RAILWAY COMPANIES DEBENTURE DEBT.—RESOLUTION.

HC Deb 02 April 1867 vol 186 cc1025-59

MR. CRAWFORD*

Sir, I rise to move the following Resolution:— That it is expedient in the interests of the public, that in cases where adequate security can be given, the State should assume the responsibility of the Debenture Debt of Railway Companies unable to meet their engagements, upon conditions providing for the eventual acquisition of such Railways by the State, upon terms of mutual advantage to the State and to the Railway Companies. I am about to bring under the consideration of the House this evening one of the most important subjects that can engage its attention at the present time; and, in order to do so in a concise form, I have placed on the paper a notice, which I think raises the question, clearly and distinctly, as to the course which legislation should take, with reference to the general subject of railways under present circumstances. The magnitude of the question, and the multiplicity of the several interests involved, will be at once my plea and justification for seeking to engage the attention of the House on this occasion. I have myself no interest whatever in the question; for largely though I have been engaged for many years past in the prosecution of railway enterprize in other parts of the world, I do not happen at any time to have been concerned in the management of any railway lines in the United Kingdom; and further, I have no personal interest in any such railway company. I hold neither share nor debenture bond in any; in short, I have no interest of a personal character, immediate or remote, direct or indirect, in the question. But I have been led to investigate and consider the subject carefully, by the fact that I live, and move, and have my being, amongst a great community, whose political confidence I possess, and who, perhaps, beyond any other community in this country, has the deepest interest in our railway system. I wish, therefore, clearly to state beforehand, that the consideration which governs me in this matter is the public interest, and that alone. However much companies may have suffered, however much the individuals composing those companies may have suffered, however much the holders of debenture bonds or other railway securities generally may have suffered, I am not here to advocate their private interests. I wish to regard the question solely from a public point of view, in reference to the fact, that railways were constructed under the authority of the State for the service of the public, and therefore that it behoves Parliament to see that the advantages which railways were intended to confer on the community are not frittered away by mismanagement. Every other consideration should, in my humble opinion, be subordinate to that. Salus populi suprema lex.

