CONSIDERATION.

HC Deb 18 July 1879 vol 247 cc1074-140

Order for Consideration, as amended, read.

MR. J. G. FIUBBARD

said, the Bill had been referred to a Select Committee, and it would, perhaps, be for the convenience of the House that he should describe the objects of the measure.

MR. SPEAKER

asked if the right hon. Gentleman presented himself as one of the promoters of the Bill?

MR. J. G. HUBBARD

said, he was in charge of the Bill, and it was in that capacity that he ventured to introduce the measure to the House. Considering the great importance of the question, he felt satisfied the House would give him their attention for the short time .he should have to trouble them. The Bill was one which had for its object the conveyance from the East India Railway Company to the Government of India of the property of the East India Railway. The line consisted, in the first place, of a main line from Calcutta to Delhi, and, in the second, of a branch line from Allahabad to Jubbulpore. The Company, having complied with the requirements of Parliament, obtained a lease in 1854, which was executed between the old East India Company and the East India Railway Company. The East India Company was now represented by the India Government, and, in addressing the House upon the Bill, he should speak of the Government of India as the Government. The conditions of the two separate lines were these. Both of them were granted on a lease of 99 years; but while the original lease was dated from February, 1854, that of the branch line from Allahabad to Jubbulpore was dated from the year 1858. The two leases running for equal periods had different conclusions, otherwise the conditions of both were very much the same. The conditions of the lease under which the property was held by the East India Railway Company, were briefly these. The term was for 99 years, and at the end of those 99 years, the lease, if not previously dealt with, would absolutely lapse to the East India Company or the Government. There were, however, two alternative propositions. One was that the property itself might be surrendered by the East India Railway Company at any period short of the ultimate 99 years, receiving from the India Government the entire amount of the capital which had been expended on the property. The other alternative was the purchase by the India Government of the Railway at a period of 25 or 50 years from the origination of the lease. With this view of the contract before them, the India Government had, in the course of the last two years, directed their attention to the policy of acquiring absolutely the possession of this undertaking, and they determined to enter into negotiations which were to lead ultimately to the acquisition of the property. They found themselves in this difficulty—that whereas they felt it to be essential to acquire the possession not only of the main line, but of the branch line, there was this difference in the arrangement for the purchase, that, according to the contracts, the one was to be claimed four years earlier than the other. With regard to the first alternative—the absolute lapse of property at the end of 99 years—that, of course, would be out of the question. The Railway Company would never think of permitting the property to run out absolutely, because at any period short of the end of the lease they could surrender it, and receive back the whole of the capital. That being the case, they had a choice between two positions. The Government might wait until the Company surrendered the property, or they might themselves propose the purchase of it. They determined to purchase, and having decided upon purchasing, they had then to consider the terms under which, according to the contract, which was to be their guide, they could come to a settlement with the Company. It was obvious from the first that it was impossible for the Government to effect the entire purchase on the precise terms of the contract, in as much as the different periods of time assigned for the separate portions precluded such a course. They had, therefore, no alternative but to attempt an amicable arrangement of the difficulty; and, by a fair and reasonable revision of the whole matter, conclude a new and independent contract with the East India Railway Company. Looking at the affair in that light, they found that the notice which under the contract would have to be given by the Government to the Company, must be given after February 15th, 1879, and before August 15th, 1879, if they acted upon the mere legal notice. If they waited until then, they had the power of acquiring the main line under the terms of the original contract. But as they desired to effect an arrangement before February 1879, it became necessary to concert terms which might be