Clause 11. — (Power to Discharge Capital Liabilities by Issue of Stock.)

Orders of the Day — Ministry of Ways and Communications Bill. – in the House of Commons on 7th July 1919.

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Any capital sum payable under this Act for reduction in the value of an undertaking, or for the purchase of privately-owned railway wagons, may be discharged in whole or in part, if the Treasury so direct, by the issue of securities, and the amount of such securities equivalent to such capital sum shall, in default of agreement, be determined by the Railway and Canal Commission.

For that purpose the Treasury may create and issue securities, the interest on which shall, in the case of securities issued for the purchase of railway wagons, be charged on the revenues derived from the wagons so acquired, after the payment there out of working expenses, and if so and far as such revenues are insufficient, or wholly in the case of securities issued for discharging such capital sum as aforesaid, shall be charged en the Consolidated Fund of the United Kingdom, or the growing produce thereof, and which shall bear interest at such rate and shall be subject to such conditions and regulations as to repayment, redemption, or otherwise as the Treasury may direct or prescribe, and the regulations may apply with the necessary modifications any or the enactments relating to local loans stock.

Photo of Sir Eric Geddes Sir Eric Geddes , Cambridge

I beg to move, after the word "wagons" ["privately-owned railway wagons"], to insert the words or any interest therein. This is intended to provide that where in. addition to the actual wagon-owner there is another person or a corporation which has an interest in the firm, and a charge upon the wagons, that charge maybe liquidated in securities at the time the wagons are acquired by the State. This Amendment is to meet a point, and I believe it does meet it, which was put to us by the wagon-owners when they said they would be in a very difficult position if die State acquired the wagons and gave their value in securities, but there was no statutory obligation upon those who had a financial interest in the wagons, as apart from the owner, to receive their interest in securities.

Photo of Sir John Harmood-Banner Sir John Harmood-Banner , Liverpool Everton

I should like to know how this Amendment will affect the proviso that I desire to move. I do not want to embarrass the Minister-designate on this question, but if he is dealing with debenture holders and others in this question I would like to know how-it is to be done. I have put down an Amendment to protect the wagon-owners both in respect of their liabilities and in respect of the cash to be received. My Amendment provides that the capital sum payable under this Act for the purpose of any privately-owned railway wagons shall not, unless the owners of the wagons consent, be discharged either in whole or in part by the issue of securities. I think that the wagon-owners have a right to be paid in cash for their wagons, especially in view of the fact that the ordinary business of wagon-owning is for the wagon-owner to build his wagons and obtain the purchase price from the hiring company or from his bankers. If he is not to be paid in cash he is placed in a very awkward position. If he is to be paid in War Loan as a part of a big security it might be one thing, but if he is to be paid, for instance, in a Wagon Loan, say, £30,000,000 or £40,000,000, to form a particular part of a separate security, that would not give him the means of paying off his creditors, either his banker or the hire company. Therefore, it is very important to know whether the Government are going to override us in taking these wagons and are going to decline to pay us in the ordinary way in bank notes or cash, and are only going to pay us in a security or the value of which we have no knowledge. If we are not paid in cash but only receive a security we cannot go to our debenture holders and say, "The Government has paid us not in cash, by which we could discharge our debentures, but in a security which is not readily saleable in the market." Our creditors may say, "We want cash for our debentures"; but the right hon. Gentleman says, "I am not going to give you cash. I am not going to consult yon: I am going to say that you must take this and deal in your own way with your debenture holders." The first step towards nationalisation is that the Minister tells us in the most distinct way that he is going to take our wagons and that he is not going to pay us in cash, but m a security which we do not wish to accept. I shall not now move my proviso, having had an opportunity of putting my case, but I do not think that the House is adding to its credit by taking away people's property and not paying cash.

Photo of Mr Marshall Stevens Mr Marshall Stevens , Eccles

Supplementing what my hon. Friend has just said, the very lucid statement of the right hon. Gentleman to-night has simplified the whole position. I agree almost entirely with what he said. Under this Bill practically all the wagons are to be purchased, and we are face to face with an expenditure in cash of £70,000,000 for these wagons. I say in cash, because we were promised upstairs that in this provision we should have the advantage that if the owners of wagons did not want securities they should have cash. I feel quite sure that that provision will be adhered to. This brings us right down to the main question which I have been trying to get at. One has heard millions dealt with here as if they were sovereigns, and here is the position. We are face to face with this expenditure of £70,000,000, and if the House thinks it desirable, on the evidence before us, that these wagons should be purchased, let us face it now and purchase them, and not wait for Orders in Council to come up from time to time. Let us decide now that we will purchase the wagons, and for cash.

