COMMITTEE.

HC Deb 10 July 1860 vol 159 cc1676-89

Order for Committee read.

House in Committee.

MR. STANILAND

said, when he told the House that this Bill directly affected property to the value of £6,000,000 or £7,000,000, and prospectively affected an amount of property equal to half the amount of the national debt, he had said enough to insure the patient attention of hon. Members to the measure before the House. It would be necessary to detain the House somewhat at length in order to put them in possession of the facts of the case; but inasmuch as he sought the reversal of a decision of a Committee, which at all times was a most difficult task to accomplish, especially when that Committee sat twenty-one days, and was presided over by a Gentleman so universally and deservedly respected as the right hon. Member for Wiltshire (Mr. Sotheron Estcourt), the House would see that he had undertaken no ordinary duty. It had always been the policy of the Legislature to encourage the investment of capital in national undertakings, securing on the one hand a fair remuneration for the capital invested, and on the other imposing such restrictions on companies as would protect the public interests. That was the principle which actuated their railway legislation in 1844. An Act then passed for encouraging the investment of capital in that description of property, which provided that if at any time after the end of twenty-one years from that period, it should be shown that railways on an average for the last three years had earned and divided 10 per cent, it would be competent to Government to cut down the rates, but, if they did, they should secure the maximum rate of dividend. In 1847, previous to which there had been extensive operations throughout the kingdom in gas and water, the Government introduced two measures—one applicable to gas, the other to water. The provisions of both were identical, making it competent to gas and water companies to earn and pay a dividend of 10 per cent, and if, after 10 per cent paid, and laying apart a sum equal to one-tenth of their capital to meet depreciation of their property, they still showed a surplus profit, the public might come in and participate by a reduction of charge. Various Acts of Parliament bad since passed applicable to particular towns and companies, and in these the Gas and Water Companies Acts had been incorporated. A very large amount had been expended in these undertakings—in gas companies no less than£18,000,000 had been invested in the United Kingdom, one-third of which belonged to the various Metropolitan gas companies. They had also a debenture debt of £1,000,000. £12,000,000 had been invested in gas companies in the provinces. In London water companies £6,000,000 had been invested, and in the provinces double that amount, so that, in these two cases of gas and water companies, a capital of not less than £36,000,000 had been invested on the faith of Acts of Parliament, under which proprietors were permitted, if the profits enabled them, to receive a dividend not exceeding 10 percent. That was the state of things at the present moment as regarded capital invested. When any of the old companies came to Parliament during the last three or four years for an extension of their capital, Parliament said to them they must submit in respect to their further capital to a smaller maximum dividend, but in no one case had Parliament interfered to cut down this maximum 10 per cent on the old capital, So recently as 1854 the Imperial Gas Company, with a capital of £1,250,000, came to Parliament for powers to borrow £600,000 new capital, and, finding their management good, and no complaint made of their charges, Parliament applied the same rate of dividend to the new as to the old capital. So recently as last Session another London company, the City Gas Company, came again to that House for further capital and increased powers; and, although Parliament did limit the price of gas to 5s. per 1,000 feet instead of 6s., they still continued the maximum dividend of 10 per cent. The companies had invested their capital, relying upon the guarantee of the Legislature, but now that guarantee was to be repudiated, and the capitalists who formed those companies were told that in future their dividend must be at a lower rate. Those companies which were well managed of course had large dividends, and their shares had been regarded as favourable investments even by trustees. He found that in one company alone, the Imperial, there were no less than 252 ladies shareholders, whose capital produced them an income of £13,900 a year. Those ladies had, no doubt, been recommended to purchase gas shares, because they were an advantageous investment, and were carried on under a settled arrangement with the Legislature. In 1857 there was a change of circumstances. In the Metropolis some persons had formed themselves into gas companies with no charter of incorporation, and without the sanction of an Act; and carried on their operations by permission of the vestries and local authorities. Those companies were not confined to any particular district, but extended their pipes in any district where they could get permission to open the roads; while the incorporated companies were limited to particular districts by the terms of the Acts constituting them. It was, however, found in 1857 that the extension of their pipes by the unincorporated companies had not diminished the price of gas to the consumer, although it had reduced the dividends of the shareholders. All the Metropolitan companies therefore agreed, in order to remove the grievance of continual stoppages in the streets arising from the laying down and repairs of pipes, and also for the sake of economy, that in future each company should take a particlar district as arranged among themselves. Immediately that arrangement was made there came an outcry from the vestries of London—not from the consumers—against what they called monopoly. He understood monopoly to mean the exclusive right to deal in an article, and in consequence of that exclusive right furnishing a bad article at a price above its value. If that were a correct definition of monopoly, then he contended that the Metropolitan gas companies were not open to any such imputation, because, in assigning districts to each company, they did not attempt to exclude any capitalists who might choose to start fresh companies from entering those districts. The cry of monopoly was a dishonest, unfounded, and purely vestry cry. What had been the results of the arrangement he had described? It would naturally be supposed from the continual outcry of monopoly against the gas companies' that the latter had raised their charges to the maximum price permitted to them by Parliament—6s. per £1,000 feet; but the fact was that since that arrangement not a single company bad increased its rates. [Sir JOHN SHELLEY: Public lights?] He could enlighten the Committee on the matter to which the hon. Member referred. Public lights consumed an enormous amount of gas, which was charged for at a very low rate, quite disproportionate to its value. He could state that the companies lost money by every public lamp they lighted. But out of 13 Metropolitan companies only two had advanced their charges for the public lights, and the whole additional charge throughout the Metropolis did not exceed£300 a year. When he added that the Bill now before the Committee would give those companies power to charge a still higher rate, he thought he had succeeded in disposing of the cry of monopoly, which was a dishonest cry, got up by interested parties in order to deprive property of its rights.