satisfactory to both parties. The Government, therefore, put themselves into communication with the chairman of the Railway Company, and, after some consideration—he believed it was upon the 1st of November, 1878—a letter was addressed by Sir Louis Mallet, on behalf of the India Government, to Mr. Crawford, the chairman of the Company, stating the terms on which they were willing to negotiate. Those terms were directed to the accomplishment of the two purposes they had in view—namely, the simultaneous acquisition of the main line and the branch line to Jubbulpore, and, also, another object which the Government laid great stress upon—the continuance of the Company in such a form as to make them the administrators of the Railway. on behalf of the Government itself. Then, with regard to the terms. The terms the Government proposed to the Company were these. They took the shares of the Company, amounting to 26,200, which were nominally of £100 each, and they had, in the first place, to set a value upon them. The value set upon the shares should have been determined by the average market price of the stock for the three years immediately preceding the day upon which the notice was given; but the Government, under their arrangement, never could reach that point, because they determined to deal with the matter before the three years were completed. They had, therefore, to make an approximate value of the property, and they did so by taking the average value of the shares, not for three years, but for two years and eight months, that was up to the date of the letter addressed by Sir Louis Mallet to Mr. Crawford. Having fixed upon the period of valuation, it was found that up to the end of October the average price had amounted to £124 3s. 5d. Why, with that evidence before them, had the Government introduced into their offers a price of £125? This was their reason. The Railway itself had been advancing in prosperity. The price of the shares before the time the negotiations commenced appeared to have been constantly ascending. So much was that the case, that in July, August, and September, the average price of these shares was £130 15s.; but the notoriety of the fact that the chairman, on behalf of the Company, had been in communication with the Government for the surrender of this property had a very depressing effect, and the shares fell, until they reached about £124. The consequence was that, taking the actual average of the two years and eight months, the average price of the shares was £124 3s. 5d., or 16s. 7d. less than the £125 offered by the Government. But the Government, considering the circumstances under which this depreciation took place, were of opinion that they afforded substantial reason why, in an amicable contract, they should attempt to measure the price by a fair adjustment, rather than by the average price derived from the period of two years and eight months. They, therefore, proposed £125, which had this further convenience, that it just enabled them, in dealing with subsidiary arrangements, to add 25 per cent premium to the nominal amount of the shares. He believed that afforded a satisfactory reason why that alteration was made in the nominal value of the shares. Then came another arrangement. The Government, having made tip its mind to the purchase, had to make up its mind as to the way in which it would pay for the purchase. According to the original contract, the Government were to pay in cash, or yearly instalments, up to the termination of the lease, the whole payment being thrown into the form of terminable annuities. In order to provide for the computation of these annuities, it was necessary to fix the rate of interest at which they should be calculated, and, according to the contract, this interest was to be the interest at which the Secretary of State for India, or the East India Company in the old régime, had borrowed money during a period of two years immediately preceding. In arriving at the ascertainment of the interest, the Government found that the clause in the original contract was of a very peculiar character. So much so, that, although he did not propose to trouble the House by reading documents, it would be necessary to read this, because, in a great measure, the whole merit or demerit of the arrangement depended upon the particular terms defined. The terms upon which the Government and the Company both agreed to proceed in ascertaining the interest were these. They were to take all the bond stock and the other public obligations of the Secretary of State for India, and were to calculate upon that basis the aggregate interest, which appeared in the result to amount to the sum of £4 6s. per cent. A great deal of comment had been made upon this sum of £4 6s., as being an excessive