Clause 7. — (Acquisition of Generating Stations.)

Orders of the Day — Electricity (Supply) Bill – in the House of Commons at on 24 November 1919.

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(1) As from such date or dates as may be specified in the Order constituting a district electricity board, all generating stations then existing within the district, cither than railway generating stations, dock generating stations, and private generating stations, and such main transmission lines as may be specified in the Order, other than main transmission lines belonging or leased to railway companies, shall by virtue of this Act vest in the district electricity board, subject to the payment by the board to the owners thereof of the standard price, but freed and discharged from all mortgages and other charges to which the same may be subject, and the proviso to Section seventy-eight of the Schedule to the Electric Lighting (Clauses) Act, 1899, shall apply as if the generating stations or main transmission lines had been sold under Section two of the Electric Lighting Act, 1888.

Where the generating station of any company is vested in or acquired by a district electricity board under this Act, and the company has created and issued mortgages, debentures, or debenture stock, whether irredeemable or not, charged upon such generating station, it shall be lawful for the company to give notice to the holders of such mortgages, debentures, or debenture stock to repay the same in whole or in part out of the proceeds of such sale not withstanding anything contained in the mortgage or the debentures or debenture stock trust deed, but in the case of debentures and debenture stock at the rate at winch the debentures or debenture stock could be paid off in the event of the winding up of the company:

Provided always that the cost which an auditor appointed by the Electricity Commissioners certifies to have been necessarily incurred in obtaining the release of any mortgage or other charge shall be borne and paid by the district electricity board:

Provided that in any case where it is proved to the satisfaction of the Electricity Commissioners that any particular generating station is so small or so situated or equipped that it could not conveniently be used for the purposes of the undertaking of the district electricity board, or for any other reason it is not desirable that such station should vest as hereinbefore provided, the Electricity Commissioners shall, after giving the owner of the generating station an opportunity of being heard, by Order exempt the district electricity board, for such period as may be specified in the Order, from the obligation of acquiring the generating station under this Sub-section.

(2) For the purposes of this Section the standard price—

(a) in the case of a generating station or main transmission line belonging to a local authority, shall be one or more annuities of such amount or amounts und con- tinuing for such period or periods as an auditor appointed by the Electricity Commissioners certifies to be required to indemnify the local authority against their liabilities for interest and sinking fund charges in respect of such sums borrowed for the purpose of providing the generating station or main transmission line as are at the date of transfer outstanding:

Provided that in lieu of such annuity or annuities a local authority shall be entitled, if it shall so elect, to be paid such sum as may, in default of agreement, be determined by an arbitrator appointed by the Board of Trade to have been the cost of and incidental to the construction of the generating station or main transmission line and the acquisition of the site thereof, less depreciation:

Provided further that if in any case it is proved to the satisfaction of the Electricity Commissioners that a substantial part of the cost of the generating station, or main transmission line, has been defrayed otherwise than by means of loans, or that for any other exceptional reason the calculation in the manner aforesaid of the annuity to be paid would work injustice, any such annuity may be increased by such umlaut as the Electricity Commissioners think just:

(b) in the case of a generating station or main transmission line belonging to a company or person, shall be such sum as may be certified by an auditor, after hearing the parties interested, appointed by the Electricity Commissioners to have been the cost of I he lands, buildings, works, materials, and plant suitable to and in actual use by the company or person for the purposes of their undertaking which are vested in the district electricity board, together with the amount of the expenses incurred as and incidental to the construction of the generating station or main transmission line, and the acquisition of the site there of, less depreciation, but with the addition of a sum as compensation for any damage shown to be sustained by any company, body or person due to the severance the generating station Of m in transmission lines, always having regard to the value the obligation in Sub-section (5) of this Section.

The expenditure which is to be taken into account as being such expenses as aforesaid, and the amount of such depreciation as a foresaid, shall be determined in accordance with regulations made by the Electricity Commissioners:

Provided that if on the application of the company or person or of the district electricity hoard, it is shown to the satisfaction of the Board of Trade that the expenditure so to be taken into account or the amount of depreciation so determined would work injustice, the expenditure so to be taken into account or the amount of depreciation, as the case may be, shall, in default of agreement, be determined by an arbitrator appointed by the Hoard of Trade.

(3) Where the owners of any generating station or main transmission line which by virtue of this Section is vested in a district electricity board are entitled to any easement or right or the benefit of any contract, and it appears to the Electricity Commissioners that the transfer, of the easement or right or benefit of the contract to the district electricity board is necessary for the proper enjoyment by the board of the generating station or main transmission line, the Electricity Commissioners may by Order transfer to the board the easement, right, or benefit on payment by the board of such consideration as failing agreement may be determined by an arbitrator appointed by the Board of Trade.

(4) A district electricity board may, with the consent, of the Electricity Commissioners, by agreement with the owners thereof acquire any railway generating station or private generating station or any main transmission line from any such station on such terms as may be agreed.

(5) Whenever a district electricity board acquire a generating station under this Section they shall be under an obligation thenceforth to supply to the authority, company, or person, from whom it is transferred, electricity not fess in amount than could have been generated at the generating station by that authority, company, or person, at a price not greater than the cost at which it could have been so generated, and in the event of any change in the type of current frequency or pressure to pay such expenses as the authority, company, or person may necessarily incur in con sequence of such change, and if any question arises as to such amount or cost, in expenses, the question shall be determined by the Electricity Commissioners, and in determining such cost regard shall be had to capital charges (including interest on capital), cost of fuel and labour, and other costs of generation, and to any reduction of costs which might reasonably have been expected to accrue from any improvement of the generating station and plant therein which is proved to the satisfaction of the Electricity Commissioners to have been on the eighth day of May, nineteen hundred and nineteen, under consideration by such authority, company, or person with a probability of early execution.

(6) Where a generating station or main trans mission line has been vested in or acquired by a district electricity board under tins Section the board may, subject to the approval of the Electricity Commissioners, agree with the former owner thereof that such owner shall work and maintain the game on behalf of the board for such period and on such terms as may be agreed between them.

(7) Where a generating station, which is vested in a district electricity board under this Section, is in course of construction, extension, or repair the rights and liabilities of the former owners thereof under airy contract for such construction, extension, or repair shall be transferred to the district electricity board.

(8) Interest at the rate of six per centum per annum upon the standard price snail be paid by the district electricity board to the former owners of any such generating station or main transmission line as from the date of vesting thereof in such board until payment.

(9) Where in any generating station vested in a district electricity board under this Section there is contained any plant which, in the opinion of the Electricity Commissioners, forms an essential part of the distribution system of the former owners of the generating station, that plant shall, notwithstanding such vesting, re main the property of Its former owners, who shall, so long as electricity is supplied for distribution from that station, at all times have the right of access thereto.

(10) Provided that if it is proved to the satisfaction of the Electricity Commissioners that for any exceptional reason the calculation of the standard price would work injustice, the matter shall be referred to an arbitrator to be appointed by the Board of Trade.

Amendment moved [20th November:] In Sub-section (1), to leave out the words "railway generating stations, dock generating stations, and."

Question again proposed, "That the words proposed to be left out stand part of the Bill."

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

I propose to ask the permission of the House to withdraw this Amendment, and I can explain very shortly why I do so. As I told the House on Thursday last, this Amendment was put down for the purpose not of pressing it through, but of discussion. When I agreed to that method of reopening the question and re-discussing it, and when I agreed that this Amendment should go down in my name, I had entirely forgotten that I had been a party to an agreement last Tuesday, and that there were one or two points with regard to the arrangements of railways which it was necessary to discuss. Having regard to my own position, I confess that I should have given the railway companies notice of the reasons win we had put this Amendment down. There were one or two points which required to be reconsidered in order to see if they were properly covered.

It was essential, whatever happened, that substantially the whole of the electricity supply should be under one guiding control. We had arranged that so far as the existing generating stations were concerned, railway and dock generating stations should not be included; and that, so far as extensions arc concerned, or so far as any new generating stations are concerned, and wayleaves across dock avid railway property, they should come within the Bill. The exclusion of the railways and docks, then fore, must only attach to the existing generating stations. From the point of view of the railways and docks, that was a matter of considerable importance; and from the point of view of the unified control of electricity in this country, with the exception of, perhaps, one Metropolitan station, the exclusion is not a matter of substantial im- portance, having regard to a subsequent Amendment, which I shall ask the House to accept, dealing with certain rights of the railway companies, when they are taking electricity from a district electricity board, or dealing with the rights of the railway companies to demand any frequency that they like.

Subject to that I am satisfied, and those who advise me are satisfied, that the arrangement we made with the railway companies is a perfectly sound and proper one it is a matter of great importance the railway companies, and it does not interfere with the unified control. Having regard to the powers that are kept which give us entire control of any new generating station or any extensions of the same and of wayleaves over the railway and dock property, we feel we can with safety leave this matter without troubling the railway companies to enter into any further discussion of the matter, and I ask the House to allow the arrangement to stand as it is, and permit mo to withdraw this Amendment.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

Gould the right hon. Gentleman indicate to the House the reasons why he put the Amendment down in the first place?

4.0 P.M.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

I tried to explain to the House on Thursday. There were a large number of cases in Committee upstairs where I had promised to see what Amendments we could put down on the Report stage. When we were going through the Bill for that purpose, and also for the purpose, of seeing if there were anything that required alteration, or clearing up, or securing, or anything of that sort, we were not quite sure whether tile exclusion of all existing railway generating stations might not have an effect which we had not anticipated. After full consideration, we have come to the conclusion that while to a certain extent that was right, because we shall ask the House to make an alteration in Clause 9 dealing with their power to require a certain frequency, we retain entire control over any future power stations belonging to the railways or docks, or any extensions, or any use of their property for purposes of wayleave. Therefore, after consideration, our doubt as to whether we had sufficient security has been removed.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

The whole House understands why this Amendment is withdrawn. It is because the Home Secretary came to an arrangement with the railway companies in June last that these railway and generating stations should not be taken over by the district electricity boards. I can perfectly well realise that that arrangement binds the Home Secretary, and that he is bound, having made a mistake in putting this Amendment down, to withdraw it after having had that arrangement brought to his notice, but he will be the first to admit that any arrangement come to between him and the railway directors does not bind the rest of the House, and every single one of the arguments which made it seem vital to him that this Amendment should be put down reversing the decision come to in Committee upstairs is as important still to the public in general and this House as it was before he withdrew his Amendment. It is perfectly obvious, even to those who are not experts, that a district electricity board that has not the power of taking over railway and dock generating stations is robbed of its principal functions. It is deprived of the two principal matters of supplying electricity, The only electricity generating stations or the main electricity generating stations that will be taken over will be the municipal undertakings. I think they might justly claim to have the same privileges as are accorded to the dock and railway companies in this matter, if it is au advantage to be left out of the district electricity board, then they, too, have a right to claim to be left out. We know, how ever, that the economy to be effected in supplying electricity in bulk from these great generating stations is the principal argument in favour of this Bill, and that economy can only be achieved if the various electricity undertakings are under one hand. It you exempt the railways and docks from joining in with the other electricity concerns in order to form a great combine, you will thereby hamper the whole measure so far as the district electricity boards are concerned.

This Bill, originally, made these boards the sole authority for managing and supplying eletricity throughout the country. In Committee upstairs, so far as I can make out, the district electricity board was relegated to the second place and is no longer the normal authority. The normal authority now is a voluntary union of the electricity concerns, a voluntary concern involving private capital, and leaving the whole of the supply of electricity in the country to the existing private capitalist and municipal concerns. I for one prefer the district electricity board, which eliminates private capital and brings the whole of the electrical supply of the country under Government hands. I understand that has been ruled out. The district board is now only the second string to the bow; it is not the normal, but the unusual. Let us, however, save what we can of the district electricity board. I do not think it will be found practicable to go on under these capitalist and municipal combines that are contemplated. We shall have to come back to the district electricity boards, but you are hampering them by cutting out all power over railway and dock generating stations. You are depriving the new authority which is to supply electricity to the whole of the country of the power of acquiring compulsorily railway and dock generating stations. We know what that means. They will have to acquire them voluntarily, and that is why the railway and dock directors have induced the Home Secretary to withdraw this Amendment. He put the Amendment down solely to preserve the right of the district electricity boards to acquire these stations compulsorily under the terms stated later in the Clause. He has withdrawn it on pressure from the railway directors and because he made a bargain with them some months ago.

It is, however, still our duty as representing the public to see that the district electricity boards are given the best possible chance. We shall get these boards, and they will have to take over the railway and dock generating stations. They will have to do it, because it will be impossible to have different sorts of electricity supplies with different voltages working at different places. You must have your big generating stations supplying all these things in future. The result will be that the big thing will come and public capital will have to be found for constructing the big schemes. You will then find the dock and railway companies coming forward and spying, "You cannot take us over. We shall require compensation. If you are going to supply this electricity, naturally we shall require to be bought up." Then we shall have all the reasons given why enormous compensation should be paid to these com- panies. I protest against the. House being forced to accept a bargain which is obviously in the interests of the railway and dock directors, and against our being hoodwinked—I do not mean it in any offensive sense—by the Home Secretary, who has not given us the true reasons why-he put this Amendment on the Paper. He knows perfectly well that the future of the district electricity boards depend upon their power to acquire these concerns, and he has left that acquisition entirely in the hands of the old system of paying compensation through the nose to these private companies. i therefore hope the House will not accept the withdrawal of this Amendment, but will go to a vote. I might add that we from these benches moved an exactly similar Amendment going slightly further by cutting out private generating stations as well. Seeing the Home Secretary's Amendment on the Paper, the hon. Member for Rother Valley (Mr. Grundy) withdrew his Amendment. That makes it all the more necessary why we should make s- protest, and. if necessary, go to a vote on this question in order to make our cape quite clear. We do not believe in these private undertakings of the dock and railway companies being able to extract abnormal compensation from the public.

Photo of Mr George Balfour Mr George Balfour , Hampstead

I am quite at a lost to understand why the Home Secretary should now desire to withdraw this Amendment. If I understand this matter rightly, one principal argument has been advanced why the whole of the electricity supply should be brought under the one unified control. The one great argument that has been advanced is that the load factor of the railways should be brought into the general pool of electricity supply of the country. The first tiling that the Home Secretary proposes is to withdraw the railway generating stations from the public control of the boards. If there is one generating station move than another that should be acquired according to the argument advanced by the Home Secretary, it is the railway generating station. We arc bound to leave these words in if the Hume Secretary is to stand by his argument. I should rather like to know to what extent the proceedings, in this House last Thursday have influenced the Home Secretary in withdrawing this Amendment. As the Bill came to this House from the Committee upstairs, the whole of the electricity supply was to be under the Board of Trade. Last Thursday that was changed on the floor of the House, and it was brought under the control of the Ministry of Transport. If the electricity supply were under the charge of the Board of Trade, I can quite understand that the Transport Department would wish to exclude the railway generating stations, and now that it is brought under the Ministry of Transport perhaps their views have changed. I do urge that these words should be left in and that the railways should have their generating stations taken over in common with other generating stations, BO that the Home Secretary may give support to the argument that he has advanced that the load factor of the railways will materially aid the general supply of the country.

