ELECTRIC TELEGRAPHS.—COMMITTEE. (Hansard, 5 July 1869)

THE MARQUESS OF HARTINGTON
said, in making the statement he should have to submit to the Committee, and in moving the Resolutions with which it would be his duty to conclude, he should avoid as much as possible everything of a controverted or disputed nature. There would be ample opportunity, if Members were so disposed, to renew the discussion of last Session on the second reading of the Bill. If any hon. Members still thought that the policy which dictated the measure of last year was unwise—if they thought that the arrangement then entered into was an extravagant one—it would be quite competent for them to move the rejection of the Bill on the second reading; and he did not think it incumbent on him at this stage of the proceeding to enter into any argument for or against the measure of last year. He therefore proposed to take up the subject where it was left by the passing of the Act of last year, and inform the House as briefly, but at the 1215 same time as clearly as he could, what had occurred since, and what yet remained to be done to accomplish the transfer of the telegraphs to Government. The effect of the Act of last year was to confirm certain agreements which had been entered into between the Postmaster General and the various telegraph and railway companies interested in the telegraph business throughout the country. Those agreements gave power to the Government to purchase these undertakings, subject to the necessity of introducing a Bill to Parliament this Session to provide the necessary funds. The principal provision of the agreements thus entered into was that a sum amounting to twenty years' purchase of the net profits of the companies up to the 30th of June of last year should be the price paid to the proprietors of these undertakings. There were in several instances other minor provisions by which, in the case of companies that had entered upon new trades or that had not yet commenced those trades, something should be allowed for prospective profits. But the main provision of all those agreements was that of twenty years' purchase of the profits. An engagement was entered into with the House and with the Select Committee which investigated the subject last year, that every possible means should be taken to ascertain that those net profits which were to form the basis of the bargain should actually be the profits they professed to be, and that the plant and other property to be handed over to the Government should be in a proper state of working order and repair. As soon as possible, steps were taken to fulfil that engagement. A Committee was appointed to investigate the accounts of the various companies; the Receiver and Accountant General of the Post Office was the head of that Committee, and he was assisted by gentlemen selected from the Office not only for their general ability, but specially for their knowledge of accounts. It was impossible that one Committee of the same persons should investigate all the accounts; but most elaborate instructions were drawn up for their guidance. Care was taken that they should proceed on a uniform principle, and that the knowledge they acquired by the examination of the accounts of one company should be available in the examin- 1216 ation of the accounts of another. The most experienced engineers whose services could be obtained were employed to examine the state of the various wires, cables, instruments, and plant belonging to the various companies; and, between the Committee which examined the accounts and the engineers who examined the plant, he believed that a fair opportunity was offered and taken advantage of to ascertain that sufficient allowance had been made in the accounts of the companies for depreciation, and that the stock which was about to be taken over was in fair working order. He would inform the Committee what were the amounts claimed by the telegraph companies under the Act, and what were the amounts to be actually paid to them. The whole amount that was claimed by the companies was £7,036,037. The amount that was to be paid to the companies was £5,715,047, showing an abatement of the claims made by the companies of £1,320,990. He should be prepared, if the Committee wished it, to state the exact sums to be paid to each company; but as they would be stated in the Schedule to the Bill he would now content himself with reciting the total. The examination made of the accounts of the companies showed that the trade the Government were about to purchase was a very steadily and rapidly increasing trade. The trade of the various companies was of course growing at different rates; but the examination of the whole showed that it was a steadily increasing trade. Great fault, he believed, had been found with the number of years' purchase that the Bill of last year awarded to those companies. He was not going to enter into any controverted subject; but he might state that investigation showed that the trade of two of the principal companies—the Electric and International and the Magnetic Companies—was growing in the one case at the rate of 18 per cent, and in the other case at 32 per cent per annum. Now, if the trade of the whole of the companies were only growing at the average rate of 10 per cent per annum that trade would, by the 31st of December in this year—the earliest date at which they would probably be able to take over the business—have increased to such an extent that, instead of its being twenty years' purchase on the receipts of 1869, it would be seventeen. 1217 and a-half years' purchase of the receipts of this year that they would give. It might be interesting to the Committee to know what proportion of that £5,715,000 was due to the purchase of those twenty years' profits, and what was due to other matters. Now £5,220,109 was due to the purchase of those twenty years' profits, while the other provisions only amounted in all to £494,938, or something under £500,000 sterling. As soon as the telegraph companies had been settled with, they proceded to deal with the railway companies interested under the Bill. The agreements with the railway companies were not yet entirely concluded, but two of the most important—the London and North-Western and the Great Western Companies—had been already settled with; and the amounts which were claimed by the other companies and the progress made in the adjustment of their accounts proved conclusively that the claims of the railway companies would to a very great extent assume the form of a charge for rent or way leave, and that £700,000 would be amply sufficient to purchase the whole of the trade of the railways which were doing public telegraphing business. While those two investigations were proceeding, they also took measures to ascertain what amount it would be necessary to spend on the extensions and re-arrangements of the telegraph lines so as to afford the country the whole extent of that accommodation which was promised last year. For that purpose the lines as they would be re-arranged were laid down on the