rate, considering that at the time the arrangement was made the India Government, in this country, were able to borrow money at 4 per cent. However, that was the contract, and this was the interpretation put upon it by those who had the management of the arrangement. The consequence was that £4 6s. was taken as the sum to be applied to the amount of £125 per share, which was fixed upon as the value of the stock. If he had been called upon to say what he thought should be the amount of interest, he might have given a different rate; but the question was dealt with in the contract with words so technical and precise, that it was simply impossible to escape from the obligation. Perhaps the House would allow him to point out how this bore upon the results—£4 6s. being taken as the rate of interest instead of £4, or even less, the amount itself was, of course, proportionately increased. But he asked the House to remember that they were not there to criticize the exact execution of a definite contract, but rather the rate at which two public bodies were making an arrangement in regard to which an absolute contract was not to be observed. That being the case, they must also consider that the Railway Company who were parting with their property were not willing sellers. They were not seeking to divest themselves of valuable property which they possessed; but they were asked by the Government to part with it, and they had a right to inquire what they would be able to do with their money when they were paid off. The proprietors had been in the habit of receiving 6 per cent per annum, and they would be exceedingly loth to part with their property for an investment at 4 per cent, and if they took the rate of interest in connection with Indian Securities as their guide, they found that at the very same moment this negotiation was being made here by the Secretary for India in Calcutta loans bearing 4 per cent interest were being made by the Indian Government at 94 per cent, which, taking stock and premium together, produced nearly 4¾ per cent. He asked the House to compare all these things, because, unless they looked at every point, they would do injustice to the arrangement which had been made. There was another fact which must be considered, and it was a practical one. What was the result of this arrangement on the value of the East India Railway stock? At the present moment its value was £125 10s. For that stock the Government had agreed to give £125—not an extravagant price when it was borne in mind how Her Majesty's Government had been compelled to pay for property they purchased even in recent times. It was not necessary to go further back than the purchase of the telegraphs. In the case of this Railway, they had only paid an amount equal to the value of the property. At any rate, that was the judgment which he himself should pass upon the transaction. He had undertaken to bring this measure before the House simply as one of the Members for the City of London. He had no other interest in it, and he was only anxious to give the House a fair representation upon which they might judge for themselves whether the arrangement between the Government and the Company was satisfactory or not. He did not propose to enter at all into the question of the policy of the Government. That was a matter beyond his power, and at the present moment he did not feel himself called upon to enter into it. But, assuming that they had good reasons for making the purchase, then he said that he could not find anything censurable as to the terms agreed upon between them and the owners of the East India Railway. He should like now to sum up what would certainly be his own view of the case, by quoting a few lines from the last Indian Budget. In the Financial Statement which came from India, a small portion was devoted to this subject, and the way in which it spoke of this particular contract was one which entirely coincided with his own view. The Indian Budget said this— Although, perhaps, by the letter of the bond even better terms might have been exacted, there is good reason for the belief, the intention of the original parties to the contract has been substantially fulfilled, and it is a cause of much satisfaction to the Government of India that this important transaction has been concluded without any breach of the friendly relations between the Government and the Company. He would make no allusion to the Amendment which his hon. Friend the Member for Hackney (Mr. Fawcett) had placed on the Paper, because if his hon. Friend propounded any proposal at variance with what he (Mr. J. G. Hubbard) had stated, there would be an opportunity of replying to him. The right hon. Gentleman concluded by moving that the Bill, as amended, be now taken into consideration.