Now, Sir, the proposition which I have to submit to the House involves two suggestions. The one is, that the State shall, under certain circumstances, assume the responsibility of the debenture debt of railway companies; the other is, that it shall do so upon conditions which provide for the eventual acquisition of such railways by the State; and to both of these propositions a subordinate condition is annexed; first, that in every case where assistance is given by the State, the company assisted shall furnish adequate security; and secondly, that the terms, under which the State may acquire in the course of years the ownership of the railway, shall be terms of mutual advantage to the public and to the railway companies. Both of these propositions I am prepared to maintain, and my object now will be to explain the manner in which I think Parliament may—not perhaps immediately, but at some future time—make arrangements for carrying them into effect. It may be asked why I have chosen to take the course of proceeding by way of Resolution, when it might be more convenient if I were to ask the House to give me leave to lay a Bill upon the table. But it is no easy matter to draw a Bill, even with a single clause in it, so as to meet the general concurrence of the House, as my hon. Friend the Member for York (Mr. Leeman) no doubt has experienced. My Bill, if I were to produce one, must be a Bill of prodigious magnitude, and must have been drawn up with a thorough knowledge of the relations which exist between the different Departments of the Government and the subject of the proposed Bill. And even if I had possessed the requisite knowledge, I could hardly have gone to the expense of preparing such a Bill, for hon. Gentlemen know well that a Bill of this character is not to be drawn without a large number of Bills of another kind coming on the back of it. Then it may be asked why I have not waited for the Report of the Royal Commission on the subject of railways generally. My answer is that I do not know when that Report is likely to be presented, nor what its terms will be when presented; it would be deferring the subject to an unknown period if I were to wait until the Report of that Commission has been placed upon the table. I think it better, therefore, to submit at once to the House, clearly and distinctly, the proposal which I wish to bring under its notice. But perhaps it may be convenient first to inquire for a moment or two into the meaning of the term "railway system." What does our railway system imply; what does it signify? What is this immense machine by means of which the whole intercourse of the country is carried on? Sir, I hold in my hand the last Annual Report from the Board of Trade on the subject of railways. It is for the year 1865. I have carefully examined that Report, not with a view to the present Motion only, but with reference to the general question and the public interest it involves; and perhaps the House may derive instructive information from some of the figures contained in it. I will read those figures to show the extent to which our national interests are at present bound up with our railway system. On the 31st December, 1865, the whole capital embarked in railway undertakings in the United Kingdom amounted to £455,478,143. Of that sum £357,657,046 was composed of share capital, and £97,821,097 of debenture and other loans. In England and Wales the share and stock capital amounted to £299,184,751, and the debenture loans to £80,420,076. In Scotland the share capital amounted to £38,569,767, the debenture loans to £11,636,265; and in Ireland there were £19,902,528 of share and stock capital, and £5,764,756 of debenture loans. The number of miles over which railway lines extended was 13,289. We now come to a fact which will perhaps astonish hon. Members. It is the extent to which railway locomotion is made use of by the people of these islands. In the year 1865 there were carried upon these lines no less than 252,000,000 of people—that is to say, about 700,000 persons were carried every day over some one or other of these lines—a circumstance which amounts to this, that every man, woman, and child in the country made on an average eight journeys of more or less extent by railway in the year 1865. From that we may derive some idea of the enormous extent to which railway communication has become a matter of daily necessity amongst us. I might also give the House figures as to the quantity of live stock, minerals, and general merchandize carried by railways, but hon. Members will be able to ascertain these things for themselves. I will merely state that 78,000,000 tons of minerals are annually carried by railways—a fact indicating the enormous extent to which the manufacturing interest and the consumers of coal for domestic purposes are dependent upon railways. The whole sum received for passengers and goods during the year 1865 was £35,890,113. With that information before the House it will be readily conceived what a vast effect upon the national interests would be produced by the cessation of working or stoppage of any one of the principal lines of the system. This may be a tempting opportunity for entering into a review of our railway legislation from the earliest period; but I will not take up the time of the House by doing so. It will be sufficient for my purpose to say that, in the opinion of many persons competent to judge, Parliament has legislated upon no fixed principles. There has been a sort of fortuitous legislation dependent on the composition of Committees, the intelligence of counsel, the activity of agents, and a variety of other circumstances, all of which, if we could have seen our way at an earlier period, ought to have been made subordinate to the carrying out of a general scheme upon principles applicable to the whole country. A system of that kind we have never yet arrived at; but, although we have not done so, I do believe that the time is coming when we may, to a certain extent, be able to take those steps in that direction which ought to have been taken at an earlier period. Dealing with legislation in an experimental form, we have benefited foreign nations and other people to a much greater extent than ourselves. We have been the pioneers of railway enterprize; other nations have seen our mistakes and adopted wiser courses. There is one point which I apprehend must be admitted on all hands. On the inception of railway legislation, five-and-thirty years ago, it was not a wise proceeding for Parliament to authorize a number of private persons, forming a company, to take the lands of A and B, and hold them in their possession to all eternity. The wiser course would have been to have allowed these persons to acquire a sort of Parliamentary lease for a long term of years. In point of fact, we ought to have adopted the system which our experience has suggested to the French and other nations of granting long but still limited leases to railway companies of the lands taken under compulsory powers from individuals for the construction of these public works. Another great error into which we fell in the course of our legislation was to leave so large an amount of capital, about to be sunk in a fixed undertaking, to be raised in the form of short debentures. What could be more unwise, or more unsafe as is now found by practical experience, than to permit about £100,000,000 to be invested in railway works, in a form which renders it necessary for those who borrow the money in that shape to be constantly, I may say almost hourly, coming before the public for a renewal of their loans? This was all very well when the horizon was clear, when there was an abundance of money in the market, and, above all, when confidence was undisturbed and people wished for such securities. But times would come—and we are now, I believe, in one of those times—when the same facilities for obtaining money do not exist, and when difficulties take their place, with which it is almost impossible to cope. There were some reasons, no doubt, why such a large amount of capital was allowed to be raised in so exceptional a form. One reason was that a debenture was a form of investment which trustees and other persons could take who were precluded from holding shares because of the risk. Another reason was the expectation that the profits upon railways would be so large that a, limited amount of interest payable upon debentures would leave a proportionately larger sum to be divided upon the capital stock of the company. But, however that might be, that reason has now fallen to the ground, for, with very few and rare exceptions, debentures may be said to pay a better interest than the stock of the companies. Another mistake into which the Legislature has fallen is this—that there is nowhere to be found a clear definition of working expenses, that is to say, nothing to define the charges, which ought to go to make up the working expenses of a company, before you arrive at the profit upon which the debenture interest forms the first charge. The definition of what is proper working expenditure is a disputed point. Of course, there are the obvious charges for conducting the business of the company, about which there can be no dispute. But then there come other considerations such as the Queen's taxes and local taxes; then there are compensations and charges of a very debateable character in the form of the rent paid for leased lines. This last point is difficult to deal with, from the fact that leased lines may be held by the companies leasing them under circumstances differing in different companies. For instance, if a company leases a line, which is simply a branch line, then it may not be a very difficult thing to estimate the claim which is to be charged on the working expenses. But in the case of such a line as the "Mid-Kent," leased to the London, Chatham, and Dover Company, and which forms a link in the main chain of its communication, it is a very different thing. That line, in fact, forms an integral part of the main line, and if it were severed from or taken out of the main line the traffic could not be carried on. Upon the subject of debenture securities, I wish to quote a few words from the recent celebrated judgment delivered by Lord Cairns— Although I have arrived at the opinion which I have expressed without hesitation, I cannot avoid feeling regret that securities such as railway debentures, upon which so many millions of money have been invested, should have been left at their creation in a state to admit of so much argument as that which has taken place in this case, and that their legal operation and extent should come to be defined not at the time when they have been given as security, but after difficulties have arisen in their repayment. I quote these words as illustrating the want of forethought and consideration for the future, which has characterized all the railway legislation of this country. There are a variety of ways in which short debentures operate unfavourably upon various interests; but I do not imagine that there is any interest which suffers more than that of the Government itself. Formerly the Chancellor of the Exchequer had no difficulty in floating £40,000,000 of Exchequer bills in the market, whereas now he can rarely float £10,000,000, because of the demand for money on the part of railway companies to renew their debentures constantly falling due. The Government suffer; the public suffer; and the shareholders suffer; and therefore it seems to me, that one of the objects which we ought to have in view is, if possible, to frame such a new system of legislation, with reference to railway capital, as shall remove, as far as possible, the future probability of difficulty arising from this constantly-recurring necessity. Now, the present position of our railway companies is becoming exceedingly serious. There is no disguising the fact; it is in everybody's mouth. Many of our railway companies are experiencing at the present moment the utmost difficulty in renewing their debentures. I need not allude to particular companies. But I dare say there are some Gentlemen in this House—probably more than one or two—who hold railway debentures, and, if they have bonds which fall due this month, they will feel in their own persons a practical exemplification of the difficulties which I have named. I have said that the difficulty has arisen, in a great degree, out of the judgment of Lord Cairns. Upon that judgment I am not going to indulge in one word of criticism. I feel that I am not competent to do so, because I should not be able to state it in proper phraseology, or in terms such as legal gentlemen may not fairly take exception to. I have, however, an idea of my own upon the subject; and this I may be allowed to say, that, looking at the position of those companies, which, in consequence of that judgment, may be unable to renew their debentures falling due, I conceive it to be not impossible, or even improbable, that the Court of Chancery may be called upon to interfere. I should like to know what is the position of a company which once finds itself within the domain of the Court of Chancery. Now, I will read one or two words from the judgment I have referred to. Lord Cairns said— When the Court appoints a manager of a business or undertaking, it in effect assumes the management into its own hands; for the manager is the servant or officer of the Court, and, upon any question arising as to the character or details of the management, it is the Court that must direct and decide. The circumstance that, in this particular case, the persons appointed were previously the managers employed by the company, is immaterial. When appointed by the Court, they are responsible to the Court, and no orders of the company or of the Directors can interfere with this responsibility. Now, I apprehend that nothing is better settled than that this Court does not assume the management of a business or undertaking except with a view to the winding-up and sale of the business or undertaking. The management is an interim management; its necessity and its justification spring out of the jurisdiction to liquidate and to sell; the business or undertaking is managed and continued in order that it may be sold as a going concern, and with the sale the management ends. Now, the point I wish to insist upon is this—that when a railway company finds itself under the jurisdiction of the Court of Chancery in the sense to which I have alluded, the Court of Chancery becomes as it were the manager of the company for the purpose of keeping it a going concern, for the purpose of sale. But who will buy a railway placed in such a position? Any number of persons possessing the requisite capital may constitute themselves a company; but I apprehend that no individuals forming a company could proceed to buy up a defunct railway concern without special legislative authority. To obtain such powers would necessitate a long delay. Nor could any existing company purchase such a defunct concern, because no existing company has any powers which would enable them to do so. To acquire such powers it would have to make application to Parliament. And there are many other difficulties attending such a course, difficulties which have been well described in a letter bearing the signature of "Inquirer," which appeared on the 23rd of February last in The Economist newspaper. In that letter the whole question was discussed at length of a railway company being offered for sale, and the difficulties are so great, that in the event of any company being brought to sale in that way, it would be impossible for the Court of Chancery to act as managers of the concern without enormous public inconvenience, and even without a cessation to a great extent of the advantages which the public derive from the continuance of traffic in the district. See, for instance, what effect has been produced within the last few days by the comparative cessation of traffic on only one line, the inconvenience to which persons living to the South of London were exposed owing to the strike of the engine-drivers on the London and Brighton Railway. From that circumstance we can form some idea of the effect which would be produced by the stoppage of the traffic on some great line such as the Great Western Railway; and I select this company as an example merely on account of the fact that it lies in the centre of a great traffic system. If such a stoppage were to occur on this line, even for one day only, the inconvenience that would result to the public in consequence it would be impossible to estimate. Now, Sir, for this state of things a great many remedies have been proposed. The newspapers have, indeed, teemed with letters on the subject. I have the greater part of them with me at the present moment, but I do not certainly intend to read them now, because I take it for granted that they have already been seen by hon. Gentlemen who feel interested in this subject. A letter from an instructive pen, the authorship of which I think I can trace, appeared in The Times under the signature of "Civis." We have also suggestions innumerable for the creation of debenture stock; another for a mutual guarantee on the part of good lines of the debenture debt of other and weaker enterprizes; for an association of railway enterprizes by which the weaker brethren would receive assistance at the hands of the stronger. There is something novel in this proposal, but it is not the one should ask the House to adopt. The creation of debenture stock is a question well deserving, in my humble opinion, the consideration of this House; but the real remedy is to be found, I think, in the proposal which, with the permission of the House, I will suggest. I would ask the House to consider the outlines of a plan by which the Government shall be empowered to assist with the credit of the State railway companies which are unable to meet their engagements. I would limit that plan to railway companies unable to meet their engagements, for two reasons. The one is, that I do not wish to excite opposition, on the part of those railways whose affairs are so well conducted as to place them beyond suspicion, and the necessity of applying for assistance to the Government or to any one else; and in the second place, I do not wish to arouse jealousy on the part of that body of the public who naturally view with jealousy any guarantee on the part of Government, or any participation of the Government in any national enterprize. I should like to see the plan I am suggesting tried tentatively, to see how it worked; because if it did succeed, as I apprehend it would, the advantage which it would confer upon the railway company receiving assistance would be so great it would, in point of fact, so raise it from the mire of despondency into so happy a frame of mind that many other well-to-do companies would view its condition with envy, and seek to share in the benefits of the plan, if Parliament should consent to the enlargement of the scheme. I would suggest that any company unable to meet its engagements, and against which a judgment at law may have been obtained, may apply to the Government under the provisions of an Act to be passed for the purpose, and then that the Government, if satisfied with the security offered, and the general condition of the railway company requiring assistance, may grant it the assistance it needs. In the majority of cases the Government would, I apprehend, run very little risk, because all the main lines of railway in the country are at this time well constructed lines, upon which no great amount of expenditure is required; lines which are earning large gross incomes, and on which the working expenses do not on the average exceed 48 per cent of their gross traffic receipts. If that be the case, it is clear that any assistance which the Government might be empowered to render to the railway company would be the subject of the first charge upon the remaining 52 per cent of the traffic receipts. I would suggest that the Government be empowered to guarantee the principal and interest of the debenture debt of the company, and that they should issue in place of that debt, as the debentures fell due and came in, obligations of the Government, in a form to be prescribed, to run for a term of fifty years. These obligations should be the first charge upon the receipts of the company after payment of working expenses, and these working expenses, if they are not sufficiently defined by the recommendation of the Committee now sitting upstairs, ought to be defined in the Bill to be submitted to the House. But as the Government would have rendered considerable assistance to the railway company, the railway company should not have the power by a lavish expenditure, and an improper use of the assistance rendered by the Government, in any way to damage the security which its profits would afford; and I would therefore enact that the Government should thenceforward possess a power of veto over the proceedings of the company in all matters affecting its capital expenditure. That power should, however, be strictly limited to matters of capital expenditure, because it is exceedingly undesirable that the Government should have anything to do with the working arrangements. A railway company might be permitted to expend money from its capital for enlarging its stations, or for purposes of an analagous character; but a controlling power should be very strictly exercised by the State to prevent companies from coming to Parliament, as they do now, at the instigation of agents, or of engineers, or of lawyers, or of any members of that class who spy their prey in the distance, for the purpose of expending capital in waging war on other companies. The public, as well as the Government, should be protected from any improper attempt to enlarge the capital expenditure. It will not be at all difficult to do this. In India millions upon millions of our money have been expended upon the construction of railways, and the system adopted there has been found to work remarkably well. It would not be difficult to lay down rules by which the Government would be enabled to exercise that power of veto. Though permitted to expend money upon the enlargement of stations and matters of an analogous character, railway companies should not be permitted to wage war upon their neighbours by invading the territory of other companies, or to offer them any molestation. The public would, I think, be pleased at seeing a power interposed between themselves and the scheming portion of the population engaged in the speculative manipulation of railway affairs. I have stated that, in my opinion, Parliament made a great mistake in not securing the reversion of the freehold interest in the lands taken from private individuals for the purposes of railway construction. I think that it is even now not too late to remedy that mistake, and that, if a railway company find it to its advantage to apply to the Government for the purpose of obtaining relief, the Government should, upon assuming the liability upon the debenture debt, call upon the company to make a surrender to the State of the freehold interest in its property, and should then grant a Parliamentary lease to the railway company of the lands and the undertaking for a long term of years—say for ninety-nine years—subject to a power on the part of the State to re-enter, at an earlier period, upon conditions which I will shortly mention. But, before doing so, I wish to say, with reference to the charge for which the Government would be liable—that is to say, for the interest upon the amount of the obligations which it assumed on the part of the company—I would compel every company to render to the Government weekly 1–52nd part, or monthly 1–12th part, of the sum estimated to be necessary to cover the liability of the Government in respect of the interest on its obligations. Now, inasmuch as the Government would have a claim upon the 52 per cent of the gross receipts of the company, it is clear that the Government would take upon itself no great amount of risk, if the money with which it was to pay the interest on these obligations were sent in at once, immediately upon its receipt, by the railway company. But inasmuch as the credit of the Government is a very different thing from the credit of a public company—being perhaps fairly estimated as the difference between 3½ and 4½ per cent—I would call upon the railway company to pay to the Government a further sum of 1 per cent, making in the whole, say 4½ per cent; the credit of the Government enabling it to issue money to the companies at 3½ per cent. This 1 per cent, which would be paid upon the amount of the outstanding obligations of the company, should be invested every half-year in Government stock, or in redemption of the railway obligations; and as £1 invested in a Government Three per Cent Stock will produce at the end of fifty years £114 8s., so at the end of the fifty years the whole of the liability of the State will have been extinguished. It is true that it will have been extinguished by the payment on the part of the railway companies; but the railway companies would have paid no more than if they had borrowed the money on their own credit, whilst they will have at the same time the benefit of the extinguishment of their debt. At the end of the fifty years, when the obligations of the Government shall have been discharged, and the other liabilities with reference to the bonded debt shall have ceased, the Government should have the power of purchasing the undertaking at the average price which it had borne in the market for a certain number of years, previously, say for two, three, four, or five years, making payment in Government securities, issued at such a price, as would enable the persons who received them in exchange for their stock, to reproduce in their pockets the value of the stock according to the computation agreed upon. If the Government did not see fit on the part of the State so to purchase the railway, the lease would then continue to run to the end of the ninety-nine years. I apprehend that it may appear to be a formidable proposition to require a railway company to relinquish and give up its property to the State even at so distant a period as ninety-nine years. Ninety-nine years is a term on which any person, when taking a lease for that time, bestows very little thought; and it is not until some forty or fifty years of the term have passed away that the possibility of the expiration of the lease suggests itself to the mind of he holder. Indeed, so small is the sum required to re-produce capital at the end of ninety-nine years, that 20d. taken out of every £100 of its net profits, and investeb by a railway company every half-year in a Three per Cent Government Stock, will reproduce the capital of the company at the end of ninety-nine years. By means of this proposition the Government would, I conceive, be enabled to render to the rail way interest at large very great and very valuable assistance. It would, I think, have the effect of relieving railway companies, and the railway world in general, from the pressure which is now placed upon them. It would enable them at once to carry on their transactions without the fear, or apprehension, or cost, attendant constant renewal of their debenture debt, while they would be subjected to no higher charge than they at present have to meet. For the charge of 1 per cent, which I have already mentioned, would place them in no worse position with respect to the rate of interest payable upon their bonds than that which they now occupy, and they would besides have the benefit of being enabled to extinguish the whole of their debt in the manner I have indicated. If, on the other hand, they were called upon to surrender their property at the end of the long term I have stated, they might by a very moderate provision secure themselves against loss. I think, therefore, upon the whole, that however startling such a proposition as this may appear to those who look upon it from a Government or shareholder's point of view, there is nothing in it, at all events, which should not entitle it to receive the attentive consideration of this House and of the public. I may add, although it may appear a somewhat visionary view, that, supposing all the railway companies to have in the course of time thus surrendered their property to the State, and State to be at the end of ninety-nine years in possession of that property, it would then have an estate of the value of something like £500,000,000, which it might, if it pleased, re-let to railway companies for the purpose of being worked. If let at a sum equal to 5 per cent, an income of about £25,000,000 per annum would be secured by the State from this property; or, in other words, a sum amounting to about the annual charge for the National Debt. It is, of course, quite true that ninety-nine years are a long time to look of forward to; and it may be said, as was once observed by a distinguished person on the other side of Temple Bar, that there is no good reason why we should trouble ourselves about posterity, inasmuch as posterity has never done anything for us. There are, however, some persons in this House who do think it worth while to have an eye to the interests of posterity; and there is, I think, nothing in my proposition which does not recommend it to the consideration of those who entertain that view. I may remark, that in the year 1768, the Finsbury Estate was let under the authority of an Act of Parliament for ninety-nine years, and that the end of that term was at the time, no doubt, looked upon as being very remote. The ninety-nine years have, however, all but passed away, and the Ecclesiastical Commissioners are now about to step into an annual income of £70,000 from that property. I am therefore of opinion that the country may very fairly be content to have some regard for posterity, and to assist in relieving it from a heavy charge in the way I have suggested.