map; the number of new instruments that would be required were computed; the cost of the re-arrangements was computed; the length of line for the extensions which would be necessary was calculated; the post offices in all parts of the kingdom were surveyed; the cost of the alterations of fittings was estimated; and the result was that the whole of the re-arrangements could certainly be effected at a sum under £300,000. He ought also to state that the £300,000 would cover the expense of obtaining the Act of last year and the expense of the preliminary investigations, of the arbitrations with the various companies, and, in fact, all the expense of setting the scheme in operation. They had now arrived at a sum for the telegraph companies of £5,715,000; of 1218 £700,000 for the railway companies; and of £300,000 for extensions and preliminary expenses. That brought the expenses as far as they had got to £6,715,000. There would be, under the monopoly clauses which it was proposed to introduce into the Bill, some few companies with whom it would be necessary to come to arrangements, and who were not dealt with under the Bill of last Session. There were some companies having very small trades indeed which it was not thought necessary to purchase. There were some companies which had got Acts and were in possession of certain patents, but which had never been in possession of some trade at all, but which would undoubtedly put in some claim under the monopoly clauses. They knew in some cases what those claims would be. Some of the claims that would be made were excessive, but still none of them were of any considerable amount; and power would be given by the Bill to deal with them by means of arbitration, which he thought would give them all to which they were entitled. It might confidently be stated, then, that the addition which those dealings would produce to the sum that he had mentioned would be very slight, and that the total expenditure to be incurred before the transfer of the telegraphs to the Government occurred would be covered by the sum of £6,750,000. The Committee would desire to know what was the net revenue which the Government anticipated the country would obtain in return for that expenditure. He would first take the gross revenue and the gross expenditure which they anticipated; and he would offer some explanation of how those gross sums were arrived at. They expected to get a gross revenue of £673,838; the estimate of the expenditure was £359,484, leaving a net profit of £314,354. The interest upon the £6,750,000 which he had stated as the purchase money would, at 4 per cent, be £270,000, or, at 3½ per cent, £236,250, leaving in the one case a surplus of £44,000 a year, and of £78,000 in the other. The Resolutions which he intended to move, and the Bill which would be founded on them, would give power to the Government to raise the necessary funds in any one or all of four different modes—either by Exchequer bills, or Exchequer bonds, or by 1219 the creation of Consolidated Stock, or by the creation of Terminable Annuities. It would not be necessary, seeing that the money would not be immediately required, that he should enter further into any explanation as to the particular one or the several modes which would be adopted. No doubt, if further information on that subject was desired, it would be furnished to the Committee by his right hon. Friend the Chancellor of the Exchequer; but he believed they might confidently expect that the money would by one or all of those methods be raised at a rate of interest not exceeding the lower figure he had named—namely 3½ per cent, and that the estimated surplus to which they might look forward, after paying all expenses and interest on capital, would be £78,000. He now proposed to state to the Committee how their estimate of revenue and expenditure had been arrived at. The first and principal item of their revenue was that for inland messages, which they estimated at £514,000 a year. That estimate was arrived at in this way. The number of inland messages for the year ending last December was, within a very few, 6,000,000. The ordinary increase that had been ascertained to exist in every one of these companies up to June 30, which was the date to which these calculations were made, would bring the messages up to 6,250,000. Now, there were two reasons why there would be a very large increase upon these inland messages. The first was the additional facilities that they were going to give to the public for the use of the telegraph, the second was the reduction in the price. As to the additional facilities which were to be given to the public in the use of the telegraph they might be classed under three heads. There would be, in the first place, the creation of offices of deposit, and every letter box and every pillar box would be an office of deposit where messages would be received to be sent to the telegraph office, to be forwarded to their destination. The next facility would be to bring the wires into the money-order office in every town and district, thereby bringing the telegraph into the centre of a population instead of its remaining, as it frequently did at present, in the outskirts. The third facility was the extension in many places of the number of hours dur- 1220 ing which the telegraph would be accessible to the public. With regard to some of these matters they had not had any means of ascertaining the increase. With regard, however, to bringing the telegraph nearer the centre of population, they had been able to form a tolerably accurate estimate. They had the experience, not only of foreign countries, but of telegraph companies in our own country to guide them, and they were consequently able to form a tolerably exact estimate of what would be the result if the telegraph companies extended their wires from the outskirts to the centres of population. They had reason to believe that there would be an increase of 15 per cent following from those facilities. As to the increase following the reduction in price, telegraph messages were now divided into several classes. Some were sent at 6d., others at 1s., others at 2s., at 3s., and at 4s. Those varying prices they now proposed to assimilate to one uniform tariff of 1s. for twenty words. In one case—that of the 6d. messages—there would be a reduction in consequence of the increase of the price to 1s., and this reduction they had estimated at 50 per cent. The number of offices would, however, be so multiplied, and the item of porterage so far reduced, that they did not anticipate the reduction would really be so great. The increase of 15 per cent from the extension of facilities would of course apply to every kind of message: and would further increase the figures he was quoting. The 1s. messages would remain as they were, subject only to the increase of 15 per cent, the 1s. 6d. would be increased by 50 per cent, the 2s. by 100 per cent, the 3s. and 4s. by 103 and 106 per cent respectively. These were not arbitrary estimates. They had been ascertained to be the increase resulting from