In the last Session of Parliament a petition had been presented by various gas consumers of London. A Committee was appointed to investigate the charges set forth in the petition. The charges were, that the companies supplied bad gas of insufficient illuminating power; that they charged more than was necessary to produce for them the maximum dividend they were allowed to earn; that the streets were continually disturbed; that the companies were capricious in their mode of cutting off supplies, and that they were in the habit of requiring an incoming tenant to pay the arrears of his predecessor. Not one of those memorialists, however, had the courage, or he might say the audacity to ask the House to interfere with the rate of dividend permitted by the existing Acts of those companies. The Committee arrived at no conclusion, and consequently the same parties came this year to Parliament with the Bill under the consideration of the Committee. On the face of the Bill there was no attempt openly to interfere with the maximum rate of dividend fixed by previous Acts of Parliament, but it sought to do so indirectly by reducing the uniform price of 4s. 6d. per thousand feet of gas to 4s. The Committee to whom the Bill was referred, and which bestowed an unusual amount of pains on the subject, was presided over by the right hon. Member for Wiltshire (Mr. Estcourt) than whom nobody was more desirous to deal fairly between man and man, and after an inquiry of twenty-one days the measure assumed its present objectionable shape. It ought to be mentioned that the promoters previously circulated, in innumerable shop windows throughout London, a document which might be characterized as a wholesale solicitation to gas consumers to prefer accusations of every sort and kind against the Metropolitan companies. Of the grievances and complaints thus collected a liberal use was doubtless made before the Committee; yet on the 10th day of the investigation the Chairman said the Committee could have nothing to do with the crimination of the gas companies, having no grounds to suppose they had gone beyond the terms of their Acts. On the 13th day, when the counsel for the promoters had concluded their case, the Chairman intimated that the Committee had pretty well made up their minds upon certain points. Among those points was the substitution of inspectors for the existing tribunal for receiving complaints. The Committee also agreed that it was indispensably necessary to affirm distinctly by a clause of the Bill that which was to be the basis of all future operations namely,—not monopoly, but the "districting." The Chairman also admitted that 10 per cent should be the maximum standard of profit, observing that the Committee only wished that the guarantee which Parliament had given to the capitalist as to the rate of dividend should be continued to him. On the faith of this intimation of the views of the Committee the counsel for the Opposition to the Bill subsequently assented to the preamble. Pour days later, however, on going through the clauses, the Committee announced that they had seen reason to "resile" (to quote their own expression) upon the heads which they had laid down for the provisions of the Bill; in other words, that they wished to depart from almost every point which they had before indicated as essential to the measure. For the dividend of 10 per cent they substituted one of 8 per cent. They also wished when the 8 per cent was earned to reduce the price from 4s. 6d. to 4s., the effect of which would be to diminish the dividends of the whole of the London companies by 4 cent at a single blow. They further proposed to give the inspectors such unheard of and inquisitorial powers as no company could possibly submit to. On the 19th day of the investigation the opponents of the Bill withdrew from the Committee, adopting that course, as was stated by Mr. Serjeant Wrangham, because certain propositions which had emanated from the Committee, and in consequence of which they had not opposed the preamble, had been departed from in such a direction and to such an extent that they were led to fear that the magnitude of the interests at stake was not duly appreciated by the Committee, or at all events, that the inevitable results of legislating upon such principles were not foreseen by them. From that time the Committee were left in the hands of the promoters of the Bill, and the consideration of the clauses was proceeded with. How those clauses were settled was well illustrated by what took place in regard to the reduction of the maximum dividend of 10 per cent, which Parliament had repeatedly guaranteed,—to 8 per cent. The Chairman first referred to the amount fixed in the Gas Works Clauses Act of 1847, and after some conversation with the Parliamentary agent and others said, "In the Gasworks Clauses Act it is 10 per cent: how would it do to put it at 8 per cent?" How would it do! This question was put to an agent who appeared