COMMITTEE.

HC Deb 08 February 1861 vol 161 cc248-62

THE CHANCELLOR OF THE EXCHEQUER

moved that the House go into Committee.

SIR HENRY WILLOUGHBY

said he had to complain that the Committee were about to discuss a Resolution, of the terms of which they were wholly ignorant. Why should not a preliminary notice be given, as in other cases, of the precise nature of the Resolution about to be proposed?

THE CHANCELLOR OF THE EXCHEQUER

said that he was in the hands of the House. The Resolution was prepared, and he, for one, fully expected to see it on the Votes that morning. The Resolution was in close conformity with the notice given on the Votes.

House in Committee: MR. MASSEY in the Chair.

THE CHANCELLOR OF THE EXCHEQUER

Sir, I will not trouble the House with any lengthened statement, because, although a great deal may be said upon the various matters connected with the subject, the immediate point before us, although important, is a narrow one. I will not say anything as to the merits, the wisdom, or otherwise of the agreement that is under consideration, nor will I enter upon two other matters—both of great difficulty—one a contest between the Red Sea Telegraph Company and the contractors; and, secondly, the course that may have been ultimately taken with regard to this unfortunate line. All this is excluded from our present view, and we are now not to consider any matter of policy, but simply a question of good faith, to which I shall accordingly limit myself in the strictest manner. An agreement was made between the Treasury and the Red Sea Telegraph Company in the year 1859, and a Bill was brought into Parliament in the Session of the same year to give effect to that agreement. The nature of the agreement was understood by the public in a particular sense, and about that sense there can be no doubt. It was understood that by that agreement the Government guaranteed to the Red Sea Telegraph Company a minimum dividend, sinking fund included, of £4 10s. upon a certain maximum amount of capital during a term of fifty years; and although it was stated in the House of Lords by the noble Earl then at the head of the Government that this was a conditional guarantee, yet I apprehend the sense in which he used the term was that this was a guarantee conditional and contingent on the execution of the work, and on its being brought into working order. But now I come to speak, not of what was said in the House of Lords, which, I believe, passed without record of any kind, but of what was understood by the public and those who subscribed their money. In the first place, then, what was this understanding? and; secondly, were they justified in entertaining it? The understanding was that the contract was unconditional in one respect, and that, according to the intent and meaning of the agreement, all that the Company had to do was to raise the capital and lay down their line, and then they were not liable to be prejudiced in respect to this guarantee by any subsequent failure of the line to perform its functions. It is undoubtedly true that when that agreement was entered into it was thought by all parties, that the main difficulty consisted in the laying down of the line, and it was conceived that after a submarine telegraph wire had once been laid down a failure was not to be apprehended. The case, therefore, which has occurred was not distinctly in the contemplation of the j parties; and if this were a question I between private individuals I do not know that it might not be made the subject of argument and contest. But any Gentleman who will examine the course of the transaction between the Government and the Company will, I think, come to the conclusion that any subsequent failure of the line to perform its functions, although it was not in the contemplation of either party as a risk to be seriously guarded against, was intended to be borne by the Government; that is to say, although it was not distinctly and expressly so provided, yet the nature of the bargain was this—that the Company having done a certain work—having laid down the line in a proper state, were thereafter to be free from risk. The general facts connected with case are pretty well known. It is, I believe, unquestionable that on that understanding alone money was raised; and the responsibility of the Government in the case was a very peculiar responsibility, because two gentlemen were appointed official directors of the Company; their names were announced, they took part in the proceedings of the Company, and that was considered a conclusive guarantee on the part of the Government to the public of the character and security of the undertaking. When I speak of the Government I speak of them in the discharge of their natural and proper functions. They concluded a contract subject to the assent of Parliament, and the assent of Parliament was regularly obtained for that purpose. The Bill passed the Commons in 1859; it did not contain the contract, although it sanctioned it. In the House of Lords attention was drawn to this fact by the noble Lord now the Postmaster General (Lord Stanley of Alderley), and the Bill was amended by having the contract set out in it. When the Bill came down to this House as amended, and the Motion was made to agree with the Lords' Amendments, my right hon. Friend the Member for Carlisle (Sir James Graham), observed that these Amendments brought for the first time under our view a very important instrument of which we had no cognizance, and he moved that the consideration of the Lords' Amendments should be delayed for a fortnight, in order that the House might become acquainted with the terms and character of the contract to which we were about to give a final assent. Most unfortunately, as I think, and as I thought at the time, the House on a division rejected by a considerable majority the Motion of