the reductions in tariffs in this and other countries, and the Government believed it to be an under statement of the increase that might reasonably be expected to follow the reductions they proposed to make. Taking the number of telegrams at 6,250,000, which was supposed to be the annual rate, from June this year the estimated number of messages in the first year would be 8,815,443. As a considerable number of these telegrams would consist of more than twenty words, each telegram had been 1221 estimated as producing 1s. 2d., and at that price these 8,815,443 telegrams would yield a revenue of £514,234. He would have to detain the Committee for a much shorter time on the remaining items of revenue, first in connection with which was £109,577 for Continental and Atlantic messages. That was no estimate, for it was the actual share of the receipts from the Continental and Atlantic messages, which under their agreement they would be entitled to receive. It was the share of the receipts earned last year, and there was no reason to suppose that there would be any diminution in the next twelve months. Then from private wires and instruments they were to receive £25,027, and on the transmission of news £25,000, and in both cases the sums mentioned were less than the receipts which had been earned by the telegraph companies whose business they had taken. These items would give a total of £673,838. The first item of expenditure was £89,371 for the maintenance of land lines. In that item there was but little uncertainty. In one or two cases contracts had already been entered into with companies to maintain the lines at a certain sum per annum, and there was but little doubt that other companies would willingly accept the same terms. For the maintenance of wires on roads and canals, which would be put down in a different way, they had taken the highest rates which existing companies had to pay. Next came the maintenance of inter-insular cables, £2,267. This sum merely related to the maintenance of the cable between England and Ireland, the maintenance of the submarine cable devolving on the Submarine Company. For the maintenance of instruments the estimate was £11,357. That estimate had been arrived at by actually counting the wires and instruments to be maintained at each station and the annual expense of maintaining each instrument having also been ascertained. The next item was for salaries and wages, uniform clothing, travelling expenses, poundage on the sale of stamps, and all other expenses incidental to the commercial branch of the business, and under this heading their estimated expenditure, including compensation for redundant officers of companies, would amount to £191,205. That estimate had not been made roughly, but had been formed 1222 upon a careful inquiry into the circumstances and requirements of every station. It proceeded upon a scheme mapped out and planned for every one of the offices; and though he did not mean to say that the scheme might not have to be altered, he wished to assure the Committee that it was the result of careful inquiry, and not of any guess. For wayleaves, rents, rates, and petty expenses, they had estimated £49,500, the larger part £30,000 having to be paid to the railway companies for wayleaves or rent. All the railway companies had not yet been settled with. They had made arrangements with the London and North-Western Railway Company; and with the others with whom their time did not so soon expire they would probably be able to arrange on more advantageous terms. The last item was £15,784 for the renewal of cables whether inter-insular or continental. That was, no doubt, a very exaggerated estimate. Contrary to the opinion of some of the most experienced engineers, the Government had taken the life of a cable at fifteen years, and estimated that they would have to replace them all at the end of that time. The total of the estimated expenditure was £359,484. It would, no doubt, be observed that the estimate was somewhat less than the estimate of the expenditure given by Mr. Scudamore. This estimate, laid before the Committee last year by Mr. Scudamore, was necessarily framed in a very rough and broad manner; but the estimate which he had just brought under the notice of the Committee was based on calculations made at every point. He might mention, as evidence of its probable accuracy, that the proportion of revenue to the expenditure was as nearly as possible the same as the proportion of revenue to expenditure in the case of the largest company— the Electric and International. He saw no reason why the Government should not be able to keep their expenditure in as favourable proportion to their expenditure as a private company had succeeded in doing. He might also observe that the calculations had been taken six months too soon, and for that reason had been taken rather to the disadvantage of the Government. The estimate of revenue had been made on the six months, ending June 30, in the present year; but the Government would not be able to enter into possession till 1223 the 31st of December, so that the revenue then would no doubt be considerably larger than that for the half-year on which the estimate was based. In the estimate no allowance was made for any increase after the first stimulus, but he thought the Committee would agree with him in thinking there was no reason to suppose that an annual increase in the profits would not arise. It was intended to introduce clauses to give a monopoly of telegraphic business to the Government. The Committee would observe that the Government did not expect this undertaking would be unremunerative. Indeed, he hoped that in time it would be a source of considerable revenue to the Government; but in resolving to enter into this matter the Government had been influenced much more by a regard to the advantage and convenience of the public than by a desire to make profits. It was true that the companies had extended their lines to the largest towns. The Government proposed to extend telegraphic communication to the suburbs of all the large towns, to all the second-rate towns having railway stations, and to places in which at present there were neither telegraph nor railway stations. The Government would serve 3,776 places, instead of 1,882 now served by telegraphs and railways, and they would have 848 branch offices, as compared with 277 existing at present. There was now one telegraph office to every 13,000 of the population; the Government would have one office to every 6,000 of the population. When the Government were giving such great advantages to the public he did not think it too much to ask that they should be protected from the unfair and dangerous competition to which they might be exposed by a company opposing them on some very remunerative line. He did not wish to enter upon any controversial topic on the present occasion. He would lay the estimates on the table and produce any other explanations in a printed form which the House might desire to be furnished with. The noble Marquess then moved the Resolutions.