there ex parte. Could hon. Members doubt what was his reply? He answered, "That would work more commercially." And thus in this most unsatisfactory manner, without data or calculations, was the maximum rate of dividend of 10 per cent reduced to 8 per cent. In making that alteration the Committee had done away with the distinction between old and new capital which had previously existed, and applied the same limit to companies which were now earning only 2 or 3 per cent, and to those which were making more than 8. The latter error was perceived by Mr. Denison, the counsel for the promoters, who pointed out that a different scale ought to be provided for companies which now paid more than 8 per cent, such as the Metropolitan, which paid 9, and the Imperial, which was paying 10 per cent. More than this, the Committee had taken from the companies their reserve funds. Hon. Members were aware that in the case of all companies, but more especially of those which were engaged in manufacturing, it was necessary that there should be a kind of balancing deposit, to meet any deficiency of dividend which might arise from unforeseen circumstances. Accordingly, in the Act of 1847 it was provided that the gas companies might set apart a portion of their receipts, not exceeding one-tenth of the capital, to form such a fund. By this Bill, however, it was provided that the inspectors should inspect the books and examine the directors of these companies upon oath, and that if it appeared to them that 8 per cent had been earned, no matter to what accidents they might have been subjected, the price of gas should be reduced 6d. per 1,000 feet. The profit from the manufacture and sale of gas depended upon the fluctuations in the price of coal, of coke, and of labour, and it was therefore most important that these companies should have reserve funds. In the course of the inquiry the Chairman of the Committee expressed an opinion that it did not depend much upon the price of coal; and, provided the prices of coal and coke maintained their usual relation in point of value that was no doubt the case. If, however, the price of coal rose, and that of coke fell, as was the case during the Russian war, the profit derived from the manufacture of gas would be materially diminished. In consequence of a recent explosion an action had been brought, and was still pending, against the Central Gas Company, in which a claim was made for no less a sum than£60,000. What would be the position of that company if it had no reserved fund? Its annual dividends amounted, in the aggregate, to about£17,000, so that, without the protection which Parliament had wisely given in the shape of a reserved fund, its profits for four years would have to be devoted to the payment of these damages. Again, those who had observed the lime light on the new Westminster Bridge were aware that the profits of the existing gas companies might be entirely destroyed within twelve months by some new discovery. So precarious was the nature of their property; and yet the Select Committee had determined that their dividends should be cut down to the ruinous rate of 2 per cent. Take the case of a company now paying 10 per cent. The Bill said that in future it should not pay more than 8, from which at least 2 per cent must be deducted for depreciation, leaving an apparent dividend of 6 per cent. But the reduction of 6d. in the price of gas, which was also part of the Bill, would be equivalent to 4 per cent of dividend, so that in reality, the annual profits of the company could not exceed 2 per cent. It was hardly necessary for him to dwell further upon the operations of such a measure. The honorary secretaries to the league against the companies had publicly stated that the Select Committee had given them far more than they sought at their hands. That was his complaint. If the Committee had given only what the promoters of the Bill asked, little or no harm would have been done, and the gas companies would have been perfectly satisfied, for they were not opposed to, but rather courted, what was called uniform legislation. So far as the Bill sought to control the management of gas companies no fault could be found with it. In 1852 a Bill was introduced to regulate the affairs of water companies, but no attempt was made to interfere with the amount of the dividends payable to the shareholders in those concerns. The water companies still received their 10 per cent, but they were subjected to certain regulations, to which the gas companies would have no objection in their own case. The present Bill, however, was an invasion of the rights of property, and unless the House was prepared to sanction the principle of confiscation, and to place its credit upon the same level as that of defaulting Spain or the repudiating States of America, it was impossible that it could sanction so obnoxious a measure. The hon. Gentleman concluded by moving that the Chairman should leave the chair.