Photo of Mr Robert Armitage Mr Robert Armitage , Leeds Central

I am very glad that the Chancellor of the Exchequer is here, because this is a question of fairness, and the wagon owners should have an opportunity of being paid in cash. A great many Members do not realise the enormous wagon finance companies which there are in the North. When colliery companies are about to start working their coal they have to get large numbers of wagons. They have spent all their capital on sinking the shafts, and they go to the wagon finance companies for wagons. A great many millions are put into these companies. These companies work in this way. One company, for instance, has £1,000,000 capital, and it has issued £100,000. It has borrowed on three, five, and seven years' term deben- tures on the uncalled capital, and it has also taken money upon deposit. These amounts run up to about £8,000,000 or £9,000,000. Under this Bill as it is, they will have to accept securities for all their wagons. They cannot pay off the debenture holders with the securities, because those securities are not based upon the wagons. They would at once have to put all these securities upon the market. It would only benefit the big London financiers who can buy up these millions of securities, and the wagon finance companies, whose shares are largely held by small people in the North, will lose all their capital, and they will have to pay up the uncalled capital. If the Chancellor of the Exchequer will look into the question he will see that a great hardship will be inflicted on many thousands of people in the North who have put their small savings into the finance companies. They are worked very much like the large building societies up there. They are worked upon very small margins. No one makes very large profits out of them. After they have been considered for years as a very sound security, I think that it is a very great hardship for these securities to be thrust upon them, and that then they should have to go and sell them on the market and lose their capital.

Amendment agreed to.

Photo of Sir John Harmood-Banner Sir John Harmood-Banner , Liverpool Everton

I beg to move, after the word "Commission" ["be determined by the Railway and Canal Commission"], to insert the words Provided that when the consideration for any wagons that are charged with the repayment of any money is discharged by the issue of securities it shall be lawful for the owner of the wagons to repay such money by the transfer of such securities of an amount equivalent to such money, and such transfer shall have the same effect as there payment of the money. I think it is right we should have some assurance or proviso of that description, because although I rather understand that the Minister-designate considered that we were protected under this Amendment, I am bound to say I am advised that we are not so protected.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

My hon. Friend has put down two provisos which, I think, would carry out inconsistent policies. What the proviso he is now pro- posing purported to do is done in a different way, as we are advised, by the Amendment which has already been moved by the Minister-designate and accepted by the House. The effect of my right hon. Friend's Amendment is that the Government would pay out the liability and pay the wagon-owners' share in the property.

Amendment, by leave, withdrawn.

Captain HAMILTON BENN:

I beg to move, at the end, to add the words Provided that the owner of any undertaking established by Act of Parliament shall not, except with their consent, be required to accept securities in lieu of cash in discharge of any sum payable to them for reduction in the value of their undertaking. This Amendment is very similar to that which has already been discussed. The Government are quite ready to take authority, to pay in securities, but it should be with the consent of the undertaking. It is more than likely that in the majority of cases the owners of the undertaking would be quite prepared to accept the securities in payment of the depreciation. On the other hand, their circumstances may be such that it does not suit them to take securities, and they require cash, and in those circumstances there seems no reason at all why the Government should refuse to pay cash in place of securities.

Photo of Sir William Raeburn Sir William Raeburn , Dunbartonshire

I beg to second the Amendment.

The case is rather different from that of the wagon owners, and I would like to know what the Government propose to do. Take any of our dock authorities; they have bondholders whose securities are becoming due from time to time. They have numerous creditors, and they will have to discharge all these in cash, whereas the Government propose to hand over to them simply securities. The cases are much more complicated than that with which we have been dealing, and I would like to hear from the Chancellor of the Exchequer how he proposes to deal with them.

