreciation to which Deputy McGilligan referred, and which permitted of dividends on the junior stocks.
Deputy McGilligan appears to think that that matter should have been referred to in the circular regarding the reorganisation scheme. I do not think it should. Certainly, at that time in October, 1943, nobody could have forecast that a dividend on the ordinary shares would have been possible. I do not know at what stage the board of the company came to the conclusion that a dividend should be paid. On the date on which it did come to the opinion that a dividend was possible, it announced that fact, announced it in advance of the annual meeting.
On the 25th October, nobody could have believed that it would be paid?
Yes.
Although I presume a proportionate increase in the last three months of the year in comparison to the others is pretty well kept.
I would say so. I am speaking from recollection. It was after the general election of 1943, probably early in July, 1943, that the chairman, in the course of conversation with me in my office, informed me that the financial position was proving to be less serious than feared, that the revenue was increasing and that the gloomier picture which he had painted for me in May, when discussing the question of increased fares, was not likely to prove as bad as anticipated.
So that a statement could have been made in July to shareholders to hold their shares.
The Deputy is now talking after the event.
I am only asking if it could have been made.
At any time in the second half of that year, rail traffic might have ceased altogether, or road services might have ceased altogether. There was no certainty that we would be able to maintain a supply of coal for the railways or a supply of petrol for the buses. Nobody could forecast that services would be maintained uninterruptedly to the end of that year.
Any statement as to the probable results of the year's working at that time would be mere guess work, and I certainly say that the chairman would have been completely wrong to have attempted to forecast at that time what the result of the year's working was likely to be. It is easy to be wise after the event. The Deputy is criticising the chairman because he was not wise before the event. He knows now that there was no interruption of service. He knows now that the railways were able to take nearly all the traffic offered to them and carried it successfully, but he could not have known in advance. In respect of the present year the situation is similar. He does not at the moment know what the result of the present year's working will be.
Put yourself in the position of the chairman who has committed himself to a statement in March that, no matter what you charge for the service, there is no reason to think the railway can pay dividends. In July that situation had changed completely.
No. I say that by July the chairman told me the financial position of the company was not likely to be as bad as he had feared in the beginning of the year. That is not "changed completely". That is an exaggeration of what I said.
He knew definitely on the 25th October that a dividend would be paid.
He did not know and could not know. Nobody knew in October that dividends would be paid.
In the last week of October—the tenth month of trading?
Or in November, for that matter.
Even taking the line of other years, you could not announce it?
Even taking the line of other years. In so far as the circular is concerned, it is not correct to say that the circular merely declared that the public would not subscribe the capital. The circular said:—
"The considered opinion of your directors is that the public would not subscribe the additional capital required at economic interest rates, even on a debenture secured by new assets, and if ranking pari passu with the existing debenture stock, the new stock would not be subscribed for unless it was also covered by independent guarantees”.
That is worse.
It is not worse but it is certainly different from the quotation given by the Deputy.
"Secured by new assets."
The point I want to bring out is that the circular did not say that the public would not subscribe the additional capital required but would not subscribe it at economic interest rates and I do not think that would be due entirely to the financial position of the company, but would be due to the financial history of the company. Anybody going to the public for money for railway shares would certainly have the difficulty of the public remembrance of the fact that in 1933 we had cut the nominal value of Great Southern Railways stocks.
I think so.
Certainly; and that a tribunal set up in 1939 also faced the fact that any new capital secured for the Great Southern Railways Company would have to have a Government guarantee.
Does the Minister know that one witness said that the phrase "reorganisation" used in connection with railway matters created shudders—I think it was?
It may.
It was a phrase of unhappy memory.
It may not be the next time. The point I want to make is that I think it is entirely wrong to assume that there is any obligation upon the House, in framing legislation of this kind, to have regard to fluctuations in the market value of shares. There have been fluctuations in the market value of Great Southern Railways shares over periods equal to if not far more definite than those that occurred in the year 1943 and nobody is going to suggest that we should attempt either to compensate or penalise those who bought or sold shares in the previous years because their judgment proved either right or wrong.
I agree with the Minister's statement, adding this only —except where interpositions in this House or statements made by members of this House had brought about the fluctuations. Then I think we have a duty.
There was one substantial fluctuation in the shares of the Great Southern Railways following an announcement about the electrification of the main-line.