There is one other point to which I wish to refer before I sit down, and that is the application of this suggestion to the case of Ireland. I find from the Parliamentary accounts relating to that country, that, on the 31st of December, 1865, the whole of the capital authorized to be raised for the construction of Irish railways amounted to £34,035,491, of which sum £19,902,528 were paid up, while the debenture loans outstanding were £5,764,284. I further find that the gross receipts from Irish railways amounted to £1,737,061, and the net receipts to £900,592. Now, if from that sum of £900,592 interest at the rate of 4½ per cent on the debenture debt be deducted, you will find that 3 per cent would represent the profit on the capital invested in those railways. But when it is considered that the Irish railways, which are upwards of fifty in number, are conducted and carried on at a great expense in the aggregate, and that that expense might be very considerably reduced by the amalgamation of the various companies under one, two, or say three or four systems of management, I think it will scarcely be thought that I am taking too sanguine a view, when I state that the receipts would, in all probability, be so enlarged by the application of my proposition to the case of those railways, that the shareholders would obtain a net profit of something like 4 or 5 per cent. I mention this by way of illustration, to show how the project might be made to work. I do not think I have anything more to say in submitting this Resolution to the notice of the House. My object is to obtain a general expression of opinion upon it. I am very thankful to the House for having allowed me to make this statement, and I leave my proposition in its hands to be dealt with as it may deem fit.

