GAS COMPANIES—ADDITIONAL CAPITAL.

HC Deb 20 April 1877 vol 233 cc1527-38

ADJOURNED DEBATE.

Order read, for resuming Adjourned Debate on Amendment proposed to Question [6th April], That in every Bill by which an existing Gas Company is authorised to raise additional capital, provision shall be made for the offer of such capital by public auction or tender at the best price which can be obtained."—(The Chairman of Ways and Means.)

And which Amendment was, To leave out from the first word "capital" to the end of the Question, in order to add the words "it shall be an Instruction to the Committee to consider the expediency of provision being made for the offer of such capital by public auction or tender at the best price which can be obtained,"—(Mr. Rodwell,) —instead thereof.

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

Debate resumed.

MR. RAIKES

said, he wished to make a remark on the point raised by the hon. and learned Member for Dewsbury (Mr. Serjeant Simon), when the subject was previously under discussion, and which was worthy of consideration. The point raised was, whether it was desirable to pass a Standing Order which might come into collision with a public Act, and the question put was answered by the statement from the Chair, that a Standing Order was not a legislative proceeding, but only a direction to a Committee of the House to do a certain thing with regard to a particular Bill, and it was by the action of the House and not of a Committee that any change in legislation could be effected. The hon. and learned Member for Sheffield (Mr. Roebuck) suggested that the House should proceed in a constitutional manner by legislation and not by Standing Order. Now he (Mr. Raikes) could not see any constitutional ground for preferring a Bill to a Standing Order, and that point was disposed of by the right hon. Gentleman in the Chair. Now he would ask what Act of Parliament this Standing Order could contravene; whether a private Act, or a public Act? Taking the case of a gas company which had obtained its private Act in 1867, and which had incorporated in that Act the provisions of the Gas Clauses Act of 1863, he asked could it for a moment be contended that Parliament, by passing a particular Act in 1867, dealing with matters then under its consideration, precluded itself from acting in 1877 as it thought proper with regard to matters which had not been contemplated in 1867. Such a contention was impossible to be maintained. It was suggested by some people that the Companies Clauses Act was a bar to such a proceeding as he proposed to the House to adopt; that that Act afforded a guarantee involving the good faith of Parliament towards the public; that it was of universal application; and that it was unalterable. But if hon. Members would read the Preamble of that Act they would see that it was merely a skeleton or model Bill, incorporating general provisions which it might be deemed desirable to introduce into a private Bill, but some of which the proposed Standing Order provided should in future have no operation in Gas Bills. If, as he contended, there was no conflict with any Public or Private Act, it necessarily followed that there could be no breach of faith. He did not see that the proposed Standing Order applied to any general Act or to any particular Act, and was quite satisfied that it would not override the provisions in any Gas Act now in force or the Companies Clauses Act. The 3rd clause of the Companies Clauses Act said that that part of the Act should apply to every company which obtained a special Act incorporating this clause. The limitation was as precise as a limitation could be, that it was only to apply to the particular Acts incorporating that clause. With reference to the Amendment of the hon. and learned Member for Cambridgeshire (Mr. Rodwell), he would say that he should be unwilling to do anything which might be supposed to trench on any right which had been guaranteed by Parliament. Now, the principal question for consideration was what would be the effect of passing this Standing Order. An illustration of that effect was to be found in the case of a Bill promoted by the Leicester Gas Company, empowering them to raise additional capital for the benefit of the existing shareholders, rather than for any public purpose, for since the Notice had been upon the Paper they had withdrawn the Bill and come to terms with the Corporation. Further, in the case of the Gas Light and Coke Company's Bill, in 1876, the Chairman of that company, after the passing of that Bill, stated that the Committee had imposed the auction clauses, which he thought a valuable enactment. Now the effect of these clauses was to send up the shares 10 or 12 per cent almost immediately. Therefore, not only on the ground of the public benefit, but even in the interests of the Companies themselves, he contended that the auction clauses were sound policy and likely to produce a benefit to all parties. The hon. and learned Member for Cambridgeshire had accepted the principle that care should be taken by the auction clauses to protect the interests of the public; but he wished to throw on those who represented the public the onus of proving their case. There was another Amendment on the Paper, which stated that auctions should be recognized as a matter of public policy but were not to be enforced—that the Committee might adopt them, but that if they did so, they must state their reasons to the House for coming to their conclusion. That shifted the onus to the gas companies, and he was prepared to accept the arrangement proposed by the hon. and learned Member for the borough of Cambridge (Mr. Marten). He (Mr. Raikes) assured the House that he did not contemplate any proceeding which would injure the property of Gas Companies, but felt convinced that on the contrary his proposition would considerably improve their position.