my right hon. Friend. They were careful lest the slightest suspicion should be raised as to the maintenance of the public faith. Nothing could be more honourable than the motive; the effect was most unfortunate; for I do not at all doubt that if that contract had been subjected to the view and consideration of the Members of the House, by allowing a fortnight to elapse before the Lords' Amendments were considered, the blot in its formation would have been hit, and, to the great advantage of all parties, it would have been removed. The Amendments of the Lords, however, were accepted and the Bill became law. Under that law provisions were made for the payment of dividends during the construction and submergence of the line, and these have been paid to the present time. In the latter part of last year it occurred that in consequence of differences of opinion between the directors, the company, and the contractors, a reference was made to the Government, and the due construction of the contract was brought under the consideration of the law officers of the Crown. They reported, in very unhesitating terms, that under the contract the Government were not bound to pay, and had no power to pay anything in the present circumstances and condition of the line. The first question, then, we had to consider was whether we were to avail ourselves of that state of the contract, or whether we should ask Parliament to amend the error in its construction, and pass a Bill which should give effect to the original understanding. Upon an examination of the evidence as to the original construction put upon the contract and the assurance given to the parties, and which they were originally justified in entertaining, we could not doubt but that our duty was to apply to Parliament, and that announcement was made to the Directors of the Company in an official letter, signed by my right hon. Friend the Member for Bury (Mr. F. Peel), on the 28th of January. There was another question, of a more delicate and more difficult character, on which the Government also came to a decision as to their duty, and that was the question whether we should at the Treasury assent to certain preliminary steps necessary for the verification of a half-year's accounts, the consequence of which would be to give authority for the issuing of half a year's dividends. The money necessary for these dividends was voted by Parliament, but for the purpose of enabling us to fulfil what was then believed and what we still believe to be a contract. The deliberate opinion, however, of the legal advisers of the Crown, in cutting away from under our feet the contract itself, appeared to us, on the just understanding of our constitutional functions, likewise to cut away from under our feet all title to pay this dividend. We might, in a case where a great practical evil was to be apprehended if any lengthened course of time elapsed, have been justified in undertaking the responsibility of issuing the money, though I am not sure that difficulties might not have been interposed by the Comptroller of the Exchequer. Whether that was so or not, we certainly came to the conclusion that inasmuch as we should have the opportunity within the course of a few days of bringing the matter under the judgment of Parliament, and inasmuch as we should be compelled to do so as regarded the general validity of the contract, it would be but due to Parliament and the respect we were bound to pay to its authority that we should refer to it the whole subject in its entirety, and that we should not reduce to an idle form the consideration of the Bill by proceeding at once to anticipate its judgment, and pay the dividends coming due; for they are not yet due, and it is even possible this measure may become law before the time has actually arrived. A Bill has been drawn for the purpose I have described, and re-establishing what we take to be the original contract. For ascertaining that understanding we have, on one hand, various documents that passed at an early period of the negotiations, and the evidence of various declarations in Parliament on record, both that of the late Secretary of the Treasury, and the still more authoritative declaration of the right hon. Gentleman the Member for Buckinghamshire (Mr. Disraeli) who expressed his view of the nature of the contract in 1859, when the Motion to which I have referred was made by my right hon. Friend the Member for Carlisle. The course we propose to take is this:—It is a matter of some nicety to determine the precise form in which an Act of this nature should be passed, because, although it is our duty to give effect to the original intention, it is certainly not our duty to do more. Our desire, therefore, is that the form of the Bill we propose should be narrowly canvassed by the House. I now submit a Resolution on the terms of which, if adopted, I propose to introduce a Bill. I will take the second reading of it on the earliest convenient day, and then I propose to refer the Bill itself to the consideration of a Select Committee for the examination of its provisions—not to go into the merits of the arrangement made, or into the question of what course it may be expedient to take with reference to this unhappy cable now submerged, and of which five out of six links are perfectly useless for all practical purposes; these may be proper subjects for inquiry, but not in connection with this Bill. The Committee will agree with me that the simple question of public faith should be kept distinct; the other questions will be more conveniently handled in a different form. With these explanations I beg to put into your hands the Resolution that it is expedient to guarantee to the Bed Sea and India Telegraph Company a minimum rate of dividend upon the amount of capital bonâ fide called up for the purpose of the said Company's undertaking.