Amendment, by leave, withdrawn.

Major BARNES:

I beg to move in Subsection (1), to leave out the words "the standard price," and to insert instead thereof the word "compensation."

My object in moving this Amendment is to endeavour to bring the compulsory compensation proposals embodied in this Bill into some degree of simplicity and fairness. At present they are of the most complicated character. This is a Bill for the compulsory acquisition of a certain kind of property. It involves taking that property and transferring it from one group of persons to another group. Obviously, that raises the question of com pensation. I am quite sure that it is the wish of the House that questions of compensation should be dealt with fairly and equitably, without any consideration as to the persons or companies or organisations that arc involved. The Government have approached this matter, I do not suggest with any desire to work injustice, but with a desire to get these properties as cheaply as they can. That, of course, is a perfectly laudable object. Everybody wants to get things cheaply, and there is no reason why one should not do so if one can do it fairly. What is the course that they have pursued here? First, they have divided the properties they proposed to take into two parts. They desire to acquire control on the electrical undertakings of this country. These undertakings can be divided into generating and distributing portions. They originally started out with the idea of taking only the generating portions. This was a Bill to acquire, by compulsion if necessary, the generating stations in the country, but it has been transformed from a measure of compulsion applied by the Government to a measure of compulsion applied to the Government, and the Government may be compelled to acquire portions of electrical undertakings which they had not intended to take. They may be compelled to acquire the distributing systems of various companies.

How have they applied the principle of compensation to that purpose? They have first taken into consideration the various undertakings, and have ruled out one set of undertakers entirely as regards compulsory powers. You cannot apply compulsory powers to generating stations belonging to railway companies or dock companies or to private stations. They can only be acquired by agreement. Those that remain they have divided into three categories—first, the generating stations that belong to local authorities; secondly, those belonging to companies acting under Provisional Orders and having the benefits of the Electric Lighting Act of 1888; and, lastly, the generating stations of power companies. These are the three classes into which they have divided the objects which they desire to acquire. As far as the actual objects themselves are concerned, there is no difference between them. They arc, all generating stations. It is as if one went into a street where there are three houses exactly alike and divided them into three classes because of the difference in their ownership. I submit that that is not in any sense of the word a proper principle to be applied in the determination of compensation. But that is what has been done under this Bill. Different methods of compensation are to be applied in the acquisition of properties with precisely similar objects, and the difference doss not depend on the difference in the objects, but on the difference in their ownership.

Take first the generating stations belonging to local authorities. The Government proposed originally to acquire these by paying to the local authorities an amount equal to their outstanding liabilities, in other words, if it had been private property with a mortgage on it, they would have proposed to pay the mortgage oil But the Government have in Committee accepted an alternative. When they come to the generating stations belonging to companies acting under Provisional Orders, they apply another principle of compensation. They propose to com- pensate these companies for the loss of their property by giving them their original cost less depreciation.

Photo of Mr Edward Carson Mr Edward Carson , Belfast Duncairn

What is the standard price?

Major BARNES:

"Standard price" when applied to local authorities means outstanding liabilities, but when it is applied to companies acting under Provisional Orders it means their capital cost. When you come to the last class of generating stations, those belonging to power companies, they are to be paid their market value as a going concern, and any difference is to be settled under the Arbitration Act of 1889. What I desire to do is to substitute for these different principles, which to my mind cannot be justified on any ground of equity or fairness, a common principle of compensation to be applied to all properties quite irrespective of their ownership, and if my various Amendments are accepted the effect will be that, in the first place, the Government will proceed to acquire these properties by agreement, and, if they cannot get agreement, they will proceed to acquire them under the terms of the Acquisition of Land Compensation Act which has been passed in this House during this Session. I put this to the House as a proposal which is fair to be applied in all these cases. We arc dealing here with the question of acquiring property, it may be by compulsion. We had the whole of this question discussed in this House in the early part of the Session in connection with the Act for the Acquisition of Land, and paying compensation for taking it by compulsion. I suggest there is no reason why this particular class of property should be singled out for differential treatment from any other kind of property that may be acquired under the provisions for the Acquisition of Laud Act. Although it is called the Acquisition of Land Act I think the Home Secretary will confirm me when I say that land has; very much wider meaning than merely soil, and may mean the buildings on the land and the plant attached to the freehold, so that it might very well be that certain properties of exactly the same character will be acquired under this Act as might be if they were going to be acquired by local authorities carrying out-improvement schemes or by Government Departments who want land for other purposes, and which would be acquired under the Acquisition of Land Compensation Act. There does not seem any reason at all why if we are going to apply compulsory powers under this Bill for the acquisition of property it should not come under the provisions of the Land Act. One objection has been raised, and that is that if the provisions of that Act were applied the effect would be that in many cases persons, companies or local authorities would get not the pre-war value of the undertakings but the post-war value, and it is felt in many quarters that that is not right or fair, as the effect would be to burden the electrical undertakings unduly and to put into the pockets of the people now owning the property a value which they ought not to have. There is no one in this House who is a stronger supporter of the idea of acquiring the difference between pre- and post-war values for the benefit of the general community. But if that policy is to be adopted, as I hope it will be—I, at any rate, shall support it—I think it should be applied generally. It does not seem to mo that this is the right way in which to acquire this difference. If the general principle is to be laid down that the increase of the pre-war value is to be taken it should be done in some general fiscal measure and not by a Bill of this kind.

Photo of Sir John Marriott Sir John Marriott , Oxford

I beg to second the Amendent, which raises an exceedingly important question—one of the most important in connection with the whole discussion on this Bill, and one of the questions to which we gave the most attention during our prolonged deliberations upstairs. I desire to second this Amendment because I entirely approve of the principle it contains, and also for another reason which I hope will commend itself to the favourable consideration of the Government. If this Amendment is accepted I shall be able to relieve the House from the necessity of considering a number of those subsequent Amendments which stand in my name, and, therefore, apart from the merits of the Amendment, I hope it will be acceptable to, and accepted by, the Government. What is the position in regard to this Amendment? Many years ago this House was engaged in discussing the desirability of promoting the electrical industry in this country, in the year 1882 a Bill was passed with that object. But what was the result of that Act? Practically nothing at all was accomplished under it, because the terms offered to the investing public were not sufficiently good to induce them to embark their capital in what was then regarded as a highly speculative enterprise. Six years passed, and the House in 1888 passed an amending Bill offering better terms to the investing public, I hope I may be allowed to remind the House what terms were, under the Act of 1888, offered to investors. The necessity of realising this very clearly at the outset will, I dunk, be apparent. Under Section (2) it is laid down: Where any undertakers are authorised by a Provisional Order or special Act to supply electricity within any area, any local authority with in whose jurisdiction such area or any part thereof is situated may within six months after the expiration of a period of forty-two years or such shorter period as is specified in that behalf in the Provisional Order or in the special Act from the date of the passing of the Act confirming such Provisional Order or of such special Act, and within six months after the expiration of every subsequent period of ten years, or such shorter period as is specified in that behalf in the Provisional Order or in the special Act, by notice in writing require such under takers to sell— That is precisely what this Act is proposing to do— and thereupon such undertakers shall sell to them their undertaking or so much of the same as is within such jurisdiction upon terms of paying the then value of all lands, buildings, works, materials, and; plant of such undertakers suitable to and used by them for the purposes of their undertaking within such jurisdiction, such value to be in case of difference determined by arbitration: Provided that the value of such lands, buildings, works, materials and plant shall be deemed to be their fair market value at the time of the purchase, due regard being had to the nature and the condition of such buildings, works, materials and plant, and to the state of repair thereof, and to the circumstances that they are in such a position as to be ready for immediate working and to the suitability of the same to the purposes of the undertaking, and where a part only of the undertaking is purchased to any loss occasioned by severance. So far as the Clause we are discussing is concerned, those words are applicable, because under this Clause only the generating stations are to be acquired. It is true that under a subsequent Clause other things are going to be done, but for the moment—

Lieut.-Colonel Sir F. HALL:

The main transmission lines are also to be acquired.

Photo of Sir John Marriott Sir John Marriott , Oxford

I ought to have said that the generating stations and main transmission lines are to be acquired. Therefore, we have arrived at the position that the circumstances which were contemplated in the Act of 1888 have now arisen, that is to say, those who, on the faith of that Act, invested their money in electricity undertakings, are now called upon to part with those undertakings or some portion of them, namely, the generating stations and main transmission lines, under this Clause. The question which immediately arises is precisely the question which has been proposed to the House by my hon. and gallant Friend the Member for Newcastle East (Major Barnes). On what terms are you going to take over these generating stations and main transmission lines? On that question there was a great deal of controversy and discussion upstairs, and the Bill as it returned to this House from Committee is not in my view, or in the view of a large number of members of that Committee, at all in a satisfactory condition, for the reason—I do not want to use any hard words—that the terms upon which the money of the public was invested on the faith of the Act of 1888—this I must say quite plainly and quite deliberately—are not being observed in the Bill as it is now presented to the House. Therefore, the question is more than a mere question— although that is a very important one— of the future development of the electricity undertakings of this country. That is a very important question. We are all agreed that we want a more abundant supply of electricity. We are all agreed that we want that electricity at a cheaper price. I believe that on those two points there is no difference of opinion in any quarter of the House, nor was there any difference of opinion in any quarter of the Committee which considered the Bill upstairs. But we are also very much concerned with another and more general principle, which is whether when the time comes for taking over private enterprises by public authorities, Parliament shall or shall not observe the bargain which it most deliberately made in the recent past. It made that bargain in a very special sense deliberately, for observe what happened. Parliament legislated in 1862 and offered certain terms, but the public would not come in. You could not get your money, and not being able to get your money under the terms of the Act of 1882, Parliament, wisely or unwisely, but most deliberately, said that in order to induce the private investor to embark his money on what was then regarded as a highly speculative enterprise, "We will deliberately improve the terms which we offer," and those improved terms were embodied in the Act of 1888.

The Parliamentary bargain made La 1888 was virtually this: to give a life of forty-two years, with a liability to be purchased at the end of that period, or at the end of a fixed period of years on the then value of the buildings, plant, machinery, etc. Now, what is the proposal which the Government has embodied in this Bill? Firstly, I would ask the House to observe that it is the Government, or the country which they represent, which is now attempting to take over these electricity undertakings. It is not the companies who are asking to be bought out. It is the Government which has decided in its wisdom that this is the appropriate moment to take over the electricity supply of the companies. It is the Government's decision; they have deliberately arrived at it. But they have also arrived at the decision that they will not take over these undertakings on the terms embodied in the Act of 1888, and I would contend hi the strongest possible way that it is to those terms that the undertakers are properly entitled. Instead of on the terms embodied in the Act of 1888, the Government are proposing to take over the generating stations and main transmission lines on the terms of Sub-section (2) of this Clause. What are those terms? They are merely cost of construction, less depreciation—a vastly different thing from the then value of the buildings, plant, machinery, etc.

Photo of Mr Edward Carson Mr Edward Carson , Belfast Duncairn

Cost of construction when?

Photo of Sir John Marriott Sir John Marriott , Oxford

I am much obliged to my right hon. Friend for his interruption, for it makes the point clearer. It is the original cost of construction, less depreciation, which may or may not have followed in the years which have intervened. There is another point to which my hon. and gallant Friend the Member for Newcastle East made some allusion. It is that the Government, for some reason best known to themselves—I am not concerned with it; there maybe so me very good reason—are differentiating between different classes of undertakers. There are three classes of undertakers—the local authorities, the Provisional Order companies, as they are known, and what are known as the power companies. As to the local authorities, the Government propose to indemnify them against their outstanding liabilities for interest and sinking fund is respect of the loans which they have raised, with an alternative to pay them— these are the terms of the Bill as it has reached the House from the Standing Committeethe cost of and incidental to the construction of the generating station or main transmission line and the acquisition of the site thereof, less depreciation, with a farther sum in case a substantial part of the cost has been defrayed otherwise than by means of loans, or in exceptional cases where the calculation would work injustice, the case is then to be determined by the Electricity Commissioners. That is what is proposed to be done in regard to the local authorities. Next, see how the Provisional Order companies are to be treated. In their case the undertakers are only to get a sum— as may be certified by an auditor… appointed by the Electricity Commissioners— that is to say, by the purchasers— to have been the cost of the lands, buildings, works, materials, and plant suitable to and in actual use by the company, or person for the purposes of their unde[...]king … together with the amount of the expenses incurred as and incidental to the construction of the generating station or their transmission line, and the acquisition of the site thereof, less depreciation, but with the addition of a sum as compensation for any damage…due to the severance. I ask the House to observe, that there is to be an addition for damage due to severance. That item, however, is qualified by a reference to Sub-section (5), under which electricity is to be supplied on certain terms to the undertakers whose generating station has been purchased. The supposed allowance for severance is, there, fore, illusory, and means little or nothing in addition to the purchase price. It is also provided that the expenses incurred and the amount of depreciation is to be determined in accordance with regulations made by the Electricity Commissioners. That is, again, by the purchasers. A further appeal is to be admitted if it is shown to the satisfaction of the Board of Trade that that result works injustice. In supporting the Amendment, I contend for two main points: First, that there should not be this glaring difference of treatment as between the different classes of undertakers, but that tie same principle should be applied to all; and, secondly, that that principle should be in itself a fair and reasonably principle, and as nearly as possible in accord with the deliberate bargain which is embodied in the Act of 1888. This is very much more than a mere question of how the country is to obtain a larger and cheaper supply of electricity. It really raises the whole question of the good faith of Parliament, and it is for that reason that I desire that this Amendment should be pressed.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

Apparently tins Amendment is moved and seconded on two entirely different grounds, the second of which—that of the Seconder—is, at the most, only a very small portion of those motives which, apparently, actuated the Mover. If this Amendment be accepted, it would of necessity involve a recasting of a very large portion of this Bill. It could not be embodied without doing that. [HoN. MEMBERS: "No!"] Hon. Members are entitled to their opinion, and I am entitled to mine. With regard to the position generally, certainly the Seconder of the Amendment appears to be under an entire misapprehension. Ho says that the position contemplated by the Act of 1888, namely, the period of time when the local authorities are to take over the supply of electricity, has arisen. It is no such thing. This Bill does not take over the supply of electricity unless any particular undertaker requires it. This Bill does nothing more than to secure for the public such a control of electricity as will ensure against waste and will ensure as cheap and efficient a supply as is possible. There is no question of taking over the supply unless the authorities desire it.

Photo of Sir John Marriott Sir John Marriott , Oxford

This Amendment refers only to the generating stations.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

And it is for that very reason that I said this Amendment is argued under an entire misapprehension. There are three different kinds of undertakings with which we are concerned. There are the local authorities, who are no parties to the bargain of 1888. They are not purchasable. There are the power companies. They are not purchaseable under the Act of 1888. The distribution companies, the purchaseable companies known as the Provisional Order companies, are the third class. With regard to that class, as with regard to the others, there is no position at all comparable to that which was contemplated by the Act of 1888. The Act of 1888 contemplates the taking over of undertakings for the purposes of supply, the intention being that the supply of electricity would be taken away from private enterprise and taken over by the local authorities. That has not arisen at all. One of the main principles on which the Bill is founded is that as full use as possible should be made of private money and private enterprise. Provision is made in the Bill that where a generating station vests in a local authority, district board, or joint authority, the district board not only buys the station and pays for it, but is bound to provide the supplying company with the same amount of electricity at as cheap a price as it could have supplied it itself. So it is not a case of the distributing company's undertaking being taken over. It is not a case of the local authorities' undertaking being taken over. They have taken over that portion of it which supplies them with that which they sold, and, after all, the profits of the distributing company are maintained in the distribution.

Photo of Sir John Marriott Sir John Marriott , Oxford

That is the question.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

Assuming that they get the electricity as cheaply from one source as from the other, the profits are maintained.

Major BARNES:

I have an Amendment down later, consequential to this, to leave out that Sub-section.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

Very likely, but I sincerely trust that the House will not accept that Amendment any more than this. At any rate, I am entitled to argue this Amendment on the supposition that that Sub-section will remain.

Photo of Mr George Balfour Mr George Balfour , Hampstead

Can the right hon. Gentleman show me anywhere in the Bill where the whole supply of electricity will be given at the price at which it can be generated by the company?

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

The whole supply which they supply out of their existing stations which are taken, or anything which they have in contemplation and are about to carry out. For the future there can be no extension for construction except with the consent of the Electricity Commissioners.

Photo of Mr George Balfour Mr George Balfour , Hampstead

An electricity undertaking may have spent large sums of money on its distribution service looking to the future, when it would have a very big generating station, and it is only going to receive the quantity of electricity which it is able to generate in a very small generating station, and it may have to pay an unlimited price for the balance of its electricity under the Bill.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

That has nothing whatever to do with this Clause, because the Bill proposes that with regard to every class of contributor and every class of person who supplies electricity any future construction or extension can only be with the consent and on the conditions of the Electricity Commissioners, and the price that is paid for the generating stations now is not affected in the least by that provision. Moreover, if there is something which they are contemplating and preparing for, they get the benefit of that under the Bill. That is a very material difference.

Photo of Mr Edward Carson Mr Edward Carson , Belfast Duncairn

Is it not a fact that ii a large expenditure has been made for distribution in view of an increase of generation in the future, by taking over the generating power, the expenditure on the increased distribution is lost, and is that provided for in the Bill?

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

It is provided for in this way, that where an undertaker sees that he will not be left in a good financial position he can insist upon being taken over upon totally different terms.

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

Is that on the terms of the Act of 1883?

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

No. If they come to the conclusion that they are prejudiced, they can insist upon the whole concern being taken over, and if they come to the conclusion that they probably will be able to get the whole supply cheaper than they could have got it otherwise, they will hold on and take their profits. But this is not a question of taking over under the Act of 1888 at all. No such situation has arisen. No breach whatever of that Parliamentary bargain is contained in this Clause. It is only taking over the portion by which they supply themselves with a commodity which they intend to sell, and provision is made for supplying them with it as fully and cheaply as they could do themselves. It really is inaccurate to describe that as any such state of circumstances as was contemplated by the Act of 1888. With regard to the general Amendment, that it should be under the Clauses of the Land Acquisition Act, it is quite impossible that that should be accepted, ft is perfectly clear, in the circumstances in which this Bill is brought in, that you cannot treat all three classes of electricity undertakings alike. It would be most unfair to the power companies, which have no termination to their period of existence, to treat them on the same footing as the purchasable distributing companies. The purchasable companies know that at the end of a certain period they are liable to be taken over. The power companies know perfectly well that they are not. Therefore, we are bound in taking over their whole undertaking to make very different terms from those of a purchasable company, and that is why, in the terms which are afterwards provided, they would be taken over as a going concern. Equally, the local authorities, who are not profit-making companies, who have not invested money for purposes of profit, can be put into the position of distributing other people's instead of their own generated electricity without the necessity of giving them the term which a company originally composed of persons who intended to make a profit, ought to get. You cannot treat them all alike, and if the Amendment were passed it would mean that you would have to treat them all alike. You would have to recast the whole Bill, and you would have to do away entirely with Sub-section (5) which provides for giving the undertakers electricity as cheaply and efficiently as they could have got it. The hon. Member (Mr. Marriott) said we wanted a fair and reasonable principle. I am satisfied that we have got it, and I believe the large majority of those who speak on behalf of the purchasable companies are satisfied that it is as near as you can get to fairness and equity m a complicated matter of this description. Therefore I ask the House not to accept the Amendment, which is not moved or seconded by anyone who has any real personal connection with the industry. I know the House will listen with great care to an Amendment moved by lion. Members who have given as much attention to the subject as they have, but in spite of that I ask the House to realise what the position is and therefore to reject the Amendment.

5.0 P.M.

Photo of Mr George Balfour Mr George Balfour , Hampstead

It seems to be a grievance on the part of the Home Secretary that this Amendment is not moved or seconded by anyone having a direct interest in the electrical industry. In supporting the Amendment I shall not be held guilty of that. I wish to put forward an additional and in my view a very much stronger reason than has yet been urged why this Clause should be very substantially amended, namely, to save the State from undesirable purchases under Clauses 12 and 13. The Bill was first presented with the intention of setting up district boards so as to control the central generating stations, so that the State should be able to control the main supply of electricity. But at that time there was nothing contemplated as to the ownership of the distribution services. This has crept in solely owing to a great dispute in Committee as to the fair method of acquiring generating stations, and Clauses 12 and 13 ultimately had added to them provisions so as to compensate for any injustice which might be put upon the undertakers under the unfair provisions of purchase under Clause 7. It is in the interests of the country that the provisions under Clause 7 should be made absolutely fair and equitable so that the State when it purchases the generating stations will not be faced with a large number of undertakers all over the country coming forward and saying, "You have taken my generating station under Clause 7. The terms of purchase are such that I cannot face my shareholders, or my ratepayers in the case of local authorities, and therefore I must ask you under Clause 12 or 13, as the case may be, to come and purchase my undertaking outright, and to relieve me of the loss I should suffer if you purchased my generating station only." I am sure the country at large will regret for all time if they force people, in order to protect themselves against an injustice under Clause 7, to purchase the whole of the distribution services. That would mean that the State would be responsible, in the large towns and cities and urban Areas, for a huge organisation in carrying out all the small details of this provision, and I am sure we have sufficient experience of the great difficulty of running a concisely organised public Department without converting the whole electricity supply of the country into a huge State controlled concern. I support the views of my hon. and gallant Friend, although I do not think this is the most desirable way of giving effect to what he desires. There is a much larger issue involved which means letting the State get control of the central generating stations, under which they are compelled to take over the minor municipal services of the country. For these, reasons I support the Amendment.

Photo of Mr Arthur Neal Mr Arthur Neal , Sheffield, Hillsborough

With some of the sentiments which have been expressed by the hon. and gallant Member who moved this Amendment and the hon. Member who seconded it hon. Members will find themselves in complete agreement, it is unthinkable that this House should desire to break faith with any persons who have invested money upon the strength of the Statute. It is quite true that the Act of 1888 was passed expressly for the purpose of stimulating the advance of private enterprise in electricity, which was not being sufficiently developed under the Act of 1882. Therefore, it becomes necessary for us to carefully consider whether there is any foundation for the charge which is being made that there is some breach of that Parliamentary bargain or of that inducement to the public. Those who affirm that, do so because of an incomplete appreciation of the precise state of affairs. What does this Statute that we are now considering desire to do? It desires to establish a more complete system of electricity by popularly constituted bodies, controlled centrally by commissioners. It desires to do that in order that greater facilities may be given and electricity may be supplied in greater quantities and more generally and more cheaply. We should buy cheapness too dear if we were to break faith. So far we are agreed. Are we breaking faith? What is the position as propounded by those of us who think that the Bill has now reached the balance of fairness and equity? The first thing to be considered is whether the Board should be set up at all. In each locality the parties concerned, the companies and the municipalities, arid everyone else, will have their chance of entering into a friendly partnership in which there will be no vesting of property, no taking over, no acquiring of the generating stations or of the main transmission line. If it is found impracticable to come to that arrangement, then there arises the statutory bargain, not a strict expropriation of property. It would be more accurate to say that the property is brought into the partnership. It is in one sense expropriation pro tanto, but not complete That is to say, people whose property is being taken into the partnership still have their definite rights. One of the lights secured is that they are to be supplied under the district electricity board with as large a quantity of electricity as they can produce from their present station or any which they had in reasonable contemplation. They are treated preferentially to that extent. Another right is, that they may maintain the whole of their distributing system. It is obvious, perfectly axiomatic, that no one makes a profit out of manufacture, per se. To go on manufacturing and storing is simply to accumulate stock which is consuming capital and not producing revenue. It is only when you turn your manufacturers' goods into marketable commodities and realise them that you begin to get your profits, and each one of these undertakers, municipal or company, are to be given all their rights of distribution and all their rights, therefore, of making profits. No one in this House is more pleased than the hon. Member for Hampstead (Mr. Balfour) to think that the companies in which he is interested will be relieved by this Bill of the necessity of financing themselves in this very troubled period

Photo of Mr George Balfour Mr George Balfour , Hampstead

I must interrupt the hon. Member when he endeavours to interpret my views in the matter. I only want the undertaker to be left in possession of his generating station or supplied with all his electricity. The undertaker would prefer all his electricity from his own station.

Photo of Mr Arthur Neal Mr Arthur Neal , Sheffield, Hillsborough

Then I withdraw my remarks referring to my hon. Friend and make them perfectly impersonal, and say that the ordinary business man will be delighted to be relieved from the intense difficulty of raising capital, which is almost impossible, and buying machinery and plant which is unobtainable, to extend his business, and to hand over these difficulties to someone else to deal with, whilehegets a guaranteed supply of the commodity which he has to sell equal to anything which he can produce himself,

Photo of Mr George Balfour Mr George Balfour , Hampstead

But not at the same price.

Photo of Mr Arthur Neal Mr Arthur Neal , Sheffield, Hillsborough

At the price at which he is able to establish he could have produced it himself. Not at to-day's price, of course, but at the price—it is in black and white in the Bill—at which he can produce it 'himself He is going to have the whole of his supply, present and contemplated, guaranteed to him on terms no worse than he could produce it himself. That is in the Bill. My hon. Friend disagrees, but it is very plain in the Bill. What is being taken from him? There is going to be taken from him his generating station and his main transmission line, but the whole of the revenue side of his account is untouched. The whole of the money he would receive for the sale of electricity without this Bill will come into his revenue and appear on his trading accounts. The only thing that disappears from his business is the manufacturing side of the business, in which he becomes not the sole proprietor, but a partner. Where the grievance is I do not understand. This view is countered by saying, "Look at the Act of 1888." If ever there was a case to which there was a complete misuse of a statute it is this one, and I very much doubt if any hon. and learned Member who belongs to my profession would read the Statute, of 1888 in the sense in which it has been interpreted up to now in this Mouse. The Act of 1888 was a restrictive Act upon the companies. The companies, all credit to them, had set up supplying electricity as pioneers. In the 1882 Act they had a term of twenty-one years given to them in which to carry on. They said, "We find that term is too short. We cannot carry on. You are strangling enterprise by limiting us to twenty-one years. Make it forty-two years. Give us a guarantee that you will not take hold of us under forty-two years; not a guarantee that you will buy us up at the end of forty-two years, and we are content to be under the obligation to be bought up fit the end of forty-two years. If you do buy us up at the end of forty-two years, the terms upon which you will acquire us are set down in the Statute. You will acquire us without paying for any goodwill. We know that. Hut if your districts do not coincide with our districts, and you have to take part of our undertakings—geographically, because that is clearly the meaning of the Section—and not the whole of our districts, then in that case you will pay us for the part which you take, with damages for severance." That was the obligation put upon the company. It is now sought to be brought into play as if it were something put into the Statute for the benefit of the company. It was notning of the kind. That was a Statute to take over the whole of their undertakings, including their sources of revenue. This Bill does nothing of the kind.

I have tried to make it plain that this Bill leaves the sources of revenue absolutely untouched, and there is no ground at all for craving in aid the 1888 Act as if that had any relationship to the circumstances which have arisen now. These arguments were put before the Committee, and. after Clause 7 was passed in its present form, it seemed from the communications which came to us to appeal to the persons interested as being fair and reasonable. Certainly there was no complaint from the municipalities, for whom I am entitled to speak with some little authority, and there was no complaint which was audible at the time from the companies. What they did say was this: "It is true that we are allowed to keep our distributing portion, and we shall have a chance of making a profit; but perhaps we shall not be allowed to keep our distribution. Perhaps we shall find under a new state of things that we had better go out of business altogether, and we want you to give an undertaking in this Bill that if a company finds it desirable to go out of business, you will buy up the rest of its undertaking." A totally different consideration comes into play then. If you are going to put these companies out of existence you must guarantee to them, in order to keep faith with them, favourable terms when they go out of existence. These terms are embodied in Clauses 12 and 13 of the Bill, and they are not less favourable than the terms of the 1888 Act, but more favourable. The true time to discuss these terms in detail will be when we come to those Clauses, and it would be trespassing on the time of the House if I were to deal with them now. They seek to apply, and I hope successfully, a new mode of assessing the sum to be paid to the company which shall give them terms more favourable than the 1888 Act. Further than that I do not propose to say anythingnowaboutClausesl2and 13. I do trust that we have heard the last of the suggestion that the Government, or the members of the Committee which devoted a great deal of care to this Bill upstairs, would willingly be parties to a breach of any bargain with the public or of any inducement held out to the public to invest its money. The main object of this Act must be the supply of cheap and abundant electricity. These very companies and municipalities are the persons who will benefit under this Section if this object is attained, but if that object is made impossible by putting upon the boards, before they come into existence, a burden which they cannot bear, the companies and the municipalities would be the first to suffer. The effect of this Amendment on the electricity companies would be to give statutory sanction to profiteering of the worst possible kind. The public would be bound to take over these stations and plant, not at what they cost, but at present-day value, possibly throe times what they cost. In other words, we should be asked to put an incubus upon the development of electricity to give this profit to these companies. I do not think that in their better moments hon. Members would ask us to do that, and I am quite sure that that was not their object in moving this Amendment.