Motion made, and Question proposed, That it is expedient in the interests of the Public, that in cases where adequate security can be given, the State should assume the responsibility of the Debenture Debt of Railway Companies unable to meet their engagements, upon conditions providing for the eventual acquisition of such Railways by the State, upon terms of mutual advantage to the State and to the Railway Companies."—(Mr. Crawford.)

MR. STEPHEN CAVE

said, there was no man in the House more entitled to be heard on such a question as that now submitted as his hon. Friend the Member for the City (Mr. Crawford). His high position in the mercantile world, and his great experience on this subject, and especially in regard to Indian railways, entitled him to speak with authority, and no one could consider this Motion ill-timed. We were now passing through a great crisis in our railway history—a crisis of deep gravity and severity, involving the interests of thousands—from which he trusted we might emerge with less loss and difficulty than we were sometimes disposed to fear. His hon. Friend had drawn a distinction—a very proper distinction—between private and public interests; but when it was considered how enormous was the number of those beneficially interested in railways, the term "public" might with great truth and force be applied to these; also, considering how many calls for immediate legislation in various directions were made upon the Government, and what confusion existed in men's minds as to the kind of legislation which was required to give them what was wanted, and even what was necessary to relieve railways from their present difficulties, he thought his hon. Friend had done good service in raising a discussion like this. He thought, at any rate, that such a discussion might clear away many difficulties, and might possibly indicate the best course to be pursued. He would endeavour to follow the points of his hon. Friend's able and interesting speech, and make such observations as his less experience might enable him, with all humility, to offer. His hon. Friend began by proposing that the State should assume the debenture debt of those companies only which are in difficulty, provided their security is good, and for the purpose of eventually acquiring the lines; and having given a very interesting and no doubt very accurate description of the vastness of railway property, and the way the public were dependent upon it for most of the comforts and conveniences, and even the daily necessaries of life, he went on to ascribe the position in which that property was now placed to the action of Parliament—to railway legislation, which he said had been experimental, guided by no fixed principles, and had operated as a warning to other countries which had profited by our example and avoided our errors. And he said we should have followed the same policy as the French Government had done in respect to their railways, by leasing the lines to companies for a term. The late Sir Robert Peel, no doubt, had that opportunity, and after much deliberation, as we are told, decided not to avail himself of it. There was much to be said in favour of such a plan; but, on the other hand, there were many objections to it. One of the objections to it was that the lessor, something like the consignee of a West Indian estate, was sometimes tempted to make advances for the purpose of obtaining his rent, and, in fact, ended frequently by throwing good money after bad. We had heard, whether truly or not, that the example of France had not been so encouraging, and that the French Government had advanced considerable sums to the railway companies for the formation of branch lines which were not likely to be commercially successful. We heard, too, that the Russian Government was on the point of selling its Imperial Railway from Petersburg to Moscow to a private company. We must bear in mind, moreover, that these Governments were the original owners of a whole system, and not the purchasers of fragments. His hon. Friend found fault with the law respecting debentures, saying they were too short in date; and he quite agreed with this. The primary idea was, no doubt, that debentures would be merely temporary loans paid off when the railway came into full work. On the Continent they ran for much longer dates, and consequently the "obligations" were brought and sold on every Bourse; whereas the sale of debentures here was a matter of negotiation, which of course affected their value, thus making them less desirable as investments for capital. Moreover, on the Continental railways a reserve was kept as a sinking fund to pay off these obligations. We were compelled to trust to renewals, and therefore were at the mercy of every wind that blew. His hon. Friend mentioned debenture stock, and it seemed to him that the best way out of this part of the difficulty was the issue of debenture stock, at long dates and at any rate of interest. But here we required fresh legislation, because a limit had been placed on the rate at which this stock could be issued. This was done, no doubt, with the very laudible object of protecting those who came after us; but like most attempts in that direction, it had been productive of much mischief; and he was in favour of legalizing the issue of debenture stock at such a rate of interest as would float it, taking care that it should be registered, and that the public should know what the company already owed. He believed, with his hon. Friend, that our legislation had been very mischievous. We began by looking upon joint-stock companies and railway companies as things to be put down. As a schoolmaster sometimes regards his pupils whom he ought to foster, so we regarded such companies as our natural enemies, and instead of confining ourselves to watching jealously their compulsory powers over other people's prosperity, and leaving their finance to take care of itself, we hemmed them in with restrictions, which they had generally found some way to evade, and thus while professing to protect the creditor, we had simply lulled him into false security, from which, sooner or later, he was sure to awake—like people who are frightened during sleep—in an unreasoning panic. Hence the judgment of Lord Cairns, which simply stated what people who had thought about the matter knew before, and which did not practically make the situation or remedies of debenture-holders one iota worse, was called the immediate cause of the panic—just as the failure of Overend, Gurney, and Co. immediately preceded and possibly precipitated the panic of last year; but it was a case of post hoc, ergo propter hoc, and the real cause was general distrust of the finance of railways. People began to hear of over issues, open debts, Lloyd's bonds, fictitious payments; and a general alarm was the consequence. His hon. Friend said this had attained such magnitude that no smaller remedy than Government interference would have any avail—just as in the panic of last year it was said that the only panacea for the panic was a Government bank. His hon. Friend proposed that the Government should guarantee the principal and interest of the debenture-debt, and that they should take the railways and place a Government Director upon the Boards.