MR. KNATCHBULL - HUGESSEN,

disclaiming any personal interest in the matter, as ho had never held a share in any gas company, doubted whether, if indeed any legislation was necessary, the matter before the House was not more properly a subject for a Bill rather than' a Standing Order. The latter implied a distrust of the Select Committees, and unless some stronger case was made out for departing from the ordinary rule of embodying provisions of this kind in Acts of Parliament, he should vote against the Motion, seeing that it was opposed to every constitutional principle of legislation. The ordinary method of legislation was by means of a Bill carried through both Houses of Parliament, and he objected to making Standing Orders supply the place of Bills. Beyond that he thought the question one upon which no hard-and-fast line could be drawn, and it would be far better to leave Select Committees to determine, each in the particular case with which it had to deal, whether any special direction should be given as to the raising of additional capital.

COLONEL BERESFORD

thought the proposal of the hon. Gentleman the Chairman of Ways and Means was one which was better suited to an arbitrary Government than to a British House of Commons. This new Standing Order was a direct attack upon capital, and if agreed to, it would repeal all the Acts of Parliament passed on this question up to the present time; and that, too, without giving the parties affected by the measure any opportunity of being heard. The Leader of the House the other night stigmatized it as a stringent measure, and the Chairman (Mr. Raikes) said that before the resumption of the debate, he would consult the Government what course should be pursued. The debate, however, was now resumed, and seeing that the proposal would be unjust to nine out of every 10 companies in the Kingdom he must vote against it. If the subject must be dealt with, a Bill should be introduced and proceeded with in the usual course.

MR. GOLDNEY

begged to draw attention to a remarkable instance which would prove the necessity of some such Standing Order as that proposed by the hon. Gentleman the Chairman of Ways and Means. In 1867 he sat on a Committee having before it a Metropolitan Gas Company's Bill. The proceedings lasted almost consecutively from the 19th of May till the 3rd of August, and the result was a very elaborate Report drawn up by Lord Cardwell, the Chairman, as to the principles which should guide gas legislation. The Report was accepted by several gas companies. In 1868 the City of London Gas Bill was passed. In 1869 a now Bill, that of the Imperial Gas Company, came down from a Committee without entering into any of the stipulations which the Committee of 1867 sought to enforce for the benefit of the public. The Bill was sent back to the Committee with an instruction to embody the clauses of Lord Cardwell's Report. The Members of the Committee on that occasion stood up and declared that they had never heard of those clauses, and that if they had been brought under their notice they would have passed a very different Bill. This showed, he thought, the necessity of some such Standing Order as that now proposed, by which the attention of Committees would be drawn to those principles, and which he would cordially support.