Photo of Mr Ronald McNeill Mr Ronald McNeill , Canterbury

I rather regret that the interesting speech of the hon. Member was brought to an end by the use of that overwrought word "profiteering." The Home Secretary will think that I have no right to form or to express an opinion upon this Bill because I have absolutely no personal interest in these electrical businesses.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

That should fit you to express an opinion.

Photo of Mr Ronald McNeill Mr Ronald McNeill , Canterbury

I heard my right hon. Friend express the new Parliamentary doctrine that unless there was partiality on the part of hon. Members addressing this House they spoke without weight.

Photo of Mr Ronald McNeill Mr Ronald McNeill , Canterbury

Like many others, I am handicapped by the fact that I was not on the Grand Committee which considered this Bill and had not the advantage of hearing the detailed discussions that took place, and I can only approach the consideration of this matter by reading the Bill and listening to the speeches delivered in support of those Amendments and by the Government against them. On looking at this Amendment I am bound to say that I thought that on the whole it was a fair one which I should support, but I was a great deal impressed by the speech of the hon. Member for Oxford, and I listened with interest to see how that speech I was dealt with by the representative of the Government, but I have come to the conclusion that neither the right hon. Gentleman nor the hon. Gentleman opposite has succeeded in showing that this Bill as it stands would riot be a very serious breach of faith. The hon. Gentleman (Mr. Neal), in a very learned discourse, has endeavoured to show us that the Act of 1888 really does not concern us and that, this Bill does not upset what was done at that time; but this point appeared to me to be left out of account, both by the Home Secretary and the hon. Member. The Act of 1888 gave a period of forty-two years of uninterrupted enterprise. I agree with the hon. Member that municipalities have not anything to complain of, but it is quite different with regard to companies. The capital was attracted to these companies by the assurance by Parliament that they would have forty-two years of uninterrupted development and would not be taken over by any public authority until the end of that period, and then would be taken over only on certain terms. The right hon. Gentleman said this is not taking them over. It is only supplying them with the raw material.

The hon. Gentleman opposite corroborated that argument and attempted to show that the revenue side of these companies would not be affected, but his argument was unsound on that point for this reason. These companies, during the forty-two years, were given the opportunity of any amount of development. It was not a fixed amount of electricity supply that they were to give when the Act was passed; it contemplated uninterrupted and unlimited development for the whole forty-two years. Now they are taking over the obligation to supply them with their raw material, and to give them as good and as cheap a supply as they require at the present moment. They do not take into account the very much larger supply which those companies might be re-acquiring ten or fifteen years hence if the original bargain of 1888 was maintained, and they were allowed that unlimited development. Consequently, I think that the right hon. Gentleman and the hon. Gentleman have quite failed to show that these companies will not be unfairly dealt with, and that there will not be a very serious breach of faith with them if this Bill becomes law in its present form. Therefore, I think for the reasons given by the hon. and learned Member for Oxford it is incumbent upon this Parliament to have regard to what was done by its predecessors. Otherwise a very serious blow would be struck at good faith in Parliamentary legislation on which public credit depends. Public credit is not merely cencerned with Government funds. It is the confidence which the investigating public has that when Parliament, in its wisdom, adopts a certain policy, that policy will be consistently carried out, and if by passing the Bill in its present form notice were given to the investing public that when legislation is passed laying down certain principles upon which capital is invited it is liable to be changed by a later Parliament which may think something else is better, and may pay no regard to the limitations laid down in the earlier Act, then that would be a very bad thing for the public credit of this country. If the hon. Gentleman goes into the Lobby in support of this Amendment I will support him.

Photo of Sir William Pearce Sir William Pearce , Stepney Limehouse

I would ask the Home Secretary does he not think that maintaining his point of view as to the standard price will tend towards the eventual purchase of the whole undertaking of the companies by the State? If the standard price is adopted it does seem on the face of it very hard that nothing is allowed for appreciation, because in these times there is an enormous amount of appreciation on every electrical plant in the country, and if a company having to submit to the Government terms finds itself in what it considers a hard position, I think that there will be an attempt under Clauses 12 and 13 to try to get back from the Government on the sale of the whole undertaking what it had lost under Clause 7. I am afraid that these Clauses, and the Bill itself may lead to the whole electrical development of the country being in the hands of the Electricity Commissioners, and eliminating the private companies altogether. I cannot think that that would be a good thing for the country, and I would like the right hon. Gentleman to consider the matter from the point of view of whether the terms of this Clause may not eventually lead to every private owner of these undertakings desiring to get rid of his whole undertaking, so that everything would be worked by the Electricity Commissioners.

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

Like my hon. Friend (Mr. McNeill) I have no interest, and I have never been interested, in any electrical companies. Neither had I the good fortune to be a member of the Committee, but I remember well what took place in 1882 and 1888. In 1882 the late Mr. Joseph Chamberlain introduced a meaure providing that at a certain date the electricity companies should revert to the municipalities. At that time there was an idea widely prevalent in the country that municipalities could do most things very cheaply, and there was a very marked tendency among municipalities to acquire certain undertakings—gas and water undertakings, and others of a similar character. Electricity was, however, supposed to be a rather speculative undertaking and the municipalities preferred that private enterprise should start it. At that time tramways were being taken over by the municipalities. They were taken over very cheaply, at the price of old iron, but many of the investing public and the shareholders in the tramways were not aware of this and were very startled when they found that their property was taken away from them at a very small price and, as a result, with a considerable loss of money. The consequence was the investing public refused to have anything to do with electrical undertakings. That went on for six years, until 1888, when electricity had developed further and it became essential that something should be done, the Act of 1888 was passed. I remember it perfectly well; I was in business in the City at the time. The people investing in electricity companies were told they were going to get a clear run for forty-two years and that at the end of that time there was an option, not in favour of the companies, as the hon. Gentleman opposite said, but in favour of the municipalities or of the Government to buy if they chose on certain terms. It never was contemplated that before the last of the forty-two years the Government would come in and take part of the undertaking. I think that the Home Secretary admits that, and the hon. Gentleman certainly did admit it, but he says that they are not damnified because they are going to receive as cheaply as they can get at the present moment the electricity, not the electricity which they may get during the next ten or fifteen years which have to run before the forty-two years are up, but the electricity they are getting at the present moment. That is, their chance of development taken from them. As far as I understand it, there is nothing in the Bill to provide that if they extend their distributing they should get a further quantity of electricity.

Photo of Mr Arthur Neal Mr Arthur Neal , Sheffield, Hillsborough

They then get their share in the partnership, of which they are members.

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

There was nothing in the 1888 Act about going into partnership, and this House has no right, having entered into a bargain on the faith of which people invested their money, to come down here, even if it is in the interests of cheapness—I do not believe it is, I believe that the reverse will take place, and that we shall have dearer and worse electricity—this House has no right to say, after that bargain has been made, "We are going to force you into a partnership." Of course, if the companies say that they are willing to agree to the Bill and are willing to enter into co-partnership, that is a different thing altogether. As far as I know that has not been done, certainly not by the majority of the companies. There is another point, and I am sorry the Chancellor of the Exchequer is not here, nor the Prime Minister, nor the Leader of the House, because the point is a very important one. We want to borrow money. It is absolutely essential that we should be able to go to the public, and say, "We want more of your money for the State." We have large loans to raise, certainly a £1,000,000,000 we shall have to raise in a short time. Is it a good thing to let the investor think that because certain portions of the State may get a little advantage you shall break faith with people who have invested their money on a Parliamentary security? Is it not likely that the people will say "No, if you do this thing with companies who have invested their money you will do the same thing with the securities of the State. If you break one bargain you will break another?" I venture to say that as the State is now in need of money nothing could be more fatal than to encourage the idea amongst the investing class that this House is careless of bargains it has entered into.

Photo of Mr Archibald Williamson Mr Archibald Williamson , Moray and Nairnshire

I think we have heard, in rather exaggerated language, about the breaking of bargains with the investor. My own feeling is that the investor is really getting the better of the bargain and not the country. The interests of the country are the superior interests; they are not the interests of the comparatively few shareholders. A good deal has been said about a loss being made. It seems to me it is rather a profit missed which is suggested.

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

I did not make myself clear. I am not speaking—I have no right to speak—for the companies, in which I am not interested. I do not care whether it is a loss made or a profit missed, but I do know that Parliament entered into a bargain with the shareholders, and that without the consent of the shareholders Parliament has no right to break it.

Photo of Mr Archibald Williamson Mr Archibald Williamson , Moray and Nairnshire

I do not think the interposition carries us much further. As a matter of fact, the shareholders in these companies are likely to be better off because of the bargain now proposed with the State. There is going to be a great development of demand for their commodity, and in order that they should supply that commodity what have they to do? They have to acquire sites and machinery and to erect that machinery at a cost two or three times what their present machinery probably cost. It is not a very cheerful prospect for them. It seems to me that the State steps in now with a proposal which is not only advantageous to the general interest of the country, but distinctly advantageous to the shareholder. "Compensation" is the Amendment. What would that mean? It would mean taking over these generating stations, not at the price they cost, less depreciation. That the Committee thought would be a fair proposal, not having in view a sectional interest, but the general interest of the State. The proposal is that there should be "compensation." In other words, these generating stations will be taken over at a price which is perhaps two or three times what they cost. Let the House observe what would be the result of the arrangement on the cost of the electricity which the new authority would have to sell. In every case the price would have to be raised immediately. Surely that would nullify the whole purpose of the Bill. If this Amendment were carried the Bill would not be worth printing. I think the Amendment is one which is directed to ruining the whole proposal. What are the arguments I have listened to for a long period of ten months? They are that you must acquire not only the municipal stations but the company stations at the lowest possible price consistent with justice, and if you give to these companies what their undertakings have cost them, and at the same time undertake to supply them with electricity at least as cheaply as they themselves can generate it, it seems to me that you are giving them an advantage and not a disadvantage, because it is to be assumed that by the union of all sources of supply and of consumption you will, or ought to, supply the whole country at a rate cheaper than the present price.

Photo of Mr Ronald McNeill Mr Ronald McNeill , Canterbury

The hon. Baronet (Sir A. Williamson) says that the proposals of the Bill are for the advantage of the shareholders. If that were so the shareholders would accept the terms of the Bill

Photo of Mr Archibald Williamson Mr Archibald Williamson , Moray and Nairnshire

Those individuals who came representing shareholders and those before the Committee over which I presided, had no complaint to make and no proposal to make at this time. This proposal has emerged only in Committee upstairs. No such proposal was put forward to our Committee. It was recognised by practically every witness who came before us that if we really desire to cheapen the price of supply we must not pay too much for the generating plants.

Sir F. HALL:

I have heard a good many principles this afternoon, new principles as far as I am concerned. I have learnt from the hon. Member for Hillsborough (Mr. Neal) that a, lawyer can read this Clause in a different way from anyone else. I intend to re-read it. An Amendment was brought up in Committee upstairs and it was to insert the words the then value as ascertained in accordance with the terms of Section 2 of the Electric Lighting Act of 1888, and in the manner that that Act provides, of the lands, buildings, works, materials, plant, etc. The price to be paid, which is subject to arbitration failing agreement, is the then value of the lands, buildings, works, materials and plant, suitable to and used for the purpose of the undertaking. And it added that "then value" is "to be deemed their fair market value at the time of purchase." I have not the advantage of legal training. I am perhaps one of those unfortunate people brought up to understand the rudiments of business in the City of London, and I say here and now that if we put a clause in a contract on these lines, and when the time came for redeeming the undertaking we were to turn round and say, "Look here, that is the meaning a lawyer can put on it. He can put a different meaning on that phraseology altogether"—I venture to say that if we did that, we should be charged with a complaint with which no business man likes to be charged, and that is the charge of being guilty of very sharp practice at the least. The Member for Elgin and Nairn (Sir A. Williamson) tells us that the shareholders are going to get an advantage by this. I am not here to say whether they are going to get an advantage or disadvantage; all I am here for is to ask the House to maintain the terms of the bargain entered into in 1888. When we were in Committee upstairs my hon. Friend the Parliamentary Secretary (Mr. Bridgeman) listened to the arguments put forward on the Amendment I have read, and his words were: Though I am not quite certain that the wording of the Amendment would meet the view of the Government, I am prepared to give, a general undertaking that the Amendment will receive our support. We ask now that the undertaking given in the Committee Room shall be redeemed on the floor of this House. We have heard a good many arguments with reference to Parliamentary bargains. The right hon. Baronet the Member for the Oity of London (Sir F. Banbury) is very likely correct in drawing attention to the fact that large sums of money would be required, and that if Parliament, having entered into an arrangement, now went back on that arrangement, it would very likely be found that the Government's appeal for money would not receive that ready response from the investing public that it has had in the past. We want to co-operate with and to strengthen the hands of those who have placed their money in certain undertakings on an agreement entered into by Parliament. We do not want to come here and say, "Oh, this Clause can be read in a different manner." We want to take the actual meaning as it is understood. The Home Secretary is very astute in bringing forth arguments which suit him. I challenge him here and now to tell me how anyone could be expected to interpret the meaning of this Clause in a different way from that I have suggested. If my right hon. Friend accepts the Amendment, I think there is going to be a very large saving of time on the Report stage. If not, I am afraid we shall have a great many Amendments on this question on the purchase price, because we do not intend, if we can possibly help it, to allow the Government to upset the terms that were entered into thirty-five years ago, and which were considered reasonable at the time for the investing public to receive. Speeches have been made this afternoon on the assumption that the Provisional Order companies

practically said, "Please relieve us of our undertakings," but the position is nothing of the kind. The undertakers are quite prepared to continue their bargain until the expiration of the forty-two years. This is the first time I have seen any Bill to upset an arrangement entered into by our predecessors in the House of Commons, and it is going to be a bad day when we start on such a proceeding. I hope that the Home Secretary will come to the conclusion that the obligations that were entered into should not be upset.

Photo of Mr George Bowyer Mr George Bowyer , Buckingham

In many of the speeches this afternoon the question as to a breach of a Parliamentary bargain has formed a large part and perhaps the substratum. If we go to a Division I understand that as the Question will be put, the whole principle of standard prices or compensation will be determined, and the compensation to be paid not only to the Provisional Order companies, but to the power companies and municipalities as well. The parties to the 1888 Act were the Provisional Order companies and Parliament. The power companies and the municipalities were not, as the Home Secretary told us, concerned. The only breach of any Parliamentary bargain surely is between Parliament and the Provisional Order companies. Is not the question, therefore, between the Provisional Order companies and Parliament, and should we not in a Division be dividing on a question referring also to the power companies and the municipalities? Perhaps the Home Secretary would say whether or not he would accept the principle of this Amendment as regards the Provisional Order companies, and in the alternative, whether he would be prepared to give them what they claim under the 1888 Act, namely, Section II. terms: that is, the fair market value, and thus keep a Parliamentary bargain.