Photo of Mr William Joynson-Hicks Mr William Joynson-Hicks , Twickenham

On a point of Order, Sir. I would like to ask whether securities issued in this manner under the provisions of this Clause would have to go through the same process in this House as if it were cash—whether this Clause would enable the Minister- designate to issue £50,000,000 of securities in payment of the loss on any undertaking without having to go through the formalities in this House as he would have to do if it were paid in cash. A decision on that point would largely influence one's vote in this matter.

Photo of Mr James Lowther Mr James Lowther , Penrith and Cockermouth

I am afraid I must say at this stage that I do not know. Before the Government could issue securities they must have Parliamentary authority to do it.

Photo of Mr William Joynson-Hicks Mr William Joynson-Hicks , Twickenham

The difficulty is this, that unless it is quite certain that the Minister would have to get the same authority of Parliament for issuing a certain number of millions for a loss on an undertaking in the form of securities this House would lose all control over the finance of this gigantic undertaking. Suppose the right hon. Gentleman makes a loss of £5,000,000 on any particular undertaking at the end of the two-years period, and then hands back the undertaking, and says, "It is £5,000,000 less in value than it was, but I will give you £5,000,000 of Government securities." If he does not have to come here and ask for an estimate there is no power in this House to check the loss lie may make on these undertakings. I suggest that it is absolutely essential that some such Amendment as that which has been moved, giving the power to receive it in cash, should be carried, both from the point of view of the owners themselves and of the country. It is certainly arguable that under the provisions of this Clause the Minister has got a statutory power, with the consent of the Treasury and without the consent of this House, to issue securities up to any amount he likes. If that is so, it is just as dangerous to the country as paying away cash without the assent of this House, and I venture to say it would be very much better in the interest of the country that the House should know definitely in an estimate that £5,000,000, or any other unit of millions, is going to be paid by way of loss on any particular undertaking, than that securities should be issued, and, from the point of view of the Chancellor of the Exchequer, I suggest to him that it would be far better finance that the cash should be paid and that the recipients of the cash should invest it in Government securities if they like, so that in the balance-sheet of the nation we should know in any particular year we had paid out so much on these particular undertakings; otherwise, in the old language, "We do not know where we are," and how much money has been lost in the provision of these undertakings. I hope the Chancellor of the Exchequer will consider this point, and make it perfectly clear that, if he does wish to issue securities, he will only do so with the assent of the House, and after the proper Resolutions have been passed, and it has gone through the proper form, in order that the House may know what money has really been spent.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I think my hon. Friend has really not realised what the Amendment means. The lose on an under taking, in the sense in which my hon. Friend seems to use the expression—that is to say, not running loss, but loss by depreciation—

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

Reduction in the value of property, owing to some action taken by the Minister. If, for instance, in the general interest of communication, the Minister took steps which permanently diverted the traffic from a line which hitherto carried it to some other, and so decreased the earning power of the first one, that might be essential in the interests of the country, but by the action of the Minister you would have depreciated the value of the property. That is really a question of whether you are entitled to set up the Minister with power which would enable him to do such things as that, and not at the same time undertake that if Tie does them on behalf of the country you would make good to the injured party ah injury which he has suffered. My hon. Friend gave all the powers to the Minister, but gave no guarantee to the injured party that he should have no redress.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

That really was the effect of my hon. Friend's argument. It is quite a different subject-matter from the case with which the Mover was dealing. I do not think it applies in a case of this kind. What happens in a case of this kind is that if permanent depreciation of value is caused by the action of the Minister, we recognise the right of the injured party to compensation. If the Minister, with the consent of the Treasury and the injured party, agrees to the assessment of the value, no further ques- tion arises. If they do not agree, it is to be settled by the Railway and Canal Commissioners. I do not think you can have any fairer arrangement than that, and I do not think you can do any less injustice to the parties concerned.