Amendments Nos. 22, 23 and 25 cover practically the same ground.
I move amendment No. 22:—
In sub-section (1), lines 25 and 26, and 38 and 39, to delete the words "the amount set out in column (4) of the said Part I at the said reference number" and to substitute therefore the words "such amount".
This is an entirely different point from the last. What I suggest by amendments Nos. 22, 23 and 25 is that, instead of giving the exchange of stock that is suggested in the Bill, we should have a proper value put upon the assets or upon the earning capacity or upon anything that can be regarded as giving a value to the shares of this company. I suggest, in amendment No. 26, that various matters should be taken into consideration by a judicial tribunal with assessors which determines this matter. In putting down that amendment and in asking that the value should be determined by the High Court, I was moved, to some extent, by a circular which was sent out by the Stockholders' Protection Association in which they ask distinctly that a proper value should be put upon the whole property of the railways. They ask that the value of the property of the Great Southern Railways Company should be ascertained, not by arbitration, but by an independent expert judicial tribunal. In a second memorandum they suggest that the tribunal should be presided over either by the Chief Justice or the President of the High Court, assisted by a railway engineer and rail constructor who could be recommended by the chairman of any of the railway companies nearest to us—the English railway companies. Seeing the High Court was mentioned in this, and the possibility of assessors being brought into High Court adjudication for certain purposes, I took this opportunity of asking that the High Court should be asked to put some value on these shares. I ask in amendment No. 26 that they should take into consideration a variety of things. First of all, as to how value is to be ascertained. I think it is the practice in this country in any dealings with property to have the value ascertained. If the value to be set upon property cannot be arrived at by agreement between the parties, that is, the party acquiring the property and the party from whom the property is taken, there is always provision for some independent arbitration or arbitration board to assess the value. The courts are constantly engaged in assessing the value to be given to people for various losses or in substitution for various properties. Under the Electricity Supply Act, where companies of particular types were acquired—ordinary private companies can only be acquired by agreement—there was provision in certain respects made that if there was dispute about certain things there was resort to arbitration. There is legislation in this country which aimed at one time—although the aim has not been very well met—at wiping out a certain number of what were called redundant public houses. The proposition was enveloped in a piece of legislation which provided that if there was to be any such redundancy declared and the licences confiscated, then there was to be a value assessed upon these by a particular type of method, which was a judicial method. It is well known that when citizens' property in this country is destroyed in ways that bring it under the Acts of Criminal Damage or Malicious Damage, the value is assessed in the ordinary way through the courts, and in such remarkable instances as, say, when members of the police force in this country lose their lives in ways that bring them inside these Acts, the amount of compensation to be given to the dependents is assessed by the courts.
In addition, the fact is that the ordinary negligence case in the country resolves itself, at least in some part in every case, and in the whole part in many cases, to a question of what is the value to be assessed on certain disabilities, pain, or suffering as a result of an accident. The courts are very well practised in assessing compensation, and there is no question as to what they can do in such cases. In this case, the people concerned have agreed beforehand, under peculiar circumstances, as to what they can get, and we are being asked now to back up these people in their claims. I could give a variety of phrases that were used in connection with this matter, but I shall confine myself to a few. Last night, I quoted from statements made by Mr. Wylie and Mr. Tweedy on this question of the exchange of transport stock. They indicated that the proposed figure was higher than any arbitrator would give. Mr. Wylie indicated that the proposal was to pay £14 10s. in stocks of the new company for every £10 stock of the Dublin United Transport Company, and he gave it as his opinion that if an arbitrator were brought in, the shareholders would not get par value or anything like it. I am not sure of the exact phrase, but I think that Mr. Wylie said that no arbitrator would give these people what they wanted. Speaking from recollection, I think that one of the directors, Mr. MacMahon, said that when he saw the proposal, he embraced it with enthusiasm. There is the situation. We are asked to build up this company in a particular way. The building up of it entails a Government guarantee, which attaches to the Bill the repayment of the principal money as well as the interest, and whether the taxpayer has to meet the 3 per cent., as well as the payment of these debentures, is a matter that the future will have to disclose. Either the Government or the taxpayer, or those who are the users of the railway, will have to pay it. Everybody is entitled to fair play, and all I want to see is that everybody gets fair play. We do not want to see people getting more than fair play. We do not expect that anything lavish should be provided, but in the interests of transport as well as in the interests of the ordinary taxpayer, I think we should see that a deficit should not be allowed to occur just because there is a public purse in the background which can be drawn on in a certain, indifferent way.