Motion made, and Question proposed, " That the Bill, as amended, be now taken into consideration."—(Mr. J. G. Hubbard.)

MR. FAWCETT

, in rising to move, That this House, adopting the recommendation contained in the Special Report of the Committee to which this Bill was referred, is of opinion that its provisions should not be regarded as a precedent for defining the terms on which the Indian Government may hereafter exercise its right of acquiring possession of the other guaranteed Railways in India. said, he knew that the House entertained a not unnatural objection to the prolonged discussion of a private Bill; but he thought he might claim their indulgence for a short time, when they considered the great importance of the issues that were involved in the question. The Committee to which this Bill had been referred unanimously came to the conclusion that, considering the great questions of public policy that were involved, and the financial issues that wore raised, it ought not to be regarded as a private, but a public Bill of the first importance. Treating the question especially as a financial one, he was sure that conclusion of the Committee would impress itself on the common sense of hon. Members on both sides of the House; for very seldom did anything connected with an Indian question involve graver financial issues than this, both in regard to the present and to the future. The Bill asked the House of Commons to ratify a purchase, the amount of which was no less than £32,000,000. That was an amount which represented, within very little, the entire net revenue of India for a single year, and about one-fifth of the entire Debt of India. But, important as was the Bill, simply looked upon in its immediate effect, when they regarded what might be its future effect the Bill became still more important. The Bill would, probably, become a precedent or a guide for the purchase of all the guaranteed railways in India, and the purchase of those guaranteed railways would involve an outlay, considering the price it was now proposed to pay, of £100,000,000. He thought these few preliminary remarks would be sufficient to convince the House of the great importance of the subject they were now considering. The question was, undoubtedly, a very complex one, and he could only say that he would do his best to explain it fairly to the House, and with as much clearness and brevity as possible. The great trunk railways of India were constructed on the principle that the Government should guarantee 5 per cent on all the capital expended. To the East India Company a lease was given, as his right hon. Friend opposite had clearly explained, of 99 years, with the power at any time, at certain stated intervals of 25 years, of the Government purchasing the lines that were constructed, either by making the payment in a lump sum, or by a deferred payment in the shape of an annuity. In the description which had been given by his right hon. Friend of these contracts, there seemed to be a most serious misapprehension in his right hon. Friend's mind, which went through the whole of his description. The right hon. Gentleman constantly spoke of this transaction as if it was a matter of option with the shareholders of the Company whether they sold the line to the Government or not. His right hon. Friend said—" Do you think they would have taken such-and-such terms? " Now, it could not be too distinctly understood by the House that the Company had no option whatever. Nothing could be more clear and precise than that the Government had, with regard to all these guaranteed railways, whether the shareholders wished it or not, a compulsory right to parchase them, on certain terms laid down in the contract. Therefore, all the remarks of his right hon. Friend, about the shareholders being willing to sell, absolutely fell to the ground. He (Mr. Fawcett) had remarked that there were two ways in which, at the end of 25 years from the granting of the original line, these railways could be acquired. They could be acquired by the payment of a lump sum down; and the price which was to be paid was the average price of the shares in the London market for the three years previous to the purchase; or, estimating the price of the shares at the same amount, they could be purchased, not by a lump sum, but by a deferred payment in the form of an annuity, and the interest on that annuity was to be calculated upon the interest received on the obligations of the Indian Government in England during the previous two years, which interest was to be ascertained by application to the Governor and Deputy Governor of the Bank of England. At the end of 99 years, if the line was not purchased, it lapsed to the Government free of cost; but, as often was the case in regard to the administration of Indian affairs, they came now to a Proviso, which was really to be looked upon as a memento of the extraordinary laxity and carelessness with which the finances of India were treated. After the Government had asserted a right to acquire the possession of these lines, free of cost, they absolutely got rid of that right by another Proviso, which gave the Company power, at any moment, even a day before the lease expired, to surrender the undertaking at par. There was no use in crying over spilt milk; but these contracts, from beginning to end, were based on the principle of " Heads, I win; tails, you lose; " and the Indian people were in the unfortunate position of " Tails, you lose." He came now to the particular transactions. He had already described the principles upon which this contract was generally based, and he had described it as it was presented before the Select Committee by those who represented the views of the Indian Government. The Indian Government would have the power, in February next, of exercising the compulsory right of purchase, which he had described; but instead of doing that, for reasons which he would presently explain, they anticipated this compulsory right of purchase, and in the month of November last entered into negotiations with the East India Railway Company. The justification they alleged for doing this was simply the following:—They said that if this line had to bed suddenly surrendered to them in February—if, for instance, on the 31st of January it had belonged to the Company, and on the 1st of February it had become the property of the Government, this sudden dislocation—this sudden jerk would have caused a great disturbance, which would have proved prejudicial to the interests of India. He did not wish now to express an opinion upon the truth or the justice of this plea. All that he would say was that it was not to his mind conclusively made out to the Committee. But the result was that the Government anticipated the surrender, and entered into an arrangement. They said—" On the whole, we wish to purchase the line; but we think it is very desirable that it should continue to be managed by the present Company, because, although in the