MR. CRAWFORD

I said that the Government should exercise a veto, not that there should be a Government Director upon the Board.

MR. STEPHEN CAVE

understood the hon. Member to allude to the practice with respect to Indian railways, where a Government Director was placed upon the Board. He said that by his plan they would prevent a speculative increase of capital; the transaction would be quite safe and the Government would obtain in the end a property the value of which it was impossible to estimate. He quite agreed with his hon. Friend that it was impossible to estimate the value; but the Government might get a worse bargain than that which appeared on paper. And if there were no net profits how could capital be replaced? But the hon. Gentleman said it was only a guarantee that was required. They had had similar proposals at different times, from several quarters and for various purposes. Some proposed that assistance should be given to sound railways only; but his hon. Friend wished them to assist only those which were in difficulties. The proposal of a guarantee was no doubt a very fascinating one. It was a mere form. They might not be called upon to give anything. It was only to satisfy the public, and there was no sort of difficulty or insecurity. He remembered the year before last being persuaded to give his guarantee—and, if he was not mistaken, his hon. Friend was also persuaded to give his—to an International Exhibition which was quite certain to have a very considerable surplus; but somehow or other in the end they found that the guarantee was not a mere matter of form. This proposal must to a certain extent tend to centralization. Now, if ever centralization was inexpedient it was in a country like this where the Executive was so liable to pressure. His hon. Friend talked about the Government veto, and mentioned India as an instance of what he meant. But in India the local interests were much weaker and more divided, and the central Government was almost a despotism. He could not fancy anything more difficult or more invidious than the position of a Government Director or officer trying to prevent a branch line much desired through a district of considerable Parliamentary influence. All who had acted as trustees knew what pressure was sometimes put upon them to consent to some investment at a higher rate of interest; but where, in his opinion, there was not sufficient security. Any one who wanted to ascertain what the position of such a Government officer would be had only to read the correspondence between Mr. Howell, who was the Government officer in New Zealand, and the Colonial Office, between 1848 and 1849, and they would there see how the Government threw over at last a man who really tried hard to do his duty—or, as they put it, had "an overstrained sense of his own responsibility." A proposition had been made to the Government that they should buy up all the Irish railways. That was a proposal clear in itself—totus teres atque rotundus. His hon. Friend proposed only that they should guarantee the railways which were in difficulty. The effect of that would be that the Government would be plunged into all sorts of railway disagreements. Supposing they took the London, Chatham, and Dover, the South Western, or the Great Western, the Government must either immediately, or in some short period, which, as his hon. Friend said, was nothing in the life of a State, be committed to partisanship or hostility to the different railways around them. He (Mr. Stephen Cave) must confess he had a most profound distrust of sinking funds. A sinking fund had a tendency from time to time to assist the surplus of an ambitious, or to palliate the deficiency of an unfortunate, Budget. He believed that in this country, as a general rule, the Government ought to do nothing that could be done by individuals. It would be a very dangerous thing for a Government to do what his hon. Friend proposed—to stand between the public in general and railway proprietors. It was not the duty of a Ministry to supply a programme to public companies or to private firms. It was impossible that it could do so; because the interest of the public would always be at direct variance with that of the shareholders. The interest of the Government would be simply to secure its debt, while the interest of the shareholders might be to run some risk for the purpose of getting profit. Government appointments were sometimes found fault with now; but how much would that dissatisfaction be increased if the Government were to turn attention to trade and finance, and obtain a patronage extending all over the country? The Government, resting as ours did upon public opinion, could not in seasons of misfortune stand against the general discontent. When panics prevailed it was a great advantage that public feeling should be able to expend itself against Boards of Directors, who were much less amenable than Members of the Government. If he might venture to make a suggestion, he would say that the best course to be pursued was to set railways free from financial trammels, and put them as to finance on the same footing as joint-stock companies. Perfect freedom and perfect publicity were the maxims that ought to prevail with regard to railway finance. Let railway companies issue debenture stock for any length of time at any rate of interest. If they became embarrassed, and could not come to arrangement among themselves, let them be wound up voluntarily by consent, or compulsorily, under the Bankruptcy laws, by the action of the Court, so as to prevent the ruinous operation of separate suits; and let the insolvent railway be sold either to a joint-stock company, which would take all the duties and be vested with all the powers, either with or without Parliamentary sanction, as might appear safe, or to another railway company which would have to come to Parliament for power to purchase. His hon. Friend said, who would buy a defunct railway? He presumed that would depend upon the price. He remembered in a once popular play, Used Up, some one saying, "We have nothing like St. Peter's in London;" the answer to which was, "If we wanted one, we should get up a company, issue shares, and run one up in no time." So, he believed, there would be no difficulty in getting up a company to buy an insolvent railway at a favourable price—just as had been done more than once in the case of the Great Eastern steamship. This cry for Government interference was no new one. Before last year companies were to do everything; now their prestige was temporarily departed—"none so small to do them reverence." His hon. Friend had drawn a vivid picture of the stoppage of a railway for a single day. He (Mr. Cave) was not much afraid of the stoppage of a great public highway from any cause except that of a strike. If the London, Chatham, and Dover could go on performing its services so admirably, there was little to feat. He did not hear complaints of the state of the permanent way over England from the Inspectors. Perhaps they might, as had been proposed, guard against any seizure of the working appliances of a railway; but, after what had been said elsewhere, they must all be alive to the danger of destroying the credit of a company for its daily expenses by imposing too much difficulty on the recovery of open debts. He thought that the general and increasing dependence of railways upon each other was the great protection against any one being brought to a standstill. He had ventured to make these remarks in the most friendly and respectful spirit upon the proposal of his hon. Friend. He admitted his great experience, and should be followed no doubt by others whose opinions were entitled to far greater weight than his own. Many plans had been proposed to get rid of these difficulties. The air, in fact, teemed with plans. That morning he had received several proposals from men of known ability and experience. One of these, which had the merit of not asking anything from the Government, was for the formation of finance companies to deal in debentures, increasing their security by the guarantee of capital of the finance company, and making them in various ways more readily negotiable. Another was for the Government to place the companies in immediate funds, by paying down at once the estimated cost of carriage of letters and troops in perpetuity. Another was satisfied with simply extending the lien of a debenture to the chattels of the company, and to the profits as well as the tolls. Another advocated the suspension of all suits, reference of all questions to one tribunal, and the raising of a preferential stock taking priority before debentures, for the purpose of clearing away incumbrances and completing works. The House would pass its time profitably and gain much by discussing such schemes in company with that of his hon. Friend. He would ask leave to conclude with one remark. Most people were feeling their way gradually, hardly appreciating the difficulties before they set themselves to grapple with them. Public opinion was forming itself, changing and ripening from day to day. This discussion would assist it. They were now waiting anxiously for the Report of the Royal Commission. He asked the House not to act, in order, as it might fancy, to gain time, with a precipitancy of which they might hereafter repent. They should not be tempted by the natural and laudable desire of terminating present inconvenience, however pressing, of alarm, however widespread and injurious, into hasty resolutions or inconsiderate fragmentary legislation on a matter of such importance.