Question put, "That the words proposed to be left out stand part of the Bill."

The House divided: Ayes, 204; Noes, 44.

Division No. 135.]AYES.[5.50 p.m.
Agg-Gardner, Sir James TynteBirchall, Major J. D.Buchanan, Lieut. -Colonel A. L. H.
Allen, Colonel William JamesBlades, Sir George R.Burdon, Col. Rowland
Baird, John LawrenceBlair, Major ReginaldBurn, T. H. (Belfast)
Barlow, Sir Montagu (Salford, s.)Blake, Sir Francis DouglasButcher, Sir J. G.
Barnett, Major Richard W.Borwick, Major G. O.Cairns, John
Barnstan, Major H.Boscawen, Sir Arthur Griffith-Cape, Tom
Beckett, Hon. GervaseBreese, Major C. E.Carr, W. T.
Bennett, T. J.Briant, F.Carter, R. A. D. (Manchester)
Bethell, Sir John HenryBridgeman, William CliveCayzer, Major H. R.
Chamberlain, Rt. Hn. J. A. (Birm, W.)Howard, Major S. G.Robinson, S. (Brecon and Radnor)
Chamberlain, N. (Birm., Ladywood)Hugnes, Spencer LeighRose, Frank H.
Cheyne, Sir William WatsonHunter, Gen. Sir A. (Lancaster)Rowlands, James
Coates, Major Sir Edward F.Illingworth, Rt. Hon. Albert H.Royce, William Stapleton
Cohen, Major J. B. B.Inskip, T. W. H.Samuel, A. M. (Farnham, Surrey)
Cowan, D. M. (Scottish University)Irving, DanSamuel, Right Hon. Sir H. (Norwood)
craig, Captain Charles C. (Antrim)Jephcott, A. R.Samuel, S. (Wandsworth, putney)
Craik, Rt. Hon. Sir HenryJesson, C.Sanders, Colonel Robert Arthur
Curzon, Commander ViscountJodrell, N. P.Sassoon, Sir Philip A. G. D.
Dalziel, Sir Davlson (Brixton)Johnstone, J.Seddon, James
Dalziel, Rt. Hon. Sir J. H. (Kirk'dy)Jones, Sir Edgar R. (Merthyr Tydvil)Seely. Maj.-General Rt. Hon. John
Davidson, Major-General Sir John H.Jones, Sir Evan (Pembroke)Shaw, Hon. A. (KiimarnocK)
Davies, M. Vaughan- (Cardigan)Jones, J. Towyn (Carmarthen)Shaw, Captain W. T. (For[...]ar)
Donald, T.Kellaway, Frederick GeorgeShort, A. (Wednesbury)
Doyle, N. GrattanKing, Commander DouglasShortt, Rt. Hon. E. (N'castle-on-T., W.)
Edge, Captain WilliamLaw, Rt. Hon. A. BonarSimm. M. T.
Edwards, C. (Bedwellty)Lewis, T. A. (Pontypridd, Glam.)Smith, W. (Wellingborough)
Edwards, Major J. (Aberavon)Lindsay, William ArthurSpoor, B. G.
Elliot, Captain W. E. (Lanark)Lloyd, George ButlerStanley, Col. Hon. G. (Preston)
Elliott, Lt.-Col. Sir G. (Islington, W.)Long, Rt. Hon. WalterStewart, Gershom
Entwistle, Major C. F.Lonsdale, James R.Strauss, Edward Anthony
Eyres-Monsell, Commander- B. M.Lorden, John WilliamSturrock, J. Leng-
Falcon, Captain M.Loseby, Captain C. E.Sugden, Lieut. W. H.
Fell, Sir ArthurM'Donald, Dr. B. F. P. (Wallasey)Surtees, Brig. -General H. C.
Finney, SamuelMacdonald, Rt. Hon. J. M. (Stirling)Talbot, G A. (Hemel Hempstead)
Fisher, Rt. Hon. Herbert A. L.M'Guffiin, SamuelThomas, Rt. Hon. J. H. (Derby)
FitzRoy, Captain Hon. Edward A.M'Lean, Lt.-Col. C. W. W. (Brigg)Thomson, F. C. (Aberdeen, S.)
Flannery, Sir J. FortescueMacmaster, DonaldThomson. T. (Middlesbrough, W.)
Forrest, W.McMicking, Major GilbertThorne. G. R. (Wolverhampton)
Galbraith, SamuelMacpherson, Rt. Hon. James l.Thorne. Colonel W. (Plaistow)
Ganzonl, Captain F. C.Mallalieu, Frederick WilliamTickler, Thomas George
Gardner, E. (Berks, Windsor)Martin, A. E.Tootill, Robert
Geddes, Rt. Hon. sir A. C. (Basingstoke)Mitchell, William Lane-Tryon, Major George Clement
Gibbs, Colonel George AbrahamMoore-Brabazon, Lieut. -Col. J. T. C.Vickers, D.
Gilmour, Lieut. Colonel JohnMurchison, C. K.Waddington, R.
Glanville, Harold JamesMurray, Dr. D. (Western Isles)Wallace, J.
Glyn, Major R.Murray, Hon. G. (St. Rollox)Ward, Col. J. (Stoke, Trent)
Graham, W. (Edinburgh)Murray, William (Dumfries)Ward, Colonel L. (Kingston-upon-Hull)
Green J. F. (Leicester)Nall, Major JosephWard, W. Dudley (Southampton)
Greenwood, Col. Sir HamarNeal, ArthurWardle, George J.
Greig, Colonel James WilliamNewman, Sir R. H. S. D. (Exeter)Waterson, A. E.
Griggs, Sir PeterNicholson, R. (Doncaster)Wedgwood, Colonel Josiah C.
Grundy, T. W.Nicholson, W. (Petersfield)Weigall, Lt.-Colonel W. E. G. A.
Guest, Maj. Hon. O. (Leic., Loughboro')Norton-Griffiths, Lt.-Col. Sir J.White, Charles F. (Derby, W.)
Hacking, Colonel D. H.Oman, C. W. C.Whitla, Sir William
Hall. F. (Yorks, Normanton)O'Neill, Captain Hon. Robert W. H.Wilkie, Alexander
Hambro, Angus ValdemarPalmer, Major G. M. (Jarrow)Williams, A. (Consett, Durham)
Hanson, Sir CharlesParker, JamesWilliams, Lt.-Col. Sir R. (Banbury)
Hartshorn, V.Perkins, Walter FrankWilliamson, Rt. Hon. Sir Archibald
Hayward, Major EvanPerring, William GeorgeWilson, W. T. (Westhoughton)
Henderson, Rt. Hon. ArthurPhilipps, Gen. Sir 1. (Southampton)Wolmer, Viscount
Hennessy, Major G.Philipps, Sir O. C. (Chester)Wood, Major S. Hill- (High Peak)
Herbert, Denniss (Hertford)Pinkham, Lieut.-Colonel CharlesYate, Colonel Charles Edward
Hewart, Rt. Hon. sir GordonPollock, Sir Ernest MurrayYoung, Lt.-Com. E. H. (Norwich)
Hilder, Lieut-Colonel F.Pownall, Limit. -Colonel AsshetonYoung, Robert (Newton, Lancs.)
Hinds, JohnPulley, Charles ThorntonYoung. William (Perth and Kinross)
Hirst, G. H.Ramsden, G. T.Younger, Sir George
Hoare, Lt.-Col. Sir Samuel J. G.Roberts, F. O. (W. Bromwich)
Hohier, Gerald FitzroyRoberts. Sir S. (Sheffield, Ecclesall)TELLERS FOR THE AYES.- Captain
Holmes, J. StanleyRobertson, J.F. Guest and Lord E. Talbot.
NOES.
Balfour, George (Hampstead)Gould, J. C.Pearce, Sir William
Banbury, Rt. Hon. Sir FrederickGoulding, Rt. Hon. Sir E. A.Peel, Col. Hon. S. (Uxbridge, Mddx.)
Banner, Sir J. S. Harmood-Grant, James AugustusRaeburn, Sir William
Benn, Com. Ian Hamilton (Greenwich)Hall, Lieut.-Col. Sir Fred. (Dulwich)Rees, Captain Tudor (Barnstaple)
Bowyer, Captain G. W. E.Hogge, J. M.Remnant, Colonel Sir James
Bull, Rt. Hon. Sir William JamesHopkins, J. W. W.Richardson, Alex. (Gravesend)
Campbell, J. G. D.Hurd, P. A.Roundell, Lt.-Colonel R. F.
Carson, Rt. Hon. Sir Edward H.Kenworthy. Lieut. -CommanderScott, Leslie (Liverpool, Exchange)
Cecil, Rt. Hon. Evelyn (Aston Manor)Kinloch-Cooke, Sir ClementTerrell, G. (Chippenham, Wilts)
Cecil, Rt. Hon. Lord R. (Hitchin)Lyle, C. E. Leonard (Stratford)Thomson, Sir W. Mitchell- (M'yhl)
Chadwick, R. BurtonMcNeill, Ronald (Canterbury)Williams, Lt.-Com. C. (Tavistock)
Colvin, Brig. -General R. B.Mildmay, Col. Rt. Hon. Francis B.Wood, Major Hon. E. (Ripon)
Davison, Sir W. H. (Kensington)Moore, Major- General Sir Newton J.
Du Pre, Colonel W. B.Newman, Major J. (Finchley, M'ddx.)TELLERS FOR THE NOES— Major
Elveden, ViscountNicholl, Com. Sir EdwardBarnes and Mr. Marriott.
Falle, Major Sir Bertram GodfrayOrmsby-Gore, Hon. William

Question put, and agreed to.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

I beg to move, to leave out the words Where the generating station of any company is vested in or acquired by a district elec- tricity board under this Act, and the company has created and issued mortgages, debentures, or debenture stock, whether irredeemable or not, charged upon such generating station, it shall be lawful for the company to give notice to the Holders of such mortgages, debentures, or debenture stock to repay the same in whole or in part out of the proceeds of such sale no withstanding anything contained in the mortgage or the debentures or debenture stock trust deed, but in the case of debentures and debenture stock at the rate at which the debentures or debenture stock could be paid off in the event of the winding up of the company:Provided always that the cost which an auditor appointed by the Electricity Commissioners certifies to have been necessarily incurred in obtaining the release of any mortgage or other charge shall be borne and paid by the district electricity board. I explained to the House that this is moved simply in order to move in the same words again at a more convenient place.

Amendment agreed to.

Further Amendment made: In Sub section (2, a), leave out the word "be" ["shall be one or more"], and insert instead thereof the words" at the option of the local authority be either (1)."—[Mr. shortt.]

6.0 P.M.

Photo of Mr William Graham Mr William Graham , Edinburgh Central

I beg to move, in Sub-section (2,a), after the word "outstanding," to insert the words Provided always that in computing such annuity, or annuities, no account shall be taken of any reserve fund belonging to the local authority. In the Committee stage there was some discussion with reference to the position of the reserve funds of municipal authorities established in connection with electrical undertakings, and we then received an assurance from the Parliamentary Secretary to the Home Department that more definite information on the subject would be forthcoming on the Report stage. Broadly the position of the Clause which we are now discussing amounts to this, that under it the municipal authorities have the choice of receiving an annuity or annuities in respect of their outstanding obligations in interest and sinking fund charges, or, if they so elect, they may receive payment on the basis of cost, less depreciation. At the moment we are concerned with the position of the payment of the annuity. A small number of the municipal authorities in Scotland and elsewhere have built up reserve funds in connection with their electrical undertakings, and the point which I desire to press specially upon the attention of the right hon. Gentleman is this, that as we understand the position there was no statutory obligation at all to establish such reserve funds. They were established for the purpose of dealing with any contingency which arose in running the electrical undertaking or in handling any exceptional or unexpected situation or difficulty which might emerge, and as there was no statutory obligation to build up the reserve fund, it is quite clear that they were first of all the result of the goodwill, the voluntary act of the municipal authorities, and they were built up by a sacrifice on the part of the consumers of electrical energy or light in getting that light and power at a rather higher charge, and perhaps also by being deprived of the application of this money to any local or other purpose to which it might properly have been applied.

We consider that it would be altogether unfair if in reckoning the annuity or annuities under this Clause these reserve funds were taken into account, partly because there was no statutory obligation to build them up, and partly because they represent a sacrifice on the part of the people of the district which, in point of fact, need never have been made at all. I should be the last in this House, I hope, to plead specially the interests of any particular district, but in Committee we pointed out, taking our own undertaking in the city of Edinburgh as an example, that we had accumulated there a reserve fund of, approximately, £100,000, and in the event of the transfer of that undertaking to a district electricity board I gathered that that reserve fund would fall to be taken into account in computing these annuities. In Committee the Parliamentary Secretary indicated that that was not the case, but, unfortunately, for some of us, the position was never entirely cleared up, and we had to found our argument on the Report of the Committee over which the right hon. Member for Moray and Nairn (Sir A. Williamson) presided, and, unless I have misunderstood the Report of that Committee, it indicated that reserve funds were to be taken into account; and the theory which we adopted after that was that any Regulations which were framed for the transfer of these undertakings would be based on the Report of this Committee, and that the reserve funds would, of course, receive attention. I trust the Home Secretary will be able to make it clear that these reserve funds are to be excluded. It may be asked that if the generating stations and the main transmission lines are transferred to the district electricity board, what does there remain to do with any reserve fund which may have been accumulated? But I presume that the local authority or the municipal undertaking would still have large duties in distribution, and there is no doubt they would find plenty of uses for the product of what I rightly call the sacrifice of the community and of the consumers in this connection. On these grounds I beg to move my Amendment.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

I think my hon. Friend may rest assured that these words are entirely unnecessary. The reserve fund is provided for by Section 7, I think it is, of the Companies Act of 1899, and that pro-vides that there may be a reserve fund amounting to 10 per cent, of the total capital. The fact of that reserve fund does not in any way alter the liabilities of the local authority for interest and sinking fund charges in respect of such sums borrowed for the purpose of providing the generating station or main transmission line as are at the date of the transfer outstanding. The fact that you have a reserve fund does not mean that your liabilities outstanding are any the less. They may be met by the reserve fund, if you like, but they are still the same, whether the reserve fund is there or not, and that is all that this provides for. Therefore, the reserve fund would not be touched in any way by the provisions of this Bill.

Amendment negatived.