early days of the Company there was great waste and mismanagement, yet, from the time when the Railway began to pay, and the Company itself became interested in its economical administration, the management has been much improved, and that this is now one of the cheapest worked lines in the world." In order to secure the management of the Company, and a continuance of a feeling of self-interest on the part of the Company, they arranged that four-fifths of the purchase money should be paid in the form of an annuity, and that the remaining one-fifth should be offered to the shareholders, partly in the shape of an annuity, and partly by giving them a claim to one-fifth of the property, the object of this being to secure that the Company should have a direct interest in the prosperity and success of the line they were going to manage. Now, after this description, he thought it would be obvious to the House that four questions immediately suggested themselves for their consideration. The first question was this —were the Government wise in purchasing the railway? Secondly, if the railway was purchased, were the Government wise in continuing the existing Company to manage it? Thirdly, if the existing Company managed it, was it prudent to allocate to them a certain share of the profits? and, fourthly, in arranging the bargain, was adequate care displayed by the Government in protecting the financial interests of India? He thought an answer to these four questions would practically exhaust the case. Now, with regard to the first three of these questions, it would be necessary for him to make very few remarks indeed, because, as far as he was concerned, he was prepared to agree with the view of the Government. He thought, in the first place, it was wise on the part of the Government, considering the improved position of this railway, to purchase it. Certainly, if it was purchased—although he did not wish to express so positive an opinion as to the wisdom of continuing the Company as its managers—yet in view of the possibility that the Government might acquire all the other guaranteed railways, it was wise to make an experiment, and especially as the arrangement was not a permanent arrangement, but might be terminated, if the Government wished it, at the end of 20 years. With regard to the third question—namely, if the Company were continued as managers, was it prudent to allocate to them a certain share of the profits—believing that there was no motive so efficient in securing good management as the feeling of self-interest, he quite agreed with the Government, that it was of the first importance, if a company were to manage the line, to make the shareholders aware of the fact that they had some direct interest in its prosperity. He knew no better way in which this could be done than by allocating to them a certain share of the profits. But now he came to the fourth question which he ventured to put to the House, and it was the one to which he should entirely confine his remarks—namely, whether, in arranging the bargain, any adequate steps were taken by the authorities in the India Office, or by the Secretary of State and his Council, to protect the financial interests of India? No one who had read the evidence given before the Committee, and the Report of that Committee, which was so ably drawn up by the noble Lord the Member for Middlesex (Lord George Hamilton), who had only recently left the India Office—no one who had read that Report could come to any other conclusion—and it was a very important conclusion—that there had seldom been a case in which the Secretary of State in Council had' shown such laxity and carelessness in protecting the financial interests of India. This statement, he thought could be substantiated without much difficulty. He knew what the plea was that had been urged on behalf of the Secretary of State and his Council. It was the plea which had been put forward to-day by his right hon. Friend the Member for the City of London (Mr. J. G. Hubbard). It was this—" Oh, you were making an arrangement with the Company. You wanted to have amicable relations with them, and, therefore, it was necessary to deal liberally with them." Yes, but even admitting that it was necessary to deal liberally with them—and he thought they ought to be careful in dealing liberally with other people's money—even admitting that it was necessary to deal liberally with them, he thought he should be able to show that the particular way that was selected to display this liberality was the most unfortunate one that could possibly be chosen. Now what would be the business-like and the common-sense view of the proceeding? They should have said to the Company this" We wish to retain your services, and we wish you to feel a direct interest in the future prosperity of this Railway. What is the proper remuneration of your services? What would be a proper share of the profits to allocate to you?" When that had been determined, the proper share of the profits ought to have been allocated—one-fifth, or one-fourth, or whatever the amount might be. When that was determined, then, of course, the business-like way to proceed was that the purchase should bed arranged strictly according to the contract. These contracts were, in their original incidence, sufficiently unfavourable to India; but he did not wish them to be departed from one hair's breadth. But let the rest of the bargain be carried out upon strict adherence to the terms of the contract; and if any difficulty had arisen upon the interpretation of the contract let it be decided by arbitration. But it was said that the Company would not have received those terms. He could only say that if they were to search the Blue Book from beginning to end they would not find a single title of evidence to show that the Company would not have received terms such as these. At any rate, if there was a probability that they refused them, the Indian Government, as guardians of the financial interests of India, ought to have made the attempt. But there was another, and, perhaps, a more cogent reason why it was important that the terms of the contract should have been strictly interpreted, and that the arrangements should have been carried out as far as possible strictly in accordance with the contract. As he had said before, that was only the first of a series of bargains and arrangements which might involve an outlay of £100,000,000, and if, in an easy-going fashion, they departed from the strict interpretation of those contracts, throwing a few pounds away here, and a few shillings there, and passing over sums of £200,000 without heed, what would be the result? Why, it would be to give an unlimited opportunity for pressure to be brought to bear on the India Office by influential persons in regard to future purchases. It was a most important thing for the House to consider that when those contracts had been departed from, and whenever the interpretation had been doubtful, that particular interