The necessity for this Bill arises out of the change in the conditions affecting transport here, due to a decrease in the earnings of the railway companies and an increase of costs in certain directions. The valuation of the railways has hitherto been governed by the valuation Act of 1852. That Act fixes the valuation on the following basis:—
Such valuation in regard to houses and buildings shall be made upon an estimate of the net annual value thereof; that is to say, the rent for which, one year with another, the same might in its actual state be reasonably expected to let from year to year, the probable average annual cost of repairs, insurance, and other expenses (if any) necessary to maintain the hereditament in its actual state, and all rates, taxes, and public charges, if any (except tithe rent charge) being paid by the tenant.
So that railway valuation was based on the rent which a hypothetical tenant would pay. However, the method of arriving at that rent was not laid down, and the effect for at least fifty years has been to take the receipts of the railway companies over periods of one year or three years prior to the making of the valuation, and to make allowances for the maintenance of the permanent way, for the renewal of fixed plant, and then to make further allowances in respect of tenant's capital as represented by rolling stock, tools, furniture, working capital and floating cash. Up to recently that system worked fairly well, but under present conditions it has been found that the continuance of the system would mean that the valuations of the railway companies' running line, stations, and so on would disappear. During the last few years, when the railways on a couple of occasions have been applying for revision of valuation, it was arranged by the Commissioner of Valuation to give a percentage reduction. There have been negotiations with the railway companies with a view to arriving at a new basis of valuation. It was not possible to proceed very easily with that.
We have now got a Bill which represents the result of negotiations between the Commissioner of Valuation and the railway companies, and the result of correspondence with the Commissioner of Valuation in Northern Ireland, the Northern Ireland Valuation Office being affected because certain lines, principally the Great Northern, run both in the Free State and in Northern Ireland. The Bill follows very largely the lines of legislation which it was found necessary to put into operation in England, and for the same reasons that legislation has been found necessary here. This Bill differs in one important respect from the legislation in Great Britain. In Great Britain no minimum valuation has been fixed, and under the legislation which has been adopted there it would be possible, if there were to be a continued decline in the prosperity of the railway companies there, for a nil valuation to be arrived at just as it would under present circumstances be possible here, and, in fact, be certain on the next valuation to have a nil valuation.
We have provided in this Bill for a minimum valuation which, in respect of running lines, will be represented by the agricultural value of the land on which the lines are laid, and in respect to buildings will be one-third of the valuation of those buildings if they had been valued in 1914. That will be a fixed minimum beyond which the railway valuation cannot fall, no matter what may be the financial condition of the railways. The justification that we have for inserting that minimum valuation is that if the railways are being worked, if people are in occupation of them and are working them, it may reasonably be assumed that there is beneficial occupation of the line and that some contribution at any rate, no matter what the condition of the company may be, should go to the various local charges.
The Bill, apart from that particular point, is in general agreement with the legislation which has been adopted in Great Britain. It definitely makes statutory what has heretofore been only customary. That is, it makes the revenue, after certain allowances, the basis of valuation. The Valuation Commissioner and the courts adopted the revenue basis in the past, because it was the only sort of basis on which it was possible to determine what rent a hypothetical tenant might pay for a railway line for the purpose of working it as a business concern. It is relatively easy to determine what rent would be paid for a shop. You have lots of other shops and you can determine the rent by relating it to hundreds of other shops whose structure, condition and situation are somewhat the same. You could not proceed in that way in the case of a railway line. Therefore, although there was no statutory provision for it, the Commissioners of Valuation and the courts in the past were driven to adopt that basis, but it had nothing in support of it except custom. In this Bill it is made the definite basis of valuation for the railways. Provision is set out in the Bill for determining the net receipts of the railway company over a period of five years. Provision is also made for making statutory another matter that hitherto has been customary — that is, the division of the valuation over a railway line. Hitherto the valuation has been divided over various sections of the railway line with reference to the train mileage, the traffic on each section, and so on. That might have been challenged and might have been the subject of expensive litigation, though when the matter is examined into it is really the only practicable way of dividing the valuation of a running line.
It would be impossible to fix the valuation of each section of a running line with reference to receipts and expenditure, because to do that would involve the keeping of books which it would be impossible to expect the railway companies to keep. One of the things that it is sought to do by this Bill, apart from providing for a minimum valuation and apart from making statutory the revenue system of valuation to the existing system of distribution of valuation by reference to traffic, is to set aside from the consideration of the Commissioner of Valuation and the courts the scale of allowances which have hitherto been made by the courts for tenants' capital. In the past the courts have allowed interest or made allowances in respect to tenants' capital, amounting in some cases to 17½ per cent., the average being 15 per cent. Of course if such a large amount were to be allowed in the future it would have the effect of unduly reducing the net valuation of the undertaking. It is provided in the Bill that in future the court shall not have regard to the existing custom or practice in that respect. It is proposed to move an amendment later which will clarify the wording of the section. The provision now is that the net receipts having been ascertained, the valuation should be fixed on that basis. The Commissioner of Valuation or any court before which the matter may go, can take into account all the relevant circumstances and material considerations with a view to arriving at such estimated rent as represents a fair and a just division of the net receipts as between landlord and tenant. Of course it is perfectly clear that there must be allowances for tenants' capital — some fair allowances — but the custom which has governed this whole matter in the past has allowed an amount that is in excess of what is necessary or reasonable, and has tended to produce this position: where with less prosperity than was formerly the case it would be quite certain in many cases, and likely in every case, that a revision of valuation would now lead to a nil return. I have one particular district noted, for instance — the Dublin and South Eastern district. A rough calculation showed that without the slightest shadow of doubt a revision, if now carried through, would result in a nil valuation in respect of that whole district.
The Bill is somewhat technical in wording, but the principles are clear enough, and I think very fair. From the point of view of the ratepayers they are an improvement on the present position, and from the point of view of the railway companies I do not think they are harsh. One of the ways in which the Bill alters the present position permanently to the disadvantage of the railway companies is to provide that no matter how things go the companies shall always have to pay rates on at least the agricultural value of the land on which the lines are laid, and in respect to buildings and other structures on one-third of the 1914 valuation.