I am asked, in effect, not to bother my head about the physical assets of the company or about the revenue earned by it. I am asked to focus my gaze only on the earnings of the company for the last year, or the last couple of years. That is not a fair way to regard such matters. Members of a Party may believe that the judgment of their leaders is wonderful, but I am sure that nobody in the country is going to believe that what happened in 1943 or 1944 represents the actualities of the situation. There is a situation existing at the moment, the result of which is that people cannot travel except by whatever means the transport company provides, and therefore the public are at the mercy of those who adjudicate on what the charges may be.
In that connection, take, for instance, the meeting of the sugar beet company which was held on the 28th July of this year, where the chairman adverted to the amazing position in regard to the fortunes of that company, arising out of transport charges. Dealing with the accounts of the company, he said that at the end of this year there was a trading loss amounting to £33,407, and he went on to say that by drawing on reserves, and as a result of a variety of things, they were able to extinguish the trading loss and to pay interest on the debenture stock. The chairman, Mr. Williams, further said:
"This year, it will, unfortunately, be impossible for the company to pay an ordinary dividend, which, in effect, means that the Minister for Finance will receive no return on his very considerable investment in the ordinary shares of the company. The disability which he will suffer by losing the dividend on this shareholding is a direct loss to Exchequer funds and those of the taxpayer."
Accordingly, the taxpayer may get it doubly in the neck through these proposals because, if there are other things to be considered, and if, despite the amazingly high transport charges, the company is not able to pay the Minister for Finance, then the taxpayer suffers. Later on, the chairman said:
"You will notice, from the profit and loss account, that the company has withdrawn from general reserve the sum of £65,000 to enable the trading loss of £33,407 to be extinguished, and to provide interest on the company's debenture stock and dividend on the 6 per cent. cumulative preference shares of the company for the half-year to 30th April, 1944. When these items for interest and dividends have been provided, the carry-forward to the next accounts of the company will amount to the small sum of £2,212."
That is a very small carry-over. Incidentally, he remarks that the net total tonnage of sugar beet washed into the company's factories was 698,901 tons, for which the growers received £2,750,000. He then goes on to speak of freights and the freight subsidy. He says:
"Each year, the sum which has to be found by the company to meet the subsidy on freight shows a definite increase, and during the financial year under review a subsidy of over £70,000 was paid by the company in case of freight charges on farmers. The directors of the company take the view that the charge for hauling sugar beet to the factories should be brought into a more strict relation with the real value to the producer of the commodity hauled, and that there are features in connection with this traffic which call for the strictest application of a policy of reasonable freight rates."
Now, £70,000 is the rate of subsidy paid to the company, and if they had not been paid that, they would not have been able to meet the Minister for Finance's little bit. The Minister for Finance was also represented at that meeting, and the Secretary of the Department of Finance spoke—he was one of the few who spoke at this meeting—and this is his comment, which is rather good:
"Another feature that one finds rather upsetting in the accounts is the heavy increase in freight charges on beet. This increase, especially in the case of a comparatively low-grade article like sugar beet, is certainly very distressing to notice and, as the chairman says, it may strike a blow at the heart of the industry unless some method is found to reduce the freight costs which, on the figures given in the statement, amount to nearly £650,000 in the year to which the accounts relate."
A calculation was made by one of the newspapers the next day, from which it would appear that that was equal, approximately, to 24 per cent. of the price to the producers, and that in the areas under beet it represented £8 an acre. I give that as a sample of the amazing effects of overcharging and of those increased freights. Of course, I understand that there are other increases pending in regard to other commodities. Earlier in the year there was a meeting of Fuel Importers, Limited, and the Turf Development Board, where it was indicated that further changes were impending.
There is a further statement, not from a judicial tribunal, but one made by counsel to the effect that the freight on turf had been increased from 13/5 to 15/9, and on firewood 17/3 to 19/8. That is in connection with something which according to the Statistical Abstract, brings the farmer £2 per ton on the bog, which is sold here at something over 60/- per ton and which involves even then a subsidy of nearly 30/-. Yet the freight is going to be raised on that commodity which cannot be sold or produced at anything near an economic rate. I move to report progress.