MR. THOMSON HANKEY

said, that the hon. Member (Mr. Crawford) had not overstated the case when he spoke of this question as one of very great magnitude. The proposal submitted appeared of so startling a character that he could hardly imagine it receiving the sanction of the House. A few days ago there was a proposal for guaranteeing £3,000,000 for Canadian railways, and they were assured that there would be no possible risk, danger, or chance of their having to pay anything. The statement that was made gave every hope that that might be done without this country incurring any liability. But the right hon. Gentleman (Mr. Gladstone) pointed out that they must consider it as a loan of £3,000,000, and that it would diminish to that extent the facilities of this country for borrowing money. The proposal of the hon. Gentleman (Mr. Crawford) was that they should lend £95,000,000 or guarantee to that amount. That was a very startling proposal in order to relieve certain interests from an embarrassment which he believed to be of an entirely temporary character. He believed that if the Government were to interfere they would only aggravate the difficulties of the railways. He had no confidence in the Government management of any such enterprize. The hon. Gentleman, of course, did not propose a Government management; but he admitted that the companies would have to be under Governmental protection in such a case, and proposed that a Government Director or inspector should be appointed. What, then, would be done in the case of the disputes and altercations which were of daily occurrence between railways? The hon. Gentleman said it was impossible for a railway to be sold, but they were bought and sold every day. The amalgamations and changes of railway property which were constantly coming before Parliamentary Committees were neither more nor less than sales by one party and purchases by the other. There would always be found parties willing to buy railways, if facilities were given for selling them. The great difficulty which attached to all these questions was owing to the mistake in our Acts of Par- liament, of giving facilities for borrowing. Those facilities were given originally for temporary purposes, it being intended that when a railway became established it should pay off its debts, and the railway supply its own capital. Railway companies were never intended to be made permanent borrowers and competitors in the money-market. One-third, or at least one-quarter of the railway work in the country was executed upon borrowed capital, and it was impossible for the companies to pay off their debt in the limited period of three, four, or five years. If the railway companies had no debt at the present moment Parliament would not be called on to interfere in the matter. He thought the difficulty might be got over by Parliament being more careful in granting of borrowing powers in the future, and with regard to the past, what must be done was that the railway creditors must become railway debtors. The debt must be amalgamated into the railway company—it must become part of the railway stock. It would be impossible if the Government became guarantors for railway companies, for them to borrow the money which they might afterwards require for the purposes of the State. Government stock would be depreciated as a matter of course, for if people could buy railway stock, guaranteed by the Government at 4½ per cent, they would naturally prefer that to the ordinary Government stock at 3 per cent which would go down as in France to 75 instead of being at 90.

MR. ALDERMAN SALOMONS

said, the House was indebted to the hon. Member for London for bringing the question forward. The question could not be snuffed out as the hon. Member (Mr. T. Hankey) seemed to imagine. He (Mr. Alderman Salomons) was not a railway man, and was not a large holder of railway stock, and therefore he might be fairly supposed to take a thoroughly dispassionate view of the subject. Whatever the railway Boards had done, and into whatever difficulties they had got themselves, it should be borne in mind that in all cases where they had not exceeded their powers they had Parliamentary sanction for all their operations. The railways of this country involved as large an outlay as from £450,000,000 to £500,000,000, and therefore he thought the House could not be engaged in a more important duty than that of considering, when they found that great interest in a distressed condition, by what means it could be relieved from its difficulty. The Vice President of the Board of Trade had quoted the example of the Great Eastern steam ship, which had been sold two or three times over. But the Great Eastern ship was not the creation of Parliament like the Great Eastern Railway. All the railways had been the creation of Parliament. It had been suggested that insolvent railways only should be dealt with and assisted by Parliament; but for his part, he would not touch the insolvent railways at all. They could give no security to anyone, and the only course in their case was to sell them. Even in the case of the London, Chatham, and Dover Railway, extensive as it was, it would not be difficult to find a purchaser at a high value, if it were put up for sale in the railway market. The House would be surprised if he mentioned the number of millions it was said it would fetch in the railway market. If in good hands, it might be relieved from many of the extraordinary difficulties which now affected that company. If it were necessary to legislate for railways, it would be desirable to see whether something might not be done by which the interests of railways might be made compatible with the interests of the State. It might be possible by some system of guarantees, or by raising money for solvent railways, taking them as security upon the condition that Parliament should lease them for ninety-nine years, similar to what is done in France, holding them as security until the debt should be paid off.

MR. J. B. SMITH

said, railway companies had got into difficulties through mismanagement and improvidence, and he suggested that they should take a lesson from the course pursued by such companies United States. There were 40,000 miles of railway there—nearly three times the length of the railway system of this country—and of course there had been from time to time great difficulties among the railway companies; but they had surmounted those difficulties, not by applying to the Government, but by depending on themselves. Our railway companies had very imprudently borrowed money on debenture bonds at short dates, and so long as there was an abundant money-market there was no difficulty in renewing those bonds, but when money became scarce they had to give any price to renew them. These bonds ought all to be converted into debenture 4 per cent stock; and instead of paying divi- dends in money every year, they might apply the sums which should be payable on dividends to the purchase of railway debenture bonds, and pay this railway debenture stock, instead of cash dividends, to their shareholders. They would then, in fact, be borrowing money of their own shareholders. That was the course adopted in the United States. If a railway company found they wanted money to develop the traffic of their railway, or to pay off their bonds, they applied the traffic receipts to the payments required. Instead of borrowing fresh capital at a great disadvantage they borrowed money from their own shareholders, and paid dividends in stock instead of cash. It was said that the amount of debenture stock was about £100,000,000, of this, £90,000,000 was perfectly good security, because it held the first claim on the traffic receipts, after the payment of expenses. There was scarcely a railway in the kingdom which had not a large surplus after the payment of these, so that there could hardly be better security. If a man were paid in debenture stock and wanted cash he could easily raise it, because debenture bonds would pass in the market, and he could get cash at a small sacrifice, while the advantage gained by his railway would more than compensate for any loss. There would not indeed be a loss, as this stock, if its value were properly understood, would be as good as consols. What could be a better investment for trustees or ladies than a stock of this kind? The railway interests, therefore, need not implore the Government for assistance; let them help themselves. The course pursued in the United States met all requirements.