Here I turn to the Mover and the Seconder of the Amendment—how they shall be paid. Is it fair to pay them in securities? I think it is. We have a stronger case here than in the wagons which the House has already accepted. The damage done has decreased the earning power. If you give them an annuity equal to the decrease of the earning power, you have fully compensated for, and in kind, for the damage they have received. Then there is the further question which is not left to the Treasury or the Minister. If there is a dispute as to the amount of security which is to be created to be given in compensation for the earning power lost—that again is to be settled by the Railway and Canal Commission. I do not think you can have a fairer proposition than this. I do not think it would be possible.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

The very clear statement made by the Chancellor of the Exchequer is subject to one mistake. My right hon. Friend seems to be under the impression that this Amendment only dealt with the reduction of the value of the undertaking, but also with the privately-owned wagons.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

No, no! My hon. Friend forgets that we have already dealt with the privately-owned wagons. The mover of the Amendment expressly confined himself to the undertakings. It would be out of order if he had included wagons again.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

I did not understand that. But whether the compensation is to be given to privately-owned wagons or in reduction of damagedone—it cannot make any difference to the people who are receiving the money whether they are paid in securities, when the amount of the security is settled by a tribunal, or whether they are paid in cash—the only possible difference can be whether or not when they have this security they will or will not be able to realise it in the market at the price at which they received it. All of that will be settled at the time the security is given by the Railway and Canal Commission, unless the parties arrive at an agreement. There is the very small point which really turns upon what may be called the turn of the market: whether or not they are to get a ¼ more or a ¼ less per cent. It is possible that it may be cither way. It depends upon the state of the market at the time.

Photo of Lord Hugh Cecil Lord Hugh Cecil , Oxford University

May I put one question to the Chancellor of the Exchequer? As I understand the Clause, it is possible for the Treasury to issue securities of this particularly limited character without the consent of Parliament. I suggest to my right hon. Friend that that is rather a dangerous proceeding, and also contrary to Constitutional practice. It is not a matter which can possibly be put right in another place, as I apprehend it is one of a strictly financial kind. I suggest that the Government should very care-fully consider what they are doing, in the interests of financial propriety and the rights of this House.

Sir F. BAN BURY:

It really does not matter whether the Government issues it in cash or securities !

Photo of Lord Hugh Cecil Lord Hugh Cecil , Oxford University

Doubtless I am out of order, and I beg the indulgence of the House, but I should like the right hon. Gentleman to explain what we are at, not merely in relation to the rights of the owner, but in relation to the rights of the House as controlling national finance?

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I can only speak again by leave of the House. I take the case that the Minister is established with the authority given, by this Bill. Given the case that, in pursuance of that authority and the objects with which it is established, he finds it in the public interest to make such changes as injure the property of a particular undertaking and reduces its value, the question is are we to pay compensation for that or not? [HON. MEMBEKS: "That is all agreed."] It is agreed that in such a case compensation ought to be paid. You come under an obligation to the undertaker, and that is embodied in this Clause. The obligation to pay is accepted by the passing of this Bill, and the duty is put upon the Government of the day, and authority is given them to pay. They are not, however, likely to pay out large sums without going to arbitration, or to the tribunal. If there is agreement I think it will be on a reasonable basis, but if there is not agreement, then the independent tribunal fixes the amount of the compensation. You cannot do less if it is once admitted that there is to be compensation.

Photo of Mr William Joynson-Hicks Mr William Joynson-Hicks , Twickenham

With great respect, I do not think the right hon. Gentleman has appreciated the point. We are all agreed about compensation, and if it is paid in cash the Minister must come here to get the money. Mr. Speaker decided only this afternoon that oven if there is statutory power the Minister must come here to get the money. That is quite clear if the compensation is paid in cash. If, however, it is paid in securities, I want to know have we the same right to know what is going on and what is being paid?

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

There can be no question about the House having all the information it wants. I understood the question asked was, must we have a Vote or must we have a separate Bill. I think the authority was given here. What you will do in case of payment in cash is that it will be issued out of the Consolidated Fund to the amount of the sums found due under this Clause.

Photo of Mr James Lowther Mr James Lowther , Penrith and Cockermouth

The ruling I gave on a former Amendment is not really on all fours with this case. In that case there was no agreement as to any particular sum being due, but it was a proposal to make certain railway or transport services which had not up to that moment been agreed upon by anybody. That was the case I dealt with, and it is rather different to a case where the compensation has been agreed upon.

Amendment negatived.