MR. SOTHERON ESTCOURT

said, that, as he had the honour to be the Chairman of the Committee to whom the Bill had been referred, he would naturally be expected to state the circumstances which came under their consideration. He might be permitted to say at the outset that he did not think any five Gentlemen ever undertook a disagreeable task with minds more entirely resolved to do that which they conceived to be their duty. Their only object was, on the one hand, to protect the public, and, on the other to do justice to the gas companies. The hon. Gentleman had based his complaint against the Committee upon two grounds—first and chiefly, the reduction of the maximum dividend payable to the gas companies from 10 to 8 per cent; and, secondly, the reduction of the price of gas from 4s. 6d. to 4s. The truth was, however, that the Committee had not really reduced the profits of the companies from £10 to £8 per cent. In the Gas Clauses Consolidation Act 10 per cent was fixed as the point at which there should be a reduction in the price of gas, and the Select Committee were at first quite prepared to recognize the propriety of adopting that standard, and the more so as 10 per cent was the actual rate of profit made by some of the companies. In referring to the conduct of the Committee, the hon. Gentleman had not fairly stated the case in quoting a single sentence from the short-hand writer's notes as having been used by him (Mr. S. Estcourt) just as if that had been all he said on that occasion. It was said he had asked how would they do if the Committee fixed the maximum at 8 per cent. But that was not the question. The question was, whether the maximum should or should not include depreciation. The Committee thought it should, but it was represented to them that it would be far better for the companies themselves to deduct a net sum—2 per cent—for depreciation, and to fix the maximum dividend at 8 per cent, instead of 10 per cent with depreciation. If the Committee had enjoyed the advantage of the presence of the counsel for the companies from the beginning of their investigation to the end, it was very likely that they would have adhered to their original intention, but on the nineteenth day, when nothing had been positively agreed upon, those gentlemen, in consequence as they said of certain observations which had fallen from the Chairman, intimated their intention to withdraw, and appeal to that House. The Committee might either accept or reject the Bill, hut he hardly thought that it would allow the hon. Gentleman to convert it into a tribunal for trying details, which ought to have been tried before the Select Committee, who showed every disposition to receive any amount of information that might be tendered to them. The question whether the preamble should pass was deemed to be a question of detail and to depend on the nature of the clauses, and when the Committee got through two-thirds of their labours the counsel for the opponents of the Bill withdrew. There was one point, respecting which the hon. Gentleman had said but little, though he should have thought that the power proposed to be given to the inspectors would have been denounced. But the Committee should understand how this matter really stood. The whole of these twenty-two companies obtained their Acts upon the understanding that the principle of competition was to be acted upon, and for years competition was carried to a great extent; but in 1856 and 1857, having probably exhausted their resources, they thought it would be better to come to an understanding, and thereupon combination took place of competition. He was ready to bear testimony that there was no ground to blame the conduct of any of the companies, but, if hereafter any vestry or private consumer should have reason to complain of the quality of gas or of the amount supplied, there would be for them, as matters stood at present, no remedy. They could not, if dissatisfied with one company, fall back upon another, because the companies had an agreement among themselves not to compete with one another in assigned districts. Under these circumstances, as competition was put an end to, it was the first duty of the Committee to protect the public, and for this purpose the establishment of inspection appeared the only means. That was the opinion of the Committee, and until the close of their labours they had thought that all the companies were satisfied with the scheme of inspection which the Committee had sketched out. The hon. Gentleman said that the Committee had not heard a great deal of that which the opponents of the Bill had to tell them, and that the House ought to reverse the conclusion of the Committee. He hoped the House would do no such thing, for it was very desirable that the Session should not pass over without legislation on the subject. If the companies, however, being dissatisfied with the decision come to, should desire the Bill to be re-committed to the same Committee for the purpose of supplying fresh information, but not with the view of defeating the measure by a protracted inquiry, he undertook to say that the Committee would fairly and dispassionately consider the new matter. Two things must be agreed on, however; first, that no fresh evidence should be offered, but that what was to be stated should be in the way of information; and next that, if the Bill were again committed, the decision of the Committee would not again be called into question. Considering the great pecuniary interests connected with these companies, the importance of securing protection to the public, and the fact that legislation had been sought for year after year on this question, he thought it would not be an unwise act on the part of the House to refer the subject back to the Committee. He had never served on a Committee with Gentlemen more patient and painstaking than his colleagues, and if the House chose again to recommit the Bill, he should enter on the inquiry with the utmost satisfaction.