Amendments made: In Sub-section (2, a) leave out the words Provided that in lieu of such annuity or annuities a local authority shall be entitled, if it shall so elect, to be paid such sum as may, in default of agreement, be determined by an arbitrator appointed by the Board of Trade to have been the cost of and incidental to the construction of the generating station or main transmission line and the acquisition of the site thereof, less depreciation; and insert instead thereof the words or(ii) a capital sum calculated in like manner and on the like principles as the standard price in the case of a company. Leave out the words "further that if in any case," and insert instead thereof the words "that if in a case where the first alternative is adopted."—[Mr. Shortt.]

Photo of Sir John Marriott Sir John Marriott , Oxford

I beg to move, in Sub-section (2, b), to leave out the words "certified by an auditor, after hearing the parties interested, appointed by the Electricity Commissioners," and to insert instead thereof the words "determined by an arbitrator appointed by the Board of Trade." The whole point is this: So far as the discussion on this Clause has proceeded, the Home Secretary, for the Government, has declined to accept Amendments which as some of us contend, would have gone some way towards giving those who are to be bought out the terms which were guaranteed to them, as we contend, under the Act of 1888. Now a further point arises. We are to be asked under this Clause, which refers to generating stations and main transmission lines belonging to a company or person, when arriving at the value of such stations or lines to accept the value put upon them by an auditor appointed by the purchaser. I submit that that is not a fair way of arriving at the value of anything which is to be taken over. An auditor is a servant appointed by the Electricity Commissioners, who in this case are the purchasers, to carry out their instructions, and I venture to submit that it would be a far fairer method of arriving at the value of the undertaking to substitute for an auditor who is the servant of the purchasers an arbitrator appointed or approved by the Board of Trade.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

May I first of all remove a misapprehension which my hon. Friend appears to be under? The Electricity Commissioners are not the purchasers; the electricity board or the joint authority, as the case may be, would be the purchasers. Again, it is not an arbitrator's work. It is a pure question of fact, which an auditor could perfectly well ascertain. In the case of local authorities, the auditor is in the same way appointed by the Electricity Commissioners, and nobody appears to have raised any objection to the case of the local authorities under this Clause being decided by an auditor appointed by the Electricity Commissioners. There is a provision lower in the Clause that, if it is shown to the satisfaction of the Board of Trade that the expenditure so to be taken into account or the amount of depreciation so determined would work injustice, that expenditure or amount shall, in default of agreement, be determined by an arbitrator appointed by the Board of Trade. I think that really does satisfy all that is necessary in this case.

Sir F. HALL:

I am not at all satisfied on this point. I think an arbitrator should be appointed. I can understand an auditor taking the books and saying, as regards the books, there are the figures that are shown. But this is a totally different matter. An arbitrator has to act in a sort of judicial matter and has to make himself thoroughly acquainted with the electrical undertakings. I can understand an auditor, a chartered accountant, doing excellent work as an auditor, but, in my opinion, he is not qualified to judge what is the proper amount that should be arranged in regard to undertakings of this magnitude. I think an arbitrator who is thoroughly well versed in the whole of electrical undertakings should be appointed, as it is only by that means that a proper and an equitable decision can be arrived at. I am sorry the Home Secretary has not viewed it from that point. However, perhaps on reconsideration a little later on, he may see the point I have ventured to put before him, because I am sure, or I believe, he is desirous of seeing that all parties are dealt with in an equitable manner, and why there should be any objection to an arbitrator being appointed I cannot understand.

Amendment negatived.

Photo of Sir John Marriott Sir John Marriott , Oxford

I beg to move, in Subsection (2, b), to leave out the words the lands, buildings, works, materials, and plant suitable to and in actual use by the company or person for the purposes of their undertaking which are vested in the district electricity board, together with the amount of the expenses incurred as… This Amendment is very closely connected with the last, but nevertheless stands on its own footing. I am merely proposing in the Amendment to make this paragraph read as the previous paragraph would have read. The words seem to me to be preferable. It is not very much more than a drafting Amendment, but it is a drafting Amendment of some importance.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

Really these words ought to be in, otherwise it is quite possible that there would have to be awarded payment for plant and machinery that had been scrapped. I am sure no one would wish that a company should be entitled to payment, not only for that which is in use, but should be entitled to be paid for that which they have scrapped as no longer of any value. I think the words cover all that is given in the proviso in the previous paragraph, "cost of, and incidental to, the construction of the generating station or main transmission, line." We have the same words and the same protection here. These words are necessary in order to ensure that only that portion of the plant which really is used by the company for the purposes of their undertaking should be appraised.

Photo of Mr Archibald Williamson Mr Archibald Williamson , Moray and Nairnshire

May I ask what the Home Secretary understands by the word "expenses," because there might be the case of a company which was formed with a considerable amount of promotion money, and there is interest? Are all those things included in the word "expenses"?

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

I do not understand that the words "expenses incurred as and in-incidental to the construction of the generating station or main transmission lines" cover such matters as that. I should not, of course, take that to include the cost of promoting a Bill, and things of that sort.

Photo of Sir John Marriott Sir John Marriott , Oxford

Might I ask the Home Secretary one question? Why is it that when he was dealing with the local authorities the Home Secretary accepted two principles—first, that the value in default of agreement should be determined by the arbitrator appointed by the Board of Trade? When I ask that the same principle should be applied in the case of the companies, it is denied to me. Again, in the case of local authorities he was prepared to take the words "cost of and incidental to the construction of the generating station." I am merely asking that these words should be also applied in the case of the companies. Why does the right hon. Gentleman propose on these two points to treat the companies differently from the local authorities?

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

The local authorities are taking first of all an annuity or annuities. Failing that, they can claim the cost of and the expenses incidental to the construction of the generating station, etc. This is a question for arbitration. With regard to the companies, they are to get "such sum as may be certified by an auditor" and is properly standing in their books for that purpose. It will be the cost of the lands and so on. If that works any injustice, they are then entitled to an appeal under the same treatment as local authorities, and to have an arbitrator appointed by the Board of Trade to decide the question.

Photo of Lord Robert Cecil Lord Robert Cecil , Hitchin

I do not quite follow what the answer of my right hon. Friend is to my hon. Friend (Mr. Marriott). It is said companies are to have the cost of the lands "suitable to and in actual use by the company," and therefore their position, so far as that is concerned, is confined to those lands. That does not appear to be applied to the local authority. So far as I can see, the local authority would be entitled to be paid for all the cost of the lands, even if not suitable to or in actual use. I do not quite follow why there should be a difference in the treatment.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

The first proviso was put in after discussion with the local authorities. They then asked to have an alternative payment. With regard to the companies not being treated on the same footing, they are in no way identical, of course. They were to get payment for only that portion of lands, buildings, works, etc., which they might have bought during their existence, and is still returnable as part of the going concern.

Photo of Mr George Balfour Mr George Balfour , Hampstead

The Home Secretary has stated that the words in connection with the local authority were put in after consultation with the local authorities. As a matter of fact, the words exactly as they appear in the Bill were written out by me, and handed in, and were incorporated in the Bill the next morning. I framed those words because I found the local authorities in a very great difficulty, as they were only to be paid out by an annuity or annuities, and I held, in common with local authorities, that they should be entitled to receive, if they so desired it, a cash sum, and so framed this proviso, which was adopted as a fair and an equitable settlement. That being so, I was very much surprised when we came to deal with the companies that different treatment should be meted out. I thought I was supporting a fair Clause, whether to the municipalities or to the companies, but I am afraid, unfortunately, some of my hon. Friends took rather a different view when it came to meting out justice to the companies. I certainly think the words proposed to be omitted from paragraph (b) should be omitted.

Amendment negatived.

Amendment made:

In Sub-section (2,b) leave out the words "in actual use" ["suitable to and in actual use by the company"], and insert instead thereof the word "used."—[Mr. Shortt.]

Photo of Mr George Balfour Mr George Balfour , Hampstead

I beg to move, in Sub-section (2, b), to leave out the words "in actual use" ["and in actual use by the company"], and to insert instead thereof the words "capable of being used."

If we are to be limited to the machinery which alone is used, and to bar all the machinery which is capable of being used, the conclusion will be obvious. I think probably the Home Secretary fully intended to cover machinery capable of being used, not limiting this Sub-section strictly to machinery which might at the particular moment be in use.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

I think the words in the Sub-section will cover not only the machinery which is in actual use, but any new machinery about to be used, but not actually in use at the moment. The words are taken from Section 2 of the Act of 1888, and cover everything, even though it may not be in actual use at the moment. We believe the words cover everything that can reasonably be included.

Amendment negatived.

Photo of Mr George Balfour Mr George Balfour , Hampstead

I beg to move, in Subsection (2,b), to leave out the words "less depreciation" ["the site thereof, less depreciation"], and to insert instead thereof the words "with an addition for appreciation or a deduction for depreciation."

I do not want to restate the case, which, perhaps, has been stated in an Amendment moved by my hon. and gallant Friend (Major Barnes), so I say that the object is to get rid of the hardship on a company incurred by taking over only the actual cost of the undertaking less depreciation. The actual cost is the pre-war cost, and the cost now is approximately three times the pre-war cost. In other words, £100 worth of plant in pre-war time will to-day cost approximately £300. If you take a literal depreciation from that £300 on an average it will give you something well in excess of £200. The pro- posal as contained in the Clause at present is to give the company simply £100, being the pre-war cost, less an unknown amount for depreciation—probably £60— for what cost £100 in pre-war days, and what is to-day, perhaps, worth £200. I admit the words are somewhat clumsy, but their effect would go some small way to do justice to the companies. I trust the Home Secretary will see his way to accept the Amendment.

Photo of Sir William Pearce Sir William Pearce , Stepney Limehouse

I would like to reinforce the argument of my hon. Friend by asking the House to consider not the transfer, say, from one public authority to another, but the transfer from private ownership to a public authority. I submit; that it will be creating a very serious precedent for the House to pass a Clause of this sort; where there is an enforced obligation to transfer to the public authority from the private individual or company, in which the cost does not represent the value. The case is one not very dissimilar to the acquisition of property, for instance, for public improvements in the shape of roads. It might be very well argued that a man, having paid £1,000 for a house required to be pulled down for the widening of a street, and its value now being three times more, that the public authority promoting a Bill in Parliament to acquire tin; land for the widening, would say that, naturally the man is entitled to the old and not the present value. On the other hand it would cost the man two or three times more to put up a new house. I think this is setting up, a very dangerous precedent. I do not believe the House as a whole really knows what it is actually doing. I should like again to point out that there is a great deal of difference in the transfer from one local authority to another and the present case. If you are going to take private property, or the property of a private company at one-third of its existing value, and insist that it shall be acquired by a new Government Department at the old value, you are setting up a very dangerous precedent which may go a very long way.

Photo of Sir John Marriott Sir John Marriott , Oxford

On a point of Order, Mr. Speaker. Supposing this Amendment is rejected, will it not put my own Amendment which follows out of order?

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

Yes. The Amendment of the hon. Gentleman raises the same point that we are now discussing, and there will probably be the same arguments.

Photo of Mr George Balfour Mr George Balfour , Hampstead

With great respect, Sir, I do not think I am dealing with the same point. The remedy I am putting forward is on similar lines to that proposed in the Amendment of my hon. and gallant Friend the Member for Newcastle. Quite a different remedy is proposed.

Sir F. HALL:

I think the Home Secretary in the Committee stage did not really intend that these words "less depreciation" should go in. I think the right hon. Gentleman recognised the purchase price, at all events, ought to have been on the terms referred to in another Sub-section. By some mistake, however, these words have inadvertently got into this measure. It is not for me to say how. I wish to make myself perfectly plain. There is no question of a breach of faith on the part of the Home Secretary. But I do say that the Home Secretary was agreeable that the purchase price should be paid without the words "less depreciation." We had decided the application of the 1888 Act; then the right hon. Gentleman came on with an arrangement by which the terms of purchase should be as set out here in this paragraph (b). The Home Secretary said that he realised the difficulty between the cost price and what should be paid under the 1888 Act, and that he was, therefore, prepared to agree that the cost should be the cost as standing in the books of the company. The House has already decided that it is not of opinion that the market price should be given. Why? Because there is a strong depreciation in value owing to the present labour conditions. My hon. Friend who has moved this Amendment knows, as do many others, that these words were inserted owing to a mistake. Because a mistake has been made Members here are not desirous of handicapping a private undertaking by not putting the thing right. I have every confidence in this tribunal. I am sure it was never the intention of my right hon. Friend that these words should be put in. I trust under the circumstances he will explain to the House how the mistake arose, and be prepared to put it right. We did not discuss it fairly in the Committee—not that actual point—in regard to these words inadvertently put in. I hope the Home Secretary will acknowledge it and take the necessary steps to put the mistake right.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

Let me at once begin to acknowledge that there was no mistake, and no inadvertence, I deliberately made arrangements. I seized upon them to get rid of the previous arrangement in order to insert the words which, to my mind, are essential. We are standing honourably by the second arrangement. If the companies had been obliged to provide themselves with new generating stations after we had taken the others over, then what my hon. and gallant Friend said would have been relevant. Under all the circumstances I think it is perfectly fair and right to offer a very different price to the price entitled to be demanded if the companies themselves had to supply these things.

Photo of Sir John Marriott Sir John Marriott , Oxford

I desire to support the Amendment. Before proceeding in a very few words to do so, I want to put this perfectly straight question to the Home Secretary: Whether the Amendment now being moved by my hon. Friend does not, in substance, reproduce the Amendment which the Home Secretary himself was prepared to move on the Committee stage of the Bill? He had an Amendment on the Paper, leaving out the words "less depreciation," or an Amendment to that effect. That is in the recollection of every member of the Committee upstairs. That Amendment stood in the name of the Home Secretary on the Order Paper. The Amendment which I have put down and which you, Sir, have very properly ruled to be out of order if this Amendment is rejected— I quite understand that—immediately succeeds the Amendment we are now discussing. It would simply reproduce the position which the Home Secretary at one point of the Committee upstairs was prepared to move.

Photo of Mr George Balfour Mr George Balfour , Hampstead

May I say I would willingly withdraw my Amendment in favour of my hon. Friend's Amendment if the Home Secretary will accept his own Amendment!

Photo of Sir John Marriott Sir John Marriott , Oxford

I very much regret that my hon. Friend did not allow me to move my Amendment I should have liked to put it forward, and for a capital reason which I was wishful to explain to Members of the House which were not members of the Committee.

Sir F. HALL:

On a point of Order. If my hon. Friend the Member for Hamp-stead -withdraws his Amendment, would it be in order for the hon. Gentleman the Member for Oxford (Mr. Marriott) to move his Amendment?

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

Both the Amendments are the same—that is, to omit the words "less depreciation," and that is the Amendment which we are now discussing.