MR. DIVETT

said, he could not agree with the right hon. Gentleman in the re- marks which he had made as to the inexpediency of entering into the question of the merits, or, as he said, the wisdom, of this undertaking. On that subject he must be allowed to make a few observations. He was not, however, about to cast any blame on the Government. He thought the Government had been forced into the guarantee by circumstances beyond their control. There was an extraordinary clamour for this telegraph at the time. There was great anxiety in reference to affairs in the East, and the press took a strong view on the subject, but the difficulties of the case had not been duly considered. It was incumbent upon Parliament, seeing that a failure of the Atlantic Telegraph had taken place, to take care that a guarantee of the public money should not be given, for nothing could be more clear than that all deep sea cables were failures. The notion of carrying those cables through deep water and their working with success was a perfect delusion as a commercial speculation. He hoped that in future nothing of this sort of guarantee would be entered into without the fullest investigation by the Government. He admitted, however, that good faith required the present Bill should be passed as speedily as possible.

SIR HENRY WILLOUGHBY

said, he did not believe that a more important question had ever been submitted to Parliament, as regarded the principle involved, than the one raised by the right hon. Gentleman the Chancellor of the Exchequer on that occasion. It was undoubtedly true that a contract had been entered into, but there was another question connected with it, to which the right hon. Gentleman had made but a slight allusion, namely, how was the contract in any way guaranteed by Parliament? It was a question involving £1,500,000. He admitted that that fact was of no consequence if it were really a question of good faith. [THE CHANCELLOR of the EXCHEQUER: The sum was only £800,000.] Yes, but if the Government guaranteed the interest on that sum for fifty years it would bring the sum up to the amount he stated. The matter came before Parliament in the shape of a private Bill: and, what was still more remarkable, it was an unopposed Bill. Was there not something unsound in their system, when, as in the present case, they might be compelled to pay £1,500,000 for nothing? And yet it was absolutely true that, with the exception of certain parties connected with the Government, the Members of the House generally knew nothing whatever about it. It passed as a private Bill, and went through the House without observation, the Chairman of Committees on the occasion being the right hon. Gentleman the Member for Kilmarnock (Mr. Bouverie). The measure passed in that way through the last Parliament, and it went up to the House of Lords, where it was suspended in its progress. When the present Parliament assembled the Bill came to that House in the shape of Amendments of the House of Lords for consideration, and he (Sir Henry Willoughby) was the person who called the attention of the House to the question. At the time the House knew nothing whatever as to what it was about. When he had put a question on the subject he received no answer. But the progress of the measure was impeded. The right hon. Baronet the Member for Carlisle (Sir James Graham) then took up the question and moved the postponement of the Lord's Amendments for a fortnight, in order to give time for a due consideration of the whole matter. Out of 307 Members then in the House 130 voted in the minority in favour of that proposition. Then, for the first time, the House became aware that it had saddled the public purse with this contingent charge; and now came the question, was it ever the intention of Parliament to give this unconditional guarantee? It was true a Resolution passed through the whole House, but in that nothing whatever was said of the extent of the guarantee. On the 14th of March that Resolution passed, fixing upon the country the burden of £36,000 a year for fifty years. Now, it was recommended in "another place," by the Earl of Derby, on March4th, that no unconditional guarantee should be given. It would now be seen that it was possible to saddle the public purse with an annuity of £36,000 a year for fifty years without obtaining one shilling advantage for the public, and almost without the knowledge of the House of Commons. The Contract Committee made a recommendation that should be borne in mind—that those matters should never be advanced unless a Resolution was placed on the Table of the House for a month beforehand, so that due inquiry might be made respecting them. Let them take the present ease for their information. He had no doubt they would have to pay the money—indeed, he thought the extreme of good faith would require it; but at least they might learn a useful lesson from the fact. He, for one, adopted the recommendation of the Committee, and would religiously adhere to the advice they gave them, namely, to insist upon a Resolution being placed on the table one month previously, and then, if there was no action taken against it, it might be proceeded with with the sanction of Parliament and upon the responsibility of the Government. As the case, however, stood, he was persuaded that the Government could take no other course than to carry out the terms of the guarantee.