MR. SCOURFIELD

said, that the payment of dividends in debenture bonds was about equal to not paying them at all. It seemed like paying a debt by a promise to pay. He knew many persons who were from much inconvenienced by the non-payment of their dividends, and they would not be be much consoled by the suggestion that they should accept a debenture, whether it could be converted into money or not. A great deal of the difficulty that had arisen in connection with these debenture bonds had been long foreseen. He thought nothing else could have been expected from the way in which Railway Bills had been passed in that House, and for which Parliament was, to a great extent, responsible. Parliament did lay down some rules by which Committees were directed to inspect the financial condition of these undertakings. This was difficult; but he thought there were means of ascertaining whether companies applying for powers had the means of carrying out their undertakings. He believed there was a sort of instinctive apprehension where it might be known that the parties applying to Parliament for Bills had the right amount of capital for carrying them out. There had been a flood of enterprize at one time, followed by stagnation at another; there had been too much confidence at one time, and too much distrust at another. The Duke of Wellington, with his usual sagacity, stated the real case when he said that all railways were, in their real nature, monopolies. They should therefore have been recognised as such, and the best possible bargain made with them. However bad monopoly might be, a ruined monopoly was the worst of all. He thought it would be well that they should come to a definite conclusion by which the embarrassment should be lessened. If Members were not willing to adopt the remedy of the hon. Member (Mr. Crawford), then he thought they had better say what remedy should be applied, or come to the conclusion that nothing should be done to meet the requirements of the railway interest.

MR. LAING

said, he wished to point out to the House what was the real and most important issue raised by the hon. Member (Mr. Crawford). The hon. Member had taken too narrow a view of the subject in looking at it as one simply relating to the existing state of railway embarrassment. If the position of railways in this country had been like that of the lines in the United States—if an uniform and consistent system of absolute free trade had been adopted, and if, afterwards, the railways had fallen into embarrassment, he would then have entirely concurred with the Vice President of the Board of Trade (Mr. Stephen Cave), that all that could be done was to remove all legal restrictions, and leave them to work themselves out of the difficulty as well as they could. In dealing with the proposal of the hon. Member, the House might, at the present stage, set aside all question of details. If the House could see its way to the principle involved in the proposal the working of details might be easily adjusted. The idea of Government interfering to give a guarantee did not, he thought, involve Government interference in the working of railways. No loss on a guarantee was likely to occur, as the debenture capital had been limited to one-fourth, with the exception of a few railways in a state of hopeless insolvency. Except in such instances he thought there was an ample margin of security in all cases. It might be assumed, then, at present that no practical risk of loss would be incurred on the guarantee. Another assumption which he would make was that assistance of the kind mentioned would be a very great and essential relief to the railway companies, and be the means of enabling them to convert the short-dated debentures into perpetual or long annuities. He then came to the question as to how this proposal was to be considered as a broad one of principle, and with respect to that he must say that weighty arguments had been adduced on both sides. On the one hand, there was no denying that if the House were prepared to guarantee railway debenture stock it must be prepared to do it largely, and must look the £120,000,000 of capital in the face. It was not exactly like going into the market for a loan of consols to that amount; but, no doubt, by such a proceeding the Government securities in the market would be greatly increased. The supply would be beyond the demand, so that the prices of Government securities would fall, and in time of peace the great national reserve for a time of war or any other emergency would be used up. He thought the question not ripe for practical decision, but it was desirable that the arguments pro and con should be fairly put before the House and the public. On the one hand, weighty and solid advantages might result from the suggested measure. There existed a mass of railway property, amounting to nearly half the amount of the National Debt, which was in a position of great distress and difficulty, that distress and that difficulty having been occasioned to a great extent by the action of Parliament. The question then arose whether by a measure which would not cost the country anything—the proposed guarantee being covered by the railway receipts—Parliament could restore that large amount of property to a condition of comparative prosperity. It was impossible to deny that the distressed condition of the railway companies was owing to the inconsistent policy pursued by Parliament. If this country had gone on the United States plan of total free trade in railways, the railway system might have been much less costly. If they had adopted the French system, or that sketched out by his right hon. Friend (Mr. Gladstone) many years ago, things might have been in a very different position. We should have had large companies in several districts whose interests were identified with that of the public, either by terminal concessions or enforcing a reduction of fares. But, by halting between the two systems, we had arrived at a state of things which placed us at a disadvantage with foreign countries as regarded railways, our cost of railway transport being on an average something like three times as much as that in Belgium. Looking at the extent to which trade and commerce was identified with railway travelling, and the conveyance of raw material and manufactures, it was a great drawback as regarded the future of this country. Then, again, while France at the end of a limited term of years would come into possession practically of a sinking fund, equal to half its National Debt, we had nothing of that kind in this country. Last year there was much discussion about the reduction of the National Debt. If anything on a large scale was to be done, this was, perhaps, the only opportunity of doing it. By giving a guarantee which cost nothing, we should bring into operation a sinking fund equal to the whole capital invested in railways, say £400,000,000. This in ninety years would become the property of the State, and so available as a set-off to the National Debt—and eventually our railway fares might be reduced to the Continental standard. Such seemed to be the balance of the weighty arguments on both sides. On the one hand we had the disadvantage, practically, of increasing the amount of the National Debt in time of peace. On the other the advantage resulting from providing a sinking fund of magnitude for the redemption of the National Debt, while at the end of a period of years the control of the Government would enable them to reduce the scale of fares of railways to a level with those of the Continent. He did not think as yet they were ripe for balancing these comparative advantages and arriving at any positive conclusion on the subject. It was one of those subjects on which they could hardly expect the Government to take the lead till public opinion ripened into definite conclusions. He thought this discussion, however, very useful as a means of calling attention to it, and in the meantime railway property could afford to wait the solution of the question. He was therefore very glad to hear from the right hon. Gentleman (Mr. Stephen Cave) an indication of his opinion as to the more immediate remedies necessary to meet the exigencies of the position. He did look forward to the time when they would relieve railways from all those absurd restrictions by which they were bound, when they would allow them to issue debenture capital to any amount and at any price the public chose to take it. That would be an immediate and practical measure; but he felt greatly indebted to the hon. Member for having raised the discussion of the far larger question of principle involved in the case.