Photo of Sir John Marriott Sir John Marriott , Oxford

I feel at some disadvantage having to speak to an Amendment which is not my own, but I wish to explain what the position was upstairs. I had an Amendment on the Paper which was infinitely larger in scope than this Amendment or the one in my own name, and that Amendment I withdrew because there was an Amendment on the Paper in the name of the Home Secretary giving us what we are now asking for. I do not say that there is anything in the nature of bad faith, but I had some conversation with the right hon. Gentleman on this point, and I withdrew my Amendment because I believed there was I an understanding that the Home Secretary's Amendment would be persisted in, but if the right hon. Gentleman's recollection is not the; same as my own then I accept entirely his explanation. My Amendment was withdrawn clearly on that understanding. The Home Secretary's advisers had prepared a Memorandum on this question which was I circulated to all the members of the Standing Committee, in which it was stated, after a careful calculation, that roughly it would be just to pay the cost without deducting depreciation. That statement was circulated to the members of the Committee, and the right hon. Gentleman himself put down an Amendment in that sense, but it was not moved, and all we are pressing the right hon. Gentleman to do now is to adhere to his own words.

Photo of Mr James Remnant Mr James Remnant , Holborn

I hope the House will give me time to explain the situation. We hear it stated that the Home Secretary moved Amendments in Committee which he has withdrawn now, and he substitutes others in their place. I should not like to give a silent vote on this very important matter, and if the right hon. Gentleman will forgive me, I should like him to explain what he means by the words "less depreciation." So far as I can gather the right hon. Gentleman has framed this Bill on the Report of the Committee which inquired into electric power supply, presided over by the right hon. Gentleman opposite (Sir A. Williamson), and that was a Committee appointed by the Board of Trade, and I take it this Bill is based on that. That Report recommended that these generating stations should be acquired, less depreciation. Does the right hon. Gentleman intend that these words should include the depreciation reserves, or are they to be taken over without any payment and depreciation to be given in the ordinary way on similar lines for all companies when generating stations are taken over? The right hon. Gentleman knows that the amount of depreciation written off by various companies varies considerably. Some of them are prosperous, and write off more than others; some are not so prosperous and not well managed, and they do not write off anything whatsoever. Does the right hon. Gentleman mean to depreciate all generating stations on similar lines, or does he mean he is to take over all the reserve funds set aside against depreciation?

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

The reserve fund will be untouched.

Photo of Mr James Remnant Mr James Remnant , Holborn

I am glad to have the statement that the reserve fund will not be touched, and that statement is very important.

Photo of Mr Arthur Neal Mr Arthur Neal , Sheffield, Hillsborough

I do not think the Home Secretary has applied himself to this Amendment. The Amendment is to leave out the words "less depreciation," and let us consider what the effect of that would be between two companies, one that has kept its undertaking up to date during war time at great expense, and another company which has allowed its undertaking to fall into a state of disrepair, almost to the verge of collapse. The latter company would have to go into the market to buy at appreciated prices, and the former company, which has kept its undertaking up to date, would not need to incur that expense. Depreciation is not to be taken into account, that is yon have to pay for the generating stations and plant what they cost, and in principle you are to pay exactly as much for the; derelict stations as for the well-equipped modern stations. There was not a single supporter upstairs for any such, policy, nor do I think that a single Member of this House would wish to support it. It is perfectly plain that you are violating one -of the simplest canons of business: if you are to take over undertakings without regard to depreciation.

Photo of Mr George Balfour Mr George Balfour , Hampstead

Apparently my hon. Friend has not read the whole of the Amendment.

Photo of Mr Arthur Neal Mr Arthur Neal , Sheffield, Hillsborough

What we are now discussing is the question, "That the words 'less depreciation' stand part of the Clause," and that is the Amendment under consideration. That is the point I am; dealing with, and what I am stating must be apparent to every business man, that any public authority should take over art undertaking quite irrespective of its present state of repair at the cost of the undertaking is a violation of a simple axiomatic principle of business. This proposal would give full value for plant, some of which was produced before the War, some during the War, and some may be since, with a deduction for depreciation.

Photo of Mr Arthur Neal Mr Arthur Neal , Sheffield, Hillsborough

That question has been; dealt with by the House on the earlier Amendment, and with all respect to the right hon. Gentleman opposite, I do not propose to repeat what I said on that occasion. The suggestion is that these new boards are to be handicapped by taking over stations which are worn out at cost price. You take over a machine which is five years old at exactly the same price as you take over a machine that is one year old, and I cannot believe that that is a proposal which will commend itself to the business acumen of this House.

Photo of Mr Arthur Samuel Mr Arthur Samuel , Farnham

I do not think this is at all fair. I do not regard this question, from the same point of view as the hon. Member opposite (Mr. Neal). Let us take this matter to its logical conclusion. It is true that it is not right to pay full price for dilapidated machinery. Take a company which laid out £1,000,000 in plant in which the directors happened to be good business men and they have not distributed large dividends but have put aside for depreciation £900,000, leaving the plant which might be worth a great deal more at £100,000, that is they have written off too much in their conservative way of managing finance. Is the House going to adopt a system which is going to take that plant over at £100,000 and penalise the frugality of the directors because they have kept their money in hand, and have not distributed it in the form of dividends? I do not think the House would countenance a system of that sort, and I think these words will have to be explained in a much broader spirit by the Home Secretary.

Photo of Mr Archibald Williamson Mr Archibald Williamson , Moray and Nairnshire

I do not understand from the Bill that, if the company had spent £l,000,000 and had put aside.£100,000 for depreciation, the Government propose to take that over. I understand the condition of the plant is to be ascertained in accordance with the regulations made by the Electricity Commissioners, and the amount of depreciation will be fixed in accordance with those regulations, and they will not have regard to what has been set aside for depreciation. [An HON MEMBER: "That should be made clear!"]

7.0 P.M.

Photo of Sir James Flannery Sir James Flannery , Maldon

I think the debate is exceeding the limits of the exact importance of the words in question, and I would like to call the attention of the House to the real merits of this discussion. If a plant be taken over with depreciation on the one hand and without depreciation on the other hand, is that fair and reasonable? Is it right that the authorities should acquire the property of these undertakings after deducting the depreciation either from wear and tear or other causes without on the other hand being liable to pay to persons who have established any claim for appreciation. I have tried to understand what grounds there are for the right hon. Gentleman holding the view that he does that there should not be appreciation on the one hand when depreciation is deducted on the other hand. If it commended itself to the right hon. Gentleman that justice required appreciation to be considered as well as depreciation, then the arrangement would be extremely simple. All that my hon. Friend the Member for Hampstead (Mr. G. Balfour) would need to do would be to ask leave to withdraw his Amendment and allow the words "less depreciation" to continue in the Bill, and then, after that leave had been given, it would, I hope, be competent for him to move that the words of which he has given notice "with addition for appreciation" should be inserted after the word "depreciation." That would be good grammar, and it would I think, make for the good understanding of the Bill. It would give what common-sense would suggest is reasonable, and would carry out the intention of the Government that the compulsory seller should have any advantage of any appreciation in value as well as being mulcted in what could fairly be considered as depreciation. I see my right hon. Friend shakes his head. Per- haps he will tell us why. I confess that I personally have no understanding at the moment why appreciation should not be taken into account as well as depreciation, and I dare say that there are many other Members equally in the dark.

Sir F. HALL:

Before the right hon. Gentleman replies, may I ask one question?

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

The hon. and gallant Member has exhausted his right to speak.

Sir F. HALL:

I was only going to ask a question on one point that came up in Committee. Is it not a fact that the ! Board of Trade circulated a memorandum to the members of the Committee suggesting that the price paid—

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

The hon. Member has exhausted his right to speak. He is only repeating a question which has been already put.

Photo of Mr Edward Shortt Mr Edward Shortt , Newcastle upon Tyne West

This is not a case of taking away a man's plant and generating station generally, and leaving him to provide himself in some other way with electricity. There is a provision in the Bill that he is to be provided with all that the generatng station has meant to him. Of course, if you take away anyone's plant and replacement is necessary, you must pay depreciation, but that does not arise here in any sense whatever. We provide for giving the cost price, less depreciation, and damages for severance. If the deduction for depreciation is considered unjustifiable, then the matter may go to arbitration. He gets the cost price less depreciation, and any damages for severance. He still retains the right to distribute, and he has the right to get from the Government authority a supply of electricty. If that is not sufficient, he gets his damages for severance. Under a subsequent Clause he can, if he chooses, go to the Government and say, "You must take me over lock, stock and barrel," in which case he gets different terms altogether. What is the appreciation that he would get? One does not like to use terms that might be construed as offensive, but they are war profits pure and simple. Any appreciation that there is in machinery is simply appreciation due to the great rise in the cost of material owing to the War. We do not think it right to pay for that appreciation. That is our view, and that is the explanation that I give to the House.

Photo of Mr George Balfour Mr George Balfour , Hampstead

May I call attention to the case of a municipality or company which has done a considerable amount of replacement and charged it to revenue account?

Major GREAME:

There is another point. If you take the cost price as the basic, and then pay the cost price less depreciation, you may find yourself in this position. During the last four years the cost of material and of construction has been steadily increasing. In consequence of that a conservative undertaking has put an increasing amount to depreciation each year. During the ten years up to the outbreak of war an undertaking may have set aside each year a reasonably fixed sum or a certain percentage of its value as depreciation, but since the outbreak of the war the actual cost of replacing something, which is what depredation means, has been increasing. If the basis were going to be the market or present value, that would be a reasonable proposition, but you start with the original cost price, which is a wholly artificial basis, and you take from that depreciation. It is very important to know whether that depreciation is going to be taken as if the cost of replacement were the same as before the War, because you are going to lose a very great deal if you take the increased cost. I do not know if I have made myself clear, but this is going to be dealt with by Regulation, and it is quite obvious, unless we have an undertaking on that point, the whole of the original basic figure might be wiped out by taking the depreciation on what is now three times the original cost. It is very important that the House should know. It will probably command my vote one way or the other if we can get an understanding on this point.

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

It would be well if we could get some education of the position which has been put by my hon. and gallant Friend. Suppose a company has spent £1,000 on plant, and before the War had put by £50 per year for depreciation. During the five years of the War, or certainly during four years of the War, that amount would have been not £50, but £150. If you multiply £150 by four you arrive at £600, and if you take ten years before the War at £50 that makes £1,150. You therefore have to take £1,150 from £l,000, which you cannot do. The result is that the company has to pay £150 to the Government for being taken over. It is rather a difficult and unsatisfactory position. Perhaps my hon. Friend (Mr. Bridgeman) will be able to tell us what is the actual result of leaving these words in the Bill.

Photo of Sir Evan Jones Sir Evan Jones , Pembrokeshire

There is one aspect of the question which has not yet been touched upon. Unquestionably, the principle of deduction for depreciation is a sound business principle, but, if it applies in one case, it must apply in all cases. Later in this Bill there is a provision which enables companies to require the Electricity Commissioners to buy the whole of their undertaking, and the remarkable fact is that if they elect to soil the whole of their undertaking the are paid for it without any deduction or depreciation. That is an anomaly. If the undertakers, in selling a part of their undertaking such as the generating station or the main transmission line, are to have depreciation deducted, why in the name of goodness, if they sell the whale of their undertaking, is no depreciation to be deducted? Yet that is what is provided later in this Bill. I am not sure whether the hon. Members who are pressing for the omission of those words have fully considered what the result will be. Assuming that the undertakers later on call upon the Electricity Commissioners to purchase the whole of their undertaking, they are paid back the depreciation which is now deducted from them. If hon. Members will look at Clause 12 of the Bill they will find that is so I am not quite sure whether I am in order in referring to a Clause which comes later, but it is very difficult to understand these things unless you look at them with a full knowledge of everything that is coming afterwards, and undoubtedly under Clause 12 any undertaker who sells the whole of his undertaking is enabled to do so without any deduction for depreciation. Consequently, if first of all he sells a part of his undertaking from which depreciation is deducted, and, later, he sells the whole of his undertaking valued at the capital expenditure which has been incurred upon it, and if from that capital expenditure is to be deducted only the amount which is repaid on account of the part already taken over, then obviously he gets back the depreciation which was deducted in the first place. Why should it be the case that any company which sells only a part of its undertaking has depreciation deducted, when if it sells the whole undertaking it re- ceives the original price without any deduction for depreciation? That is the point on which we should hear something from the Government.

The PARLIAMENTARY SECRETARY to the BOARD of TRADE (Mr. Bridge-man):

I am afraid I am under a disadvantage in not having heard the earlier part of the Debate on this Amendment. But the points which have been raise [...] since I have been hero seem to turn on the question how the depreciation is to be arrived at. The depreciation is to be settled in accordance with the Regulations made by the Electricity Commissioners, and if those Regulations appear to work an injustice, then the matter, in default of agreement, is to be determined by an arbitrator appointed by the Board of Trade. Regulations will be drawn up for calculating the depreciation, and as in the event their appearing to work an injustice the matter is to be settled by arbitration, that seems to me the case of all concerned.

Major GREAME:

Who is to lay down the procedure in regard to the arbitration if the Regulations appear to work an injustice?

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

This question of depreciation is a very important, one, because, if we consider the cost of replacing any of these works at the present time, there would be a very large appreciation, and, therefore, there ought to be a considerable addition. Do I understand the Government agree to accept the words "less depreciation"? That, I take it, was the agreement come to upstairs, and it is, to my mind, an extraordinary matter that they should go back from the arrangement then come to. We all know how depreciation is arrived at; the depreciation will be taken really from the original cost to the company, and they will, therefore, obtain a very much less sum than if the undertaking were taken over altogether. I have been handed a document which I understand the Board of Trade now read in an entirely different sense. The words are: The Board of Trade believe that such an arrangement would not be regarded as a satisfactory solution of the difficulty. After discussing with representatives of the companies and after full consideration of all the circumstances the Board of Trade have come to the conclusion that the most reasonable compromise is to make the standard price in the case of London companies the actual capital invested in the assets taken over by the district electricity boards.

Photo of Mr William Bridgeman Mr William Bridgeman , Oswestry

Is my hon. Friend referring to Clause 12?

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

No; I am referring to Clause 7. This Paper was handed to me as the document which was used to satisfy the members of the Committee upstairs, and a promise was given to put down an Amendment to this effect. But it is now scrapped, and we are asked to take a most insufficient sum or to submit to arbitration. I challenge the Government to say whether that is fair treatment of the electricity companies. I ask them not to go back on their promises, not dishonourably to cancel every principle which they offered to the House. [HON. MEMBERS: "Oh, oh !"] Well, I apologise; I will simply ask them not to cancel every principle they offered to the House as reasons for carrying through their proposal.

Photo of Lord Robert Cecil Lord Robert Cecil , Hitchin

I do not think my hon. Friend was present during the earlier part of the Debate. There appears to have been some misunderstanding as to what took place in Committee upstairs. I do not think the Government can be fairly charged with any breach of faith or any dishonourable conduct.