SIR HENRY JACKSON

said, it seemed to him that the Motion involved two questions—one of law, and the other of policy. The first seemed perfectly plain, the other required some consideration. On the question of law he agreed with the hon. Gentleman the Chairman of Ways and Means. It seemed to be conceded that every Select Committee would have the power of imposing these auction or sliding-scale clauses in every case when they thought justice required it; and if that could be done in isolated cases, he failed to see why the House might not adopt a Standing Order applicable to all cases, assuming that it was expedient to do so. The real question, however, was whether it was expedient for the House to adopt that course at present. There could be no doubt as to the existence of a considerable amount of jealousy towards Parliamentary Gas Companies, and he ventured to say that this was founded on a not unnatural dislike to any kind of monopoly. No one cared to be obliged to go to only one merchant for a commodity almost of necessity, and to buy it at that merchant's own price. How was that to be dealt with? Parliament had encouraged the investment of money in the production of gas, and' while the manufacture was in its infancy and to some extent experimental, had considered 10 per cent the proper rate of maximum dividend. If that was now thought too high, Parliament could very well impose a lower rate even for new investments, just as it now usually did on additional capital, and limit the dividend to 7 or 6 per cent; or Parliament might determine once for all that no further facilities or powers should be conferred on private gas companies, and that local authorities alone should for the future supply gas to their respective districts. This might raise an important economical question, but it was one which really underlay the present controversy. It might be raised either by discussing a Standing Order or a Bill; but it seemed to him the most inconvenient way to deal with it was by Standing Order. Many companies would like to raise further capital by the auction clause. Let Parliament give them that power if it chose, but why impose it upon them? So long as Parliamentary Companies were allowed to continue, it could not be wise to discourage their efforts by interfering with their internal affairs, and subjecting them to quasi public control. The subject was a large one, and such as could only be satisfactorily dealt with by a Bill brought in by the Government and thoroughly discussed; and for that reason he suggested that the matter should stand over for further consideration. He hoped the matter would not be pressed to a division.

MR. HEYGATE

said, that he had nothing whatever to do with the management of the Leicester Gas Company, but he had received several remonstrances from that and other companies regarding the subject of this Motion. The hon. Gentleman the Chairman of Ways and Means had been misinformed in regard to the Leicester Gas Company, and his statement that that company had proposed to raise capital that was not required for the purpose of the town was entirely unfounded; the suggestion had not been made, even by the opponents of the Bill; and he did not know what the case of Leicester had to do with the proposal, unless it had enabled the Corporation to purchase on terms that were unfair to the company. He preferred to believe that the terms agreed upon between the Gas Company and the Corporation were fair to both parties, and that they were arrived at without any undue pressure. He protested against the notion that the Act secured a dividend to shareholders. On the contrary, all that the Act did was to limit the dividend and impose new and onerous conditions on the Companies. A largo amount of capital had been created under these Acts, and it was hardly fair to those who had invested their capital under a given assurance to deal with them as was proposed by this Standing Order. He agreed in the remark that had been made by the hon. and learned Baronet opposite (Sir Henry Jackson) and would urge the Chairman of Ways and Means to consider whether it would not be fairer to propose legislation in the ordinary way by means of a Bill; but he would not promise to vote for such a Bill, because had not heard any reasons to show that it would be a politic measure and for the good of the country. It would have the effect of encouraging questionable enter prize, for it would prevent the extension of existing companies into outlying districts, and in that way those districts would be left in a state of starvation. It might be said that other companies might then come in and compete, but he did not think that under the circumstances it would pay any new company to do so, as the capital outlay would render it impossible for them to supply gas at remunerative prices to the outlying districts of towns only. Gas shares were held generally by the middle classes, and were a favourite investment with those who had saved a little money after years of toil, and it should be the policy of the House to encourage, and not to discourage, such investments, instead of forcing people of that class to put their money into bubble companies, or such securities as Turkish or Paraguayan Bonds. They often had to wait for years before they earned a satisfactory dividend, and, when they did at length earn it, it was surely not for Parliament to grudge it. Under all the circumstances of the case he would support the Amendment of the hon. and learned Member for Cambridgeshire.