§ MR. HUNT
thanked the noble Marquess for the clear and able statement in which he had laid the plan of the Government before the Committee. He would not enter into any controversial matters at present; but as the proposal 1224 to give the Government a monopoly was a departure from the scheme of last year, he would reserve his opinion on that point. He perceived also that it was proposed to give them the option of taking cash or Government securities, and he supposed the Government would reserve to itself the right to elect which of these four plans they would adopt.

§ MR. CRAWFORD
also thanked the noble Marquess for the clear and succinct manner in which he had treated this complicated subject. He wished to know whether, in awarding compensation, individual shareholders in companies would be dealt with by the Government in a direct manner or through the companies. There was some apprehension in the City that a large amount of stock was to be created, but perhaps there was no good ground for that apprehension. He should also be glad to know whether it were intended that the Government monopoly should interfere with the right now possessed by private individuals of communicating between their places of business and their manufactories or warehouses; he believed that any interference with that privilege would be found very inconvenient in many large establishments. He also thought that the increase of the charge from 6d. to 1s. for messages within the bounds of the metropolis would be unpopular, and would check the employment of the telegraph in that important portion of the kingdom. He thought the surplus should be applied, part in paying off the debt to be incurred, and part in reducing the cost of messages. The result of the telegraph being very extensively used would, however, be a reduction in our postal receipts. He wished further to be informed by the noble Marquess how it was proposed to deal with messages sent over sea—whether it would be necessary to resort to the telegraph companies in communication with such places as India or New York, or whether the work would be undertaken at the Government Offices? In conclusion, he had to express his belief that they were all bound to give to the Government every assistance they could towards carrying out that important scheme now that it had been finally adopted.