SIR GEORGE LEWIS

said, the Bill had been before the Committee nineteen days, and had received full investigation, with the assistance of counsel. When a measure had been examined at such length, it was not very respectful to those hon. Gentlemen who had undertaken so laborious a duty, and did not tend to the economy of time, when attempts were made to review, in detail, the proceedings of the Committee. No doubt, with a mixed measure of this kind, it was competent to the House to go through it clause by clause, as if it had not been referred to a Committee. But if the labours of a Committee were thus to be thrown away, he hardly knew how the business of the House was to be conducted. Without expressing any opinion on the details of the measure, he would merely observe that circumstances had come to light since the Report of the Committee, which rendered some further consideration of the question as between the consumers and the companies expedient. But he confessed that he thought if the House were to undertake such an arbitration at that period of the Session, it would inevitably result in the loss of the Bill, and in the waste of all the time bestowed upon it by the Select Committee. Under these circumstances, the House, in his opinion, would do well to take the course indicated by the right hon. Gentleman, and refer back the Bill to the Committee, who would then attempt to reconcile these conflicting interests. If that object were accomplished, the Bill might be passed through Committee without much delay; and it would go to the House of Lords and might become law in the present Session. He did not think any useful object would be served by pursuing the debate in detail; and he hoped the Committee would consent at once to report progress, in order to carry into effect the suggestions so wisely and prudently made to it. If so, he would himself move that the Chairman do leave the Chair, on the understanding that some Member of the Committee would give notice for the recommitment of the Bill.

MR. NORRIS

said, that with a view to make the passage of the Bill more easy when it came back to the House, he would suggest to the Chairman (Mr. Sotheron Estcourt) that he should now state whether the Committee would be likely to leave the question of dividend where the Gas Clauses Consolidation Act of 1845 placed it. If so, he believed all parties would be satisfied.

SIR GEORGE LEWIS

said, he thought it would be most inconvenient if Members of the Committee, before hearing any evidence, or having any opportunity of conferring one with another, should pledge themselves to any particular course. He felt satisfied that they would investigate fairly all the questions which came before them; that they would not think themselves bound by any point of honour to adhere to their previous decision; and that they would regard the whole subject as open to reconsideration.

MR. HENLEY

said, he agreed in thinking that the Committee should be perfectly unfettered in their reconsideration of the Bill. At the same time, it should be understood that when the measure came back here, the House would not be pledged to accept it as final. Such great and important principles were at stake, that the House had a right to express its opinion upon them, even at the last stage of the Bill. He had been much struck with the remark of his right hon. Friend (Mr. S. Estcourt) that there were no grounds of complaint against the gas companies, although it was desirable that the public should have protection for the future. That had not been the case with regard to the water companies; for the public had complained most grievously of the quality of the water.