MR. WATKIN

said, that in dealing with the general question, they ought not to forget the legislation of 1844. The idea of the mode by which the country might become the owners of these train roads was not therefore formed to-night. It had been in the minds of statesmen since 1844. At that time a Committee was appointed at the instance of Sir Robert Peel, which devoted a great deal of time to the consideration of the question, and the minority were in favour of altering the constitution of railway companies to this extent that, instead of being freeholders, the railways should after a certain period become the property of the State. At this particular moment the State might make conditions which in the time of their prosperity railways would have refused. If he were a financier charged with any department, he should consider whether an opportunity was not now offered to effect a good, permanent and useful transaction for the country. Were they to do anything for the reduction or final extinction of the National Debt? It might be thought by some that it was better to have the steadying weight of £800,000,000 around our necks. But all must admit that both the credit and interests of the country were bound up in the reduction of the National Debt. How, then, were they to reduce it? Not by taxing industry. Was it, then, to be reduced by cash payments or by applying the credit of the country to the operation? A great financier would endeavour to use credit rather than a hard, dry payment of cash. Was there any other operation available but one analagous to that proposed by his hon. Friend (Mr. Crawford) to bring about that admittedly desirable result? It seemed to be a matter on which there was very little difference of opinion—after all it came to a question of terms. In France they would have the means in fifty-seven years of paying off the whole of their National Debt. If we did not initiate some measure of policy with regard to our Debt, we should still have £800,000,000 around our necks. An opportunity now existed of taking advantage of the necessities of railway companies to lay down some scheme by which that great property would become the property of the State in a limited number of years. This was not purely a question of finance. Thirty-five years ago railway property in this country would have been covered by £1,000,000; it was now £450,000,000, What, if it increased in the same ratio, would it be twenty-five years hence? It would be the most powerful industrial and the most powerful single political element in the whole country. Were they, then, indifferent to the consequences of committing such an enormous political power into the hands of railway companies as they were now gradually and silently, but certainly, accumulating? This was, in his opinion, a favourable opportunity for a great financial scheme. There were precedents for its success. This was the only way in which the National Debt could be dealt with, and there was great danger in allowing these great political corporations to grow up uncontrolled.

SIR STAFFORD NORTHCOTE

The proposal of the hon. Member (Mr. Crawford) is one of such great importance, that whilst we are obliged to him for having called the attention of the House to it, I would appeal to him whether it is desirable that he should ask the House to come to a vote on a question of such magnitude, which is hardly ripe for decision. What strikes me in the discussion is this—that there are two considerations, one of which throws doubt on the other. On the one hand, it is said that the position of a certain number of railway companies is such that it is difficult for them to raise the money they require to meet their debentures—that to a certain extent the embarrassments of these companies is due to the action of Parliament and to legislation—and therefore that they have certain claims on Parliament and on the Executive for some assistance. On the other hand, we are told now that we have an excellent opportunity of effecting large transactions for the reduction of the National Debt. When we have two such arguments as these two such fine birds to be killed by one stone, it is necessary that we should consider carefully the ground for such arguments, that appear too good to be compatible one with the other. What is the case as it lies upon the claim of the railway companies? The railway companies say, "We are in a position in which we cannot raise the money we want, and therefore we come to you to help us to raise the money." Now, why were they not in a position to raise it for themselves? They say that they cannot raise at less than 4 or 5 per cent the money that they think the Government can raise at 3 or 3½ per cent. Is it because the security of the railways is not good enough to induce people to invest their money, or because there are some legal difficulties or artificial impediments to their obtaining the money that people would be glad to lend? If it is meant that there are artificial impediments in the way, then the question arises whether we cannot clear them away. But if the security is not good enough to induce the public to lend the money, then what you are asking the Government to do is to take upon themselves a certain amount of risk for the sake of the railway companies. I do not say that, under certain circumstances, the Government should not take upon themselves some risk for the sake of the railway companies. But then, you set aside the other part of the argument, that it involves no risk to the Government to secure such a large privilege as would enable us even to pay off the National Debt. I confess that the second argument makes me look with very great suspicion upon this proposal, and it appears to me a very sufficient reason not for setting aside the proposal, but for asking in detail for the data upon which the proposal is made. We think that hon. Gentlemen ought to tell us whether they are of opinion that the railway companies, whose debts we are to assume, have or have not sufficient security. If they have, I want to know what is the inducement that the railway companies should give 1 per cent to the Government to finance their railways for them; give 1 per cent more than the Government could borrow the money for. Some definite statement should be made upon these points before the House is asked to deal with the question. Under present circumstances, it would be unfortunate if the House were compelled to pass a hasty vote, either in favour of or against the proposal. I therefore hope the hon. Gentleman will withdraw his Motion.

MR. GLADSTONE

I am very much inclined to join my voice to that of my right hon. Friend (Sir Stafford Northcote) in expressing the hope that the hon. Member for the City will not ask the judgment of the House upon the Resolution which he has proposed. It is quite plain that whatever the opinions many of us entertain, or whatever the leaning of our minds, this is certainly one of the most vast and intricate subjects that was ever introduced into the House of Commons. If the assumptions of the railway companies be correct, or the protest against all interference be just and sound, yet neither party ought to desire, in the present immature and crude state of our information and views, that the House should be committed to any judgment. I can quite appreciate the anxiety of my hon. Friend (Mr. Crawford), connected as he is with the money-market and all time transactions in the City, to avail himself of this particular moment for effecting what he feels to be a great public object. I quite grant that there are specialities at the present moment which, if we were in a condition to entertain the question, would make it desirable that at this very moment we should come to a decision in the affirmative or negative. But in matters of this kind we have not always an unembarrassed choice, and certainly at this time it would be premature to give a decision upon a question of so vast a range, which so deeply affects the public interest, and reaches so far into futurity. I think, after the very intelligent statement of my hon. Friend (Mr. Laing), and with the example of France before our eyes, it is difficult to deny that there is considerable weight, and also that there is great attraction, in the views which have been pointed out as to this proposal being calculated to relieve the railway companies of their difficulties without any great increase of the public burdens of this country. On the other hand, it cannot be denied that by causing a very great extension of the aggregate amount of public securities in the market, without any means of procuring an extension of the number of those who are bidders and buyers of those securities, you would have to account for a fall in those securities. I am far from inclined to think that it would go so far as to affect seriously our credit. I believe that its action would be restrained within much narrower limits. I would venture to say that the amount of that action would be very much restrained, or extended and enhanced by the general policy of Parliament in dealing with the ordinary amount of balance and expenditure from year to year. Many Members take a special interest in the application of this question in the sister country, and it appears to me there are many considerations that must recommend a separate inquiry and a separate dealing with Irish railways. The total amount of railway property in Ireland is much more limited. Therefore the inconvenient consequences that are apprehended must be very much restrained, and it is possible that an experiment in Ireland might tend to prove the possibility or the impossibility of any such experiment in England. There are some difficulties connected with the matter which could only be disposed of after a most careful and minute examination. As to Government management and centralization, it appears to me that these are topics which might be easily disposed of. Government management ought not to be under any circumstances entertained; and as to centralization, this is a matter to be disposed of from time to time as the leases of the lines fall in and shall be renewed. As far as we can see at present, there would be great difficulties in the practical working connected with new works for which the demand is so instant and various in form. It appears to me that we are not in a condition to arrive at a decision at the present moment, and therefore the best practical course is to wait and see what encouragement or discouragement we shall receive from the labours of a body of very competent persons, who have undertaken an investigation into railways under a Royal Commission appointed some two years ago. The publication of the Report of that Commission cannot fail to be an epoch and a stage in the discussion of the question, and I trust that my hon. Friend will be contented to wait till the Report of that Commission is printed, to consider what is the nature of the step which he should take. I trust that for the present he will be content with the acknowledgment, that is universal, of the public service which he has performed in drawing attention to a subject of such great magnitude.

MR. CRAWFORD

said, he was sure the House would be of opinion that the last two hours had not been thrown away. He should, for his own part, be willing to take the advice given him by Gentlemen on both sides, not to ask the House to express an opinion upon the Motion. He was not without a hope that the discussion which had taken place would be of great use in the House, as well as outside of it, and in that hope he was willing to withdraw his Resolution.

Motion, by leave, withdrawn.