MR. AYRTON

said, he wished to ask the Chancellor of the Exchequer whether the Resolution to be submitted to the Committee was in terms that the Government should pay interest at 4½ per cent upon a certain sum under all circumstances. No doubt good faith would have to be kept with those with whom they contracted, but he did not understand that the Government should do more than the prospectus which the Government received stated. The hon. Member having referred to the terms of the prospectus, said there was no engagement to pay a dividend of 4½ per cent, but what the prospectus contemplated was that the Government should pay the subscribers their £800,000 and make the telegraph. That was the only alternative in case of failure, and that was a serious matter, because the working expenses of the Company were formidable, and the last half year published showed them to be larger than the income. Now, he believed, there was no income but expenses. He quite admitted that they were bound to act in good faith with the Company, whatever might be the construction of the contract.

MR. WALPOLE

said, with reference to the duties which the Committee would have to discharge, he wished to ask whether it was proposed that the Committee should give an opinion upon the legal effect of the contract, because, if so, it would be better for the Chancellor of the Exchequer to act on the opinion of the law officers of the Crown than to have the matter discussed in that House. On the other hand, were the Committee to give an opinion upon the question whether the contract was conditional or unconditional? If so, that would admit of their receiving parol evidence upon the matter. If the Govern- ment did not think that should be done, the safer course would be to take the Bill through the House in the usual way, and that the House should act under the authority of the responsible advisers of Crown.

SIR STAFFORD NORTHCOTE

said, that in reply to the hon. Member for the Tower Hamlets (Mr. Ayrton) he wished to observe that in regard to the working expenses the Government would have the matter practically under their own control, because they had on the Board two officers directors, who would control the proceedings of the company, and prevent any unnecessary expenditure or charge being thrown upon the country. With regard to the penalty for the non-efficient conduct of the service, the Government might certainly take the line into their own hands; but there was no compulsory obligation to that effect. It was entirely optional for them to do so. He was not at the time this arrangement took place in the Treasury, and therefore was not cognizant of much that had taken place on the subject; but he had heard it was a proposed arrangement that if the company should fail the Government should be compelled to take the line. That proposition was, however, objected to, and therefore formed no part of the arrangement. In regard to what had fallen from the hon. Member for Evesham (Sir Henry Willoughby) as to the recommendation of the Committee last year, he apprehended that it would be impossible in future for any such bargain again to pass through the House without a distinct vote of the House had previously been come to. It should not be forgotten, at the same time, that the course pursued with regard to the Red Sea Telegraph Bill, though inconvenient enough, was not unusual, but that, on the contrary, it was the precise course which up to that time had been followed in all similar cases. Nor, he was sure, was there the smallest idea of deliberate concealment. Those who introduced the Bill had every reason to suppose that the terms of the contract would be made the subject of a rigid inquiry. There were seated at that time on the Opposition benches men of great intelligence and talent, who were perfectly well aware of the negotiations that had been in progress with the Red Sea Telegraph Company while they were themselves in office, and who knew that the Company had declined to undertake this service, except on the terms of an uncon- ditional guarantee. He referred especially to the late Mr. Wilson, who had taken an especial interest in these negotiations, and who was not likely to allow any attempt to pass a measure of that sort unfairly through the House without exposing the proceeding. If, as had been stated, the law officers of the Crown had advised the Government that the contract was not binding upon them, he supposed there was no other course open to the Chancellor of the Exchequer than that which he had taken, though he could not himself see where the difficulty lay. Some surprise had been expressed that the Government had agreed to secure to the Telegraph Company a dividend of 4½ per cent, whether the line was kept in working order or not. It should be recollected, however, that it was shown by the correspondence laid before the House and in the evidence before the Packet Contract Committee that it was the deliberate intention of the Government of that day to enter into the contract by which they were to secure to the Company a dividend of 4½ per cent, whether the line was or was not successful. It was a matter which the Government decided ought to be made an exception to the general rule of giving only a conditional guarantee. It was a matter of great political interest and emergency at the time. The line was brought forward when the country was suffering under a double infliction. There was first the mutiny in India, which demanded the speediest communication with that country. There was next the monetary crisis in this kingdom, which rendered it most difficult to obtain money at a cheap rate. Again, it was to be remembered that it was the policy of the Government to lay these private enterprises under restrictions which impeded their commercial success, and gave them a claim to some compensating assistance. The policy of the Government was to prohibit English companies obtaining the monopoly of particular lines as was usually done by foreign Telegraphic Companies, and to demand certain rights in respect of the transmission of Government messages. It was not fair to require this without giving the Company some corresponding advantage. Those were the considerations in favour of this arrangement. The question now was one of good faith. He was glad there was no intention to throw the slightest doubt upon the good faith of the Government. Parties had in- vested their money in the undertaking with great confidence. He believed trust money and money under marriage settlements had been invested in the undertaking on the faith of the Government guarantee. It would be most unfortunate if anything should give rise to the idea that beause an unintentional blunder had been committed it should be open to Parliament to consider the contract again upon its merits.