Photo of Sir Eric Geddes Sir Eric Geddes , Cambridge

I beg to move, at the end of Sub-section (1), to insert the words Provided that the Minister shall not make an advance exceeding one million pounds at any one time for the purpose of any work unless specially authorised to do so by a Resolution of the House of Commons. The object of this Amendment is to apply a limit to the powers of the Minister to make advances. The proposal is put down in response to an appeal made in Committee that we should apply a limit of £1,000,000 to the power of the Minister to make such an advance.

Photo of Mr John Remer Mr John Remer , Macclesfield

I understood that the Minister-designate had agreed that the limit should be £500,000.

Photo of Mr John Gretton Mr John Gretton , Burton

Earlier in the afternoon, I think, the Government agreed to a limit of £500,000 in the case of undertakings which they were going to finance. This is a different case. It is a case where the Government arc going to guarantee money paid by others. If they are able to make an advance in this way, the provision that the Order shall lie on the Table of the House would be a mere formality. On the other hand, if they are subject to criticism, their actions should not be withheld from the knowledge of the House, and the House should not be prevented from having that opportunity of considering acts of capital expenditure on such undertakings by the Government. All things considered, the same thing should be inserted here. Five hundred thousand pounds has already been agreed to by the House, and there is no reason for greater powers in this case. I ask the Government to reconsider their Amendment, and I beg to move, as an Amendment to the proposed Amendment, formally to leave out the words "one million,'' and insert instead thereof the words five hundred thousand.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

I beg to second the Amendment to the proposed Amendment.

I think it would make the proposal of the Government consistent with w-hat we did earlier in the evening. If it was right that the Government should not spend, without coming to this House, more than £500,000 on any one scheme, surely it is right that they should not advance more than £500,000 on any one scheme to any one undertaking. As the matter stands the Government could, by making an arrangement with the undertaking, advance £1,000,000 and then spend half of it themselves and the other half on the new scheme, and so they really would get over what we arrived at a short time ago, namely, that the amount expended by the Government on a scheme should not exceed £500,000. I think that in all probability this Amendment was put down before the Government knew that they intended to accept the other Amendment.

Photo of Sir Eric Geddes Sir Eric Geddes , Cambridge

The supposition of the right lion. Baronet is not correct. There was no Amendment put down for limiting the expenditure to £500,000 on new services. This Amendment was put down long ago.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

I moved the Amendment, and the right hon. Gentleman said if we withdraw it he would offer as a compromise to reduce the sum from £1,000,000 to £500,000.

Photo of Sir Eric Geddes Sir Eric Geddes , Cambridge

The Government, in Committee, said they were prepared to reduce it. But the position is quite different in the case of expenditure on new services. We have here to consider, after the Advisory Committee have given their advice, the needs and commercial prospects of the new service. It has been pointed out, perhaps rather unfairly to the Treasury, that they are not as well able to look after the matter from a practical or technical point of view as from the purely financial point of view. For the breaking up of roads and for the acquisition of land there was no objection to reducing the amount, but in the case of new services the position is rather different. In the first place the undertaking to which the money is to be advanced has to give, to the satisfaction of the Treasury, interest and security, and these certainly are matters on which the Treasury are able to judge, and they will be able to say whether the proposed expenditure is from a commercial point of view desirable. It would not involve a reference to the House in many cases as. there would be no land to acquire and no roads to break up. It was thought by the Government there were excellent reasons and justification for differentiating between expenditure on new services and the other expenditure in the shape of advances. It might be the undertaking would have-to give both interest and security and that interest and security would be proof to the Treasury of the soundness of the-scheme. Therefore, under that head, I hope the House will not wish to reduce-the measure of the Financial Resolution passed, in respect of new works, by the Committee upstairs, and which was inserted here merely to provide a limit of the expenditure so that very large sums should come to the House. These advances, I may further point out, are also-under the control of Parliament, as we cannot advance the money unless Parliament has provided it. The second safeguard is that where it is a new service of over £500,000 the Minister, even after Parliament has advanced the money, must come back to the House to justify his scheme, and the advance. I venture to think that Parliament is getting a greater control than it really, gets in other Departments, because, in the first place, it provides the money, and, in the second place, if it is over certain amounts they have to approve of the individual transaction. Therefore, I hope the Amendment will not be pressed.

Amendment to the proposed Amendment, by leave, withdrawn.

Proposed words there inserted in the Bill.