MR. JOHN LOCKE

said, he thought the evidence showed that great complaints were justly made against a particular company which supplied gas on the other side of the water; but not against the other companies. He considered the proposition made by the right hon. Chairman of the Select Committee a fair one, and he believed all questions would be disposed of with the greatest ease.

LORD ROBERT CECIL

said, that with the amouut of business which the House had before it, it would be useless to go on with the Bill, or to reappoint the Committee, unless there were some understanding that hon. Members would abate to some extent the right which they possessed of discussing its provisions. He hoped a precedent would not be drawn from the course taken by the counsel for the gas companies in this case, who, when they found they had not got a Committee to their liking withdrew from before it, and transferred their arguments to the floor of the House of Commons. The result of such a course, if persevered in, would be utterly to destroy the system of Select Committees. Hybrid Bills of this nature were attended with the double disadvantage that they entailed enormous expenses on their promoters, without in return obtaining any certainty that the Report of the Select Committee would be followed up by legislation. They had all the inconvenience and delay of public measures with all the cost of private Bills.

SIR MINTO FARQUHAR

said, he had no interest whatever as a shareholder in any gas company, but, residing as he did in the Metropolis for seven months in each year, he felt it to be of the utmost importance that the question should be settled. There were clauses in the Bill which arbitrarily interfered, as he thought, with the gas companies, and he regarded the proposition to refer it back to the Select Committee as fair and reasonable. At the same time he should be sorry to see the principle established, even though a measure might come from the most respectable Committee, that it was to be passed in silence by the House. Gas companies differed from other associations in one important particular. With other undertakings the purchase of shares was optional with the public; but they were compelled to go to the gas companies, and these ought therefore to be conducted on principles just towards the public as well as to their own proprietors.

MR. STANILAND

said, he was perfectly willing to withdraw his Motion on the understanding that the companies should be at liberty to place their case fully not only before the Committee but also, if necessary, before the House.

MR. NORTH

observed that the Select Committee had declined to enter into the charges against the gas companies, and had not, therefore, pronounced a verdict either of condemnation or acquittal.

SIR JOHN SHELLEY

said, whenever a Member stood up to advocate public interests, in which those of his constituents happened to be involved, he was at once accused of seeking popularity, and of acting with a view to electioneering: interests. The best answer he could give to such a charge was that the subject of the present measure had been anxiously discussed for four Sessions; there had been three Select Committees, and he had been a party to two compromises with the representatives of gas companies. He was quite willing to have taken the Bill in the shape in which it had come back from the Select Committee, but he would not object to their going into the whole question again. He had no desire to interfere unjustly with those who had invested capital in gas establishments, but he thought the public ought to be protected against their arbitrary conduct. Judging, however, from the excitement which had been going on in the lobby outside for the last fortnight, it was probable that nothing would satisfy the companies but trying what really was the determination of the vestries, but if they went up to the House of Lords they would find the vestries perfectly ready to fight it out there.

MR. SOTHERON ESTCOURT

said, it was a mistake to suppose that he had ever maintained that the House would be bound by the decision of the Committee. If the hon. Member for Limerick would say that he approved the scheme now before the House, then he should be perfectly satisfied that it would be a Bill likely to carry out the desired objects.

MR. F. W. RUSSELL

said, the companies could not receive that amount of justice which they required unless the Bill went upstairs with a full understanding that there was to be a full and fair inquiry, and that further evidence was to be taken if necessary. Without that understanding it could not be expected that the companies would assist in carrying the Bill. At present there were many points in the Bill most objectionable to the companies—particularly that relating to inspectors, which would take away the entire control of the companies from the directors, and to vest it in officers who had no interest whatever in their prosperity.

LORD ROBERT CECIL

said, that after the declaration of the hon. Gentleman it would be useless to waste time by sending the Bill upstairs again. The case of the promoters had taken fifteen days, and it was presumable that the case of the opponents would last the same time, and this being the 10th of July it was easy to see that it would not be possible to get the Bill up to the House of Lords before the last day fixed by them for receiving Bills from the Commons. The object was clearly not settlement but delay, and it would be better to fight the matter out at once.

Motion agreed to.

House resumed. [No Report.]