Photo of Lord Robert Cecil Lord Robert Cecil , Hitchin

There are two questions concerned here. The first is whether we ought to pay for the value of these generating stations on the basis of their present value, and on that point I confess the Government's reply seems to me overwhelming. If it were a question of replacement of the generating stations, evidently we ought to pay on their present value, but as the Government are going to supply the electric current which the generating stations now produce that it does not seem necessary to pay the actual cost of the stations. Then comes the question, what exactly should be paid to the company. The proposal is to pay the actual money spent on the generating stations less the depreciation. I think that principle is right. I do not think we ought to give them the full amount they paid originally, since you are in future going to give them their electricity and you are only taking from them the things which they may be said to have there in their hands, the actual material. It is said with great force, and this I think is the one point the Government has not met, that depreciation involves payment of the value at the present time, and it may well be that even taking oft' the depreciation, the present market value would amount to more than the original actual cost of the station. But I am satisfied that the Government do not mean that. What they mean, no doubt, is that the depreciation shall be calculated on the basis of the percentage of the original cost, and if that is so there is no injustice. On those grounds I cannot support this Amendment.

Photo of Mr William Bridgeman Mr William Bridgeman , Oswestry

There are two other questions I should like to answer. It is quite clear that as the people who are affected by the Regulations will have the power, should they consider themselves subjected to an injustice, to make an application for an arbitrator, it will be in the nature of an appeal to the Board of Trade, and that Department would not lay down the rules which would govern the procedure of the arbitrator in that case. With regard to the pledge quoted by my hon. Friend the Member for Everton, Sir J. Harmood-Banner) from a document which he did not identify in any way. but which suggested the Government had treated as a scrap of paper, I am perfectly convinced in my own mind that no pledge was made by the representatives of the Government upstairs that the words "less depreciation" would be left out. I am glad the hon. Member has withdrawn the phrase he used against the Government. The general intentions of the Government in regard to the Regulations are those which have been indicated by the Noble Lord (Lord R. Cecil) and so far as I can see the power of appeal against any injustice will ensure that nobody will be any worse off.

Photo of Sir William Mitchell-Thomson Sir William Mitchell-Thomson , Glasgow Maryhill

It has become more and more obvious during the Debate that a great deal is going to turn on the Regulations which the Electricity Commissioners are to make. Would it be possible before the Third Reading of the Bill to let us see a draft set of the Regulations, or, if that be impossible, would the hon. Member object to providing on the face of the Bill that the depreciation shall be determined in accordance with Regulations which shall be laid on the Table of the House? That would give us an opportunity of seeing what the Regulations actually are.

Amendment negatived.

Amendments made: In Sub-section (2, 6) leave out the words "a sum" ["with the addition of a sum"], and insert instead thereof the words "such sum as in default of agreement may be awarded by an arbitrator appointed by the Board of Trade."

Leave out the words "any company, body," and insert instead thereof the words "the company."—[Mr. Bridgeman.]

Photo of Mr William Bridgeman Mr William Bridgeman , Oswestry

I beg to move, in Sub-section (2, b), after the word "section" ["in Sub-section (5) of this Section"], to insert the words Provided that, if in any case it is proved to the satisfaction of the Electricity Commissioners that, owing to exceptional terms of purchase contained in the special Act or Order relating to a company the standard price, as calculated as aforesaid, would work an injustice, the Electricity Commissioners shall, on the application of the company, refer the matter to an arbitrator to be appointed by the Board of Trade for his determination whether any and, if so, what addition to the standard price, as calculated as aforesaid, should be made.

Photo of Mr George Balfour Mr George Balfour , Hampstead

I beg to move, as an Amendment to the proposed Amendment, to leave out the word "exceptional" ["owing to exceptional terms of purchase"], and to insert instead thereof the word "the."

If it will facilitate matters, perhaps I should move the next Amendment standing in my name. I do not know whether this is the time to do that?

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

We must take the Amendments one at a time.

Photo of Mr George Balfour Mr George Balfour , Hampstead

Then, in support of this Amendment, I would submit that it must be clear to the House that it should not depend upon exceptional terms of purchase.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Ladywood

I beg to second the Amendment to the proposed Amendment.

Photo of Mr William Bridgeman Mr William Bridgeman , Oswestry

My hon. Friend will remember that the Amendment I have just moved has been moved to meet a particular case which was raised by the hon. Member for South Down (Mr. Mac-Veagh), namely, the cape of the Dublin Tramways Company, who have special terms in regard to purchase. When the Home Secretary undertook to move some words to meet his case my right hon. Friend said it would be subject to an alteration in the wording which the hon. Member for South Down then proposed. The wording has been altered in order to confirm the matter to cases where the terms if purchase are special terms as apart from any other exceptional terms.

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

The hon. Member has exhausted his right to speak.

Amendment to proposed Amendment negatived.

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

The next Amendment to the proposed Amendment, in the name of the hon. Member for Hampstead (Air. G. Balfour) I understand is consequential?

Photo of Mr George Balfour Mr George Balfour , Hampstead

That is so: I do not move it.

Proposed words there inserted in the Bill.

Photo of Sir John Marriott Sir John Marriott , Oxford

The next Amendment standing in my name is consequential upon that already rejected by the House; therefore I do not move it.

Photo of Mr William Royce Mr William Royce , Holland with Boston

I beg to move, in Subsection (2, b), after the word "aforesaid" ["such depreciation as aforesaid"], to insert the words "together with any compensation for damage due to severance as aforesaid."

Photo of Mr William Bridgeman Mr William Bridgeman , Oswestry

I hope my hon. Friend will not press this Amendment. The Amendment which has just been agreed to provides that compensation for damage due to severance can be settled by arbitration. The effect of this Amendment would be to provide that it should be settled by Regulations. It will be obvious to everybody that it would be very hard to draw up Regulations which would cover every particular ease, and it is far better that any difference there should be, and there may be many differences, should be settled in reference to each particular case by a special arbitrator.

Amendment negatived.

Photo of Sir William Mitchell-Thomson Sir William Mitchell-Thomson , Glasgow Maryhill

I beg to move, in Sub-section (2, b), after the word "Commissioners" ["Regulations made by the Electricity Commissioners"], to insert the words "which shall be laid before Parliament."

I do not think I need repeat what I said just now in regard to this matter.

Photo of Mr William Bridgeman Mr William Bridgeman , Oswestry

I have no objection in principle to this proposal, but I have some little difficulty in accepting it, because I am not quite sure whether what my hon. Friend suggests could be done in the time. If he will kindly withdraw his Amendment we will make every attempt to do it. I hope that before the Royal Assent is given we may be able to meet his wishes, but I am not in a position to give a definite undertaking that that shall be done.

Photo of Sir William Mitchell-Thomson Sir William Mitchell-Thomson , Glasgow Maryhill

The effect of inserting these words would not necessarily be to bind the Government to lay the Regulations before the Bill receives the Royal Assent. It only commits the Government to the principle of laying the Regulations before Parliament. If they can lay them before the Royal Assent is given to the Bill, so much the better.

Photo of Mr William Bridgeman Mr William Bridgeman , Oswestry

Perhaps it would meet my hon. Friend if I accepted his words now and then. If it is necessary to make any alteration, it can be dealt with in another place.

Amendment agreed to.

Further Amendments made: In Subsection (4), after the word "station" ["railway generating station"], insert the words "dock generating station."

In Sub-section (5), leave out the words "a district electricity board acquire" ["Whenever a district electricity board acquire."]

After the word "station" ["district electricity board acquire a generating station "], insert the words, "is vested in a district electricity board."—[Mr. Bridgeman.]

Photo of Mr George Balfour Mr George Balfour , Hampstead

I beg to move, in Subsection (5), to leave out the words "electricity not less in amount than," and to insert instead thereof the words "such quantity of electricity as may be required for the purposes of the undertaking and as regards the amount that."

This is an Amendment relevant to a great deal of discussion which took place earlier in the day. In Committee upstairs the Home Secretary stated that there was already a provision in the Bill compelling the district electricity board to give a supply of electricity to the full extent required by the undertaking for the whole purpose of that undertaking— that is, to give a supply of electricity not only to replace the supply of electricity given from the generating station taken over, but also to meet the fullest possible requirements in the future. I have looked carefully through the Bill, and particu- larly at Clause 11—which, I think, was the Clause referred to by the Home Secretary upstairs—but I can find no such provision. Without the Amendment, I am suggesting, the undertaker will be in the position of having parted with his generating station, being protected to the full extent of the electricity he himself could have generated or had in immediate contemplation, protected not only as to obtaining the supply but, it is quite true, protected to some extent as to the price at which the supply is to be given, because the supply is to be given at a price not greater than that at which he himself could have produced it. With my Amendment, the Subsection will read— thenceforth to supply to the authority, company, or person from whom it is transferred. Such quantity of electricity as may be required for the purposes of the undertaking and as regards the amount that could have been generated at the generating station by that authority, company, or person. Without these words, so far as I can read the Bill, the undertaker would be called upon to give a supply in his area but would not be able to compel the district board to give the full supply required. Upstairs there was a great discussion as to the unfairness of a suggestion on these lines, as it was suggested that undertakers would compel a supply at a lower price for the surplus requirements of the undertaking than that at which the undertakers themselves could have supplied it. These words amply protect a district board against any such proposal. It compels them to give a supply as to quantity in excess of the amount which might have been generated at the generating station, but only the amount which could have been generated at the generating station at a fixed price. I trust the Parliamentary Secretary can see his way to accept this Amendment.

Sir F. HALL:

I beg to second the Amendment.

Photo of Mr William Bridgeman Mr William Bridgeman , Oswestry

I quite appreciate the point raised by my hon. Friend, and I am quite ready to accept his Amendment, but I am a little doubtful as to the wording. I think I should be quite safe in accepting it now if my hon. Friend will understand that there may have to be some verbal alteration, which I do not think will alter the sense in any way, at a later stage.

Photo of Mr George Balfour Mr George Balfour , Hampstead

I accept that, and am prepared to alter the wording in any way.

Amendment agreed to.

Photo of Mr William Bridgeman Mr William Bridgeman , Oswestry

I beg to move, after Sub-section (7), to insert (8) Where the generating station of any company is vested in a district electricity board under this Section and the company has created and issued mortgages, debentures, or debenture stock (whether irredeemable or not) charged upon such generating station, it shall he lawful for the company to give notice to the holders of such mortgages, debentures, or debenture stock to repay the same in whole or in part out of the proceeds of the sale, notwithstanding anything contained in the mortgage or the debentures or debenture stock trust deed, but in the case of debentures and debenture stock at the rate at which the de[...]ernt r[...]s or debenture stock could be paid off in the event of the winding up of the company:Provided that the cost which an auditor appointed by the Electricity Commissioners certifies to have been necessarily incurred in obtainin the release of any mortgage or other charge shall be borne and paid by the district electricity board. This is only to put in a more convenient place in the Bill a passage which was left out in an earlier part of the Clause

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

I do not understand what is the object of it. A company has borrowed a certain sum of money upon debentures which are irredeemable—that is to say, they cannot be redeemed unless the company is wound up. The company is not going to be wound up. Only a portion of it, namely, the generating station, is going to be taken away. We have been told that the profit is not in the generating station, but in the distribution. Why, if the profit is to be left to the company, should the debenture holders be forcibly deprived of their property? Then the Clause says, "to repay the same in whole or in part out of the proceeds of the sale." Therefore it contemplates that the proceeds of the sale may not be sufficient to repay the whole of the debentures. Are they to be drawn, or how are the debentures to be chosen? suppose there is a debenture debt of £500,000 and the profit on the purchase of the generating station only amounts to £250,000, are the £250,000, of debentures to be paid oil, and, if so, how is that particular, £250,000, to be chosen? I do not see any reason for this Sub-section, which is encouraging the company to commit a breach of faith. The company borrowed the money in irredeemable debentures, and an irredeemable debenture can only be paid oil in the event of the winding up of the company. Why should the Government suddenly say, under the circumstances which have now arisen, "We will sanction your breaking of the agreement and you may redeem the irredeemable debentures in the same way as if the company was wound up"? I do not see any object in it. I do not see what the Government or the Electricity Commissioners are going to gain by it. It is all tending in the direction, of which I have a great horror, of not keeping an inconvenient bargain. It does not follow because these words were in another part of the Bill that they are good words. In fact, the contrary is more likely to be the case. I want to know why these words are in, and I want a justification for it.

Photo of Mr William Bridgeman Mr William Bridgeman , Oswestry

These words were not in the bill originally, but were put in in order to meet a point raised by the late Commander Norman Craig, who was understood to be representing the wishes of the companies. The Government put these words in to meet what seemed to me at the time a reasonable object on, and the Committee deemed it reasonable. If the House thinks it better to leave them out it is perfectly immaterial to the Government.

Photo of Mr Arthur Neal Mr Arthur Neal , Sheffield, Hillsborough

There are two points of view from which this question may be approached—that of the companies and that of the debenture holders. You are taking away from the company part of its assets—very tangible assets—its generating stations, its machinery and plant, and its main transmission lines. By so much you are reducing the security upon which the various lenders have advanced their money, and I can very well understand someone speaking on behalf of the debenture holders, saying, "We have a claim to that money to be distributed amongst us now. You have no right to reduce the assets of the company by this amount, and leave our charges outstanding at their full value." I can quite understand the right hon. Baronet urging that with great force, and on simple, equitable grounds. If you reduce the security you ought to reduce the loan upon the security. I can quite understand an Amendment moved in that sense giving the debenture holders or mortgagees a right to claim that the sum should be handed over to trustees for them and distributed pro rata, not by a system of drawing or any chance methods, but distributed so far as it would go in discharging their obligations. That is not the objection which I understand the right hon. Baronet to take: He said, "You are compelling these debenture-holders or stockholders, so far as their stock is irredeem able, to take it, although it is irredeemable." There is something to be said from that point of view, but there is a great deal more to be said from the other point of view. Look at the position of the companies. A company finds itself suddenly in possesion of funds which have been paid to it for a portion of its undertaking. What is the company to do with that money? Obviously the first thing it ought to do is to apply it pro tanto in discharge of its liabilities, and there would be very grave reason to complain on the part of the shareholders if they were told they had to keep that fund earmarked or invest it as a fund against the reduction of the irredeemable stock. In point of fact, it is obvious that these words should stand.

Amendment to the proposed Amendment made: After the word "company" ["it shall be lawful for the company"], insert the words "with the consent of the holders of the mortgages, debentures, or debenture stock."—[Sir F. Banbury.]

Proposed words, as amended, there inserted in the Bill.

Further Amendments made: At end of Sub-section (8), add the words or where the standard price consists of an annuity upon any instalment, or the annuity from the date when the instalment becomes payable until payment.

Leave out Sub-section (10). —[Mr. Bridgeman.]