SIR GEORGE LEWIS

said, he was not disposed to charge the late Government with any concealment upon the subject of this contract. The Committee, however, was not called upon to go into a discussion of the prudence of the terms upon which the contract was arranged. The simple question they had to consider was, what was the understanding which existed between the parties, and which was ratified by Parliament. It would, undoubtedly, be the wish of the House to give effect to that understanding. Now, he confessed, having looked into the matter with some care, that he felt considerable doubt as to what the real understanding was with respect to the contingency which had arisen—namely, the entire failure of the line. It seemed to him that when the negotiations took place with the late Government, both parties assumed, as a matter of course, that the line once laid down, it would remain in working order, subject to only temporary interruptions. They accordingly entered into a guarantee that during any partial disturbance of the line, or any temporary want of funds on the part of the Company, a certain dividend should be paid to the subscribers; but he did not see any evidence in the papers that either party ever contemplated the contingency which had actually occurred. The contingency which had occurred, and the question the House had to consider was whether they were to pay 4½ per cent on these £800,000 for fifty years without the most remote prospect of any advantage to the public. As it was the desire of every hon. Member that the strictest good faith should be observed towards the shareholders, it would be satisfactory before the question was decided in Committee, or at any other stage of the Bill, that those persons connected with the late Government who were the principal parties in conducting this negotiation should give their assurance to the House that they understood that the contract as passed by Parliament did bind the country to the payment of that dividend on that sum in the contingency which had actually occurred. If such an assurance were distinctly given the House would feel, however disadvantageous the contract might be to the nation, the utmost willingness to retain faith with the shareholders.

MR. DISRAELI

observed that there were two kinds of guarantees in respect to these lines—the conditional guarantee and the unconditional guarantee. The conditional guarantee meant that a certain rate of interest for a certain amount of capital was secured to the Telegraph Company on the condition, first, that the line was laid; and next, that it was kept in working order. If the line were not kept in working order then the guarantee would of course lapse or be suspended. By the unconditional guarantee, however, the Government guaranteed a certain rate of interest on a certain capital, provided the line were laid, and, when laid, placed at once in working order, though not kept in working order. The only unconditional guarantee which was sanctioned by the late Government was this one of the Red Sea Telegraph. The line was laid, and it was first proposed that the guarantee should commence when the line had been ten days in complete working order after being laid down. The Government did not think that a sufficiently long time, and they inserted thirty days in the contract. The line having been completed and in working order for thirty days, the Government felt themselves engaged under the unconditional guarantee. What happened was certainly not contemplated. It was not supposed that on the 31st or 32nd day the machinery would fail; but it was perfectly clear that if the line was in successful operation for thirty days, the Government was entirely bound by the contract. The test which had been agreed upon had been successfully performed, and the case therefore came within the category of unconditional guarantees sanctioned by the Government. He agreed that the present was not the occasion on which to enter into the policy of these undertakings, though he was prepared to do so, were it necessary. He would only remark, in reference to an observation made by an hon. Member (Mr. Divett) who seemed to argue that, after the failure of the Atlantic cable, the Government should not have sanctioned such an operation as this, that the Government entered into the en- gagement before the failure of the Atlantic cable.