§ MR. MACFIE
said, he thought the country would be much indebted to the Government for bringing forward the scheme. A reduction in the tariff ought, 1225 however, to be made as soon as circumstances allowed of it. It was only on that understanding that the country would consent to a monopoly.

THE MARQUESS OF HARTINGTON
said, he hoped that either he or his right hon. Friend the Chancellor of the Exchequer would be allowed to reply fully to the numerous questions of the hon. Member for the City of London on some future occasion. He might, however, say at once that the Government proposed to deal with the companies and not with individual shareholders, and that there was not the remotest intention of interfering with private lines of telegraph used for the transmission of messages, relating solely to the business of the owners. The exceptions to the clause granting a monopoly, would be sufficient to cover any case of that sort. The increased receipts were expected to result from the increased facilities which would be given, and from the reduction of the charges. To the question respecting Indian and foreign telegrams he could not now reply with certainty, but his impression was that messages to India and. all Continental messages would be transmitted in the usual way through the ordinary offices; and he could not help thinking that the facilities afforded for the purpose would lead to a large increase in those messages. In conclusion, he took this opportunity of stating that, if the Resolutions were agreed to, he should to-morrow move the first reading of a Bill founded upon them. The measure would be referred to the Examiners of Private Bills, and he would take an early opportunity of stating when it would come on for a second reading.

(1.) Resolved, That it is expedient to provide for the purchase by the Postmaster General of the Undertakings of Telegraph Companies in the United Kingdom.

(2.) Resolved, That the Commissioners of Her Majesty's Treasury be authorized to raise such monies as shall be required for such purchase by the creation of securities chargeable on the Consolidated Fund of the United Kingdom.

(3.) Resolved, That the said Commissioners may raise such monies by Terminable Annuities or Exchequer Bills or Exchequer Bonds or Three per Cent Capital Stocks of Annuities, or by either or by all of such modes, provided that the total amount shall not exceed in the whole the sum of seven millions of pounds sterling.

(4.) Resolved, That it is expedient to authorize the payment, out of monies to be provided by Parliament for the purpose of all expenses which may be incurred in working, maintaining, and extending the Telegraphs so purchased, and for the 1226 issue of any surplus of receipts over payments arising therefrom to the Commissioners for the Reduction of the National Debt to be applied to the redemption of National Debt.

(5.)Resolved, That it is expedient to amend "The Telegraph Act, 1868."