MR. W. E. FORSTER

said, he did not agree with the last two Speakers, and could not but think that the Standing Order proposed, with the Amendment of the hon. and learned Member for Cambridge (Mr. Marten) which was to be accepted, would be one which would be generally accepted by gas companies, and one which would be a settlement of the question at issue. It was at first said that the most dreadful results would follow the enforcement of changes on the metropolitan gas companies recommended by the Committee which had been alluded to by the hon. Member for Chippenham (Mr. Goldney), and of which he (Mr. Forster) too was a Member. They were, it should be remembered, dealing with the largest and most powerful gas company in England, the Gas Light and Coke Company, who opposed the sliding scale quite as much as the auction clauses. But since then they had themselves adopted the sliding scale as beneficial, and last year in the amalgamation Bill the auction clauses were accepted without any real discussion on the matter by the companies. The principle that the Committee decided upon was to accept the sliding scale, they would allow them to take higher dividends, if they gave the gas cheaper, and lower dividends if they charged a higher price for it. They had not had the auction clauses before them, and were therefore never asked their opinion upon them; but he believed that most of the Committee were favourable to the principle. Without them it must be the object of a company that could make 10 per cent. to be as extravagant as possible in order that it might divide 10 per cent on future capital, and the payment of 10 per cent instead of 5 would, of course, prevent the reduction of the price of gas to the consumer. It was only fair to the public that the companies, who got a good business, for which they might thank Parliament, should raise their capital on the terms on which it could be obtained in the open market. Some objection had been taken to the form by which the Chairman of Ways and Means proposed to accomplish his object. He thought the course taken by the hon. Gentleman was quite right, and that a new Standing Order would be a better means of effecting the desired change than having recourse to a Bill, which would inflexibly bind the companies to the adoption of a certain course. There were Standing Orders relative to railways quite as imperative as this. It was, in fact, merely a strong suggestion to the companies to put this provision into their clauses, unless some strong reasons to the contrary could be shown to exist.

MR. ROEBUCK

said, that since the last debate he had been told by the hon. Gentleman the Chairman of Ways and Means that he (Mr. Roebuck) was mistaken in supposing that this Standing Order could override an Act of Parliament, and that it was, in fact, a mode of proceeding quite in accordance with the Rules and Orders of the House. It appeared that there were three parties interested in this question—first, the public, secondly the gas companies, and lastly the individual share holders, and the interests of the shareholders were not always coincident with the interests of the companies. By this Standing Order the interests of the public and of the companies would be considered, and not the interests of the shareholders. If so the House ought to pass the Resolution, and in order that it might do so, he should give it his support.

THE ATTORNEY GENERAL

said, that it had been stated that the proposal would be an infringement of an Act of Parliament, and it was also suggested a few days ago, when the matter was under discussion, that it was unconstitutional, and that the House of Commons had no power to adopt such Standing Orders. He did not see any legal or constitutional difficulty in the matter. The hon. and learned Member for Dewsbury (Mr. Serjeant Simon) appealed to the Speaker, and the right hon. Gentleman thereupon clearly explained the law and practice of Parliament in the matter. A lurking doubt, however, evidently continued to exist in the minds of some hon. Members; but the hon. Gentleman the Chairman of Ways and Means thereupon gave a further explanation. It might, however, be necessary to repeat, that if any different provision existed in a former Act of Parliament the passing of an Instruction to a Committee sitting on a Gas Bill, that some provision of a different sort should be adopted would not be an unconstitutional proceeding. That Instruction would come back to the House in a Bill which would pass through all the usual stages of legislation, and would then be taken up for the assent of the other House of Parliament, and to receive the Royal Assent. It would then be no longer an Instruction, but the legislation of Parliament, which might or might not interfere with the former legislation of Parliament. It was, however, clear that no such Act existed. The Act of Parliament referred to by the hon. and learned Member for Dewsbury was the Companies Clauses Amendment Act of 1863, and all that it did was to frame a number of model clauses which might be inserted in Bills if the Committees on those Bills chose to insert them. It was not, how- ever, compulsory upon the Committees to adopt the Companies Clauses Act of 1863, and the Order of the House that a certain Instruction should be given to a Committee would in no way contravene the Act. It was asked—"But why not proceed by a Bill?" He would ask in return—"Why should you, when what you want to accomplish can be so much more easily done by a Standing Order?" It was said that the shareholders of the gas company had some sort of right to have whatever additional capital was created offered to them in the first instance. In his opinion, the shareholders certainly had no such legal right; and why should they have even a hopeful anticipation of this profit merely because Parliament had dealt with them too leniently already? The real fact of the matter was the gas companies had a great monopoly, and it was necessary, either by an Act of Parliament or by a Standing Order, to protect the interests of the consumer. He supported the Standing Order, because it was the best means of protecting him.