MR. EDWIN JAMES

said, many of his constituents were deeply interested in the question, and had subscribed their money upon the security of the public faith, and on considerations which he thought would influence any gentleman of ordinary prudence. The prospectus was published under the sanction of eminent solicitors in the City, and bankers did not hesitate to advise their customers to subscribe to the undertaking. There could be no doubt that the public faith was pledged to the undertaking, and he could not see that the late Government ought to be taxed with any improvident proceeding. It was easy to find fault after a failure which no human sagacity could contemplate, but at the time the line was proposed it was extremely desirable to have telegraphic communication with India. He agreed with the hon. Member for Evesham, that this proceeding might operate as a warning against the House voting hastily in such, matters, but they had now to deal with parties out of doors, who had subscribed their money on the faith of the Government guarantee. He, however, did not see the necessity for the appointment of a Committee on the subject. Although the Bill was passed as a private Bill, the contract was published in the Estimates, and was therefore fully brought under the notice of the House.

THE CHANCELLOR OF THE EXCHEQUER

said, he was glad that the Committee had had so clear a declaration from the right hon. Member for Buckinghamshire of the intention and understanding of the late Government with regard to the contract. He quite agreed with what had fallen from the hon. Baronet the Member for Evesham as to the dangerous practice of inserting money clauses, which made a charge on the Consolidated Fund, in private Bills; and, without presuming to pronounce an absolute opinion on the point, it nevertheless appeared to him well worth the consideration of the House of Commons whether it would not be proper to provide that no such charge should be imposed, except through the medium of a public Bill. The right hon. Member for Cambridge had asked what would be the functions of the Select Committee. He did not think, as he had already stated, that the functions of the Committee would be to enter into the policy or providence of the arrangement made; but the contract was an instrument somewhat complex and very peculiar in its form, and it had been a matter of doubt what was the understanding on which the contract was adopted and the Act passed. These were matters which Government had examined for themselves, but the House did not act upon what the Government had done, and it was desirable that it should, by an organ of its own—a Select Committee—try these questions and verify the facts on which the Bill was founded. A Committee could, on the part of the House, very easily satisfy itself by the inspection of documents, and by the examination, perhaps, of a single witness, what was the understanding on which the contract was founded, and whether or not the terms of the Act carried out that understanding. With respect to the objection that the terms of the Resolution were not in conformity with the terms of the prospectus, he would remind him that a Resolution like this proposed in preliminary Committee rarely formed the exact measure of the enactment which was subsequently to follow, as the House could restrict, though they could not enlarge, the terms of the Resolution in its subsequent course. As to the Question whether, in the event of the working expenses of the Company not being defrayed by its receipts, the public of this country and the Indian Government jointly would be liable to be called upon to make good the deficit, the most consolatory answer he could give was, that the working expenses were brought within the discretion of the Government, and would be reduced within very narrow limits. According to the wording of the contract itself, he was afraid the working expenses, as well as the payment of the necessary advances, would have to be borne by this country in the event of the failure of certain resources mentioned in the instrument as originally drawn up. He was glad to find that there was a concurrence in the House, in regard to a question where public faith was involved, toward the side of what the right hon. Baronet called extreme public duty.

MR. ARTHUR KINNAIRD

expressed his regret that the public credit seemed to have been somewhat tampered with by the course, with respect to the question, which had been, adopted.

Motion agreed to.

Resolved,— That the Commissioners of Her Majesty's Treasury be authorised to guarantee to the Red Sea and India Telegraph Company a minimum dividend of four and a half per cent, per annum upon a certain amount of capital honk fide called up for the purpose of the said Company's undertaking.

Resolution to be reported on Monday next.