SIR CHARLES ADDERLEY

said, that the Board of Trade suggested the auction clauses should be inserted in the two great metropolitan Gas Bills of last year—the Gaslight and Coke and South Metropolitan. As the right hon. Gentleman opposite (Mr. W. E. Forster), who was Chairman, had stated, it was so obviously just, that it was becoming generally inserted in Gas Bills all over the country. The poverty of gas companies in their earlier undertakings in 1847 led Parliament to the extraordinary act of practically fixing for them an artificial profit. The Act of 1863, which was in the very nature of a Standing Order, contained clauses which might be incorporated in special Acts, and, unless Committees otherwise decided and, of course, only when incorporated, offered new capital at par to existing shareholders. The terms of 1863 might have been incorporated in several Gas Acts, but that was no reason why they should be in future. The hon. and learned Member for Cambridgeshire (Mr. Rodwell) abandoned such an untenable position as asserting a right in gas companies to such a bonus by the terms of his Amendment, which offered the auction clauses, only in another way. Auction clauses for additional capital, except in very special circumstances, were indispensable in justice to the public. To leave their insertion, as the hon. and learned Member did, to the Committee would frustrate the proposal, as the hon. Member for Chippenham (Mr. Goldney) had clearly shown. But the hon. and learned Member for Cambridge (Mr. Marten) proposed a very reasonable addition, allowing Committees to report that the provision of the proposed Standing Order ought not to be required in a particular case. This the Government accepted, and, besides, would add a new clause to the effect that when additional capital was required and put up to auction, and the bid of a proprietor was as high as the bid of a non-proprietor, the bid of the proprietor should have the preference.

Question put.

The House divided:—Ayes 256; Noes 84: Majority 172.—(Div. List, No. 85.)

Amendment proposed, At the end of the Question, to add the words "unless-the Committee on the Bill shall report that such provision ought not to be required, with the reasons on which their opinion is founded."—(Mr. Marten.) Question, "That those words be there added," put, and agreed to. Amendment proposed, At the end of the last Amendment, to add the words "In the case of every such Bill it shall be competent to the Committee so to regulate the price of gas to be charged to consumers that any reduction of an authorised standard price shall entitle the Company to make a proportionate increase of the authorised dividend, and that any increase above the standard price shall involve a proportionate decrease of dividend."—(Mr. Bristow.)

MR. RAIKES

quite agreed with the Amendment. He thought that a sliding scale would be a very great improvement upon existing legislation for gas companies.

Question, "That those words be there added," put, and agreed to.

Main Question, as amended, put.

(Gas Companies—additional capital.) Ordered, That in every Bill by which an existing Gas Company is authorised to raise additional capital, provision shall be made for the offer of such capital by public auction or tender at the best price which can be obtained, unless the Committee on the Bill shall report that such provision ought not to be required, with the reasons on which their opinion is founded. In the case of every such Bill it shall be competent to the Committee so to regulate the price of the gas to be charged to consumers that any reduction of an authorised standard price shall entitle the Company to make a proportionate increase of the authorised dividend, and that any increase above the standard price shall involve a proportionate decrease of dividend. Ordered, That the said Order be a Standing Order of this House [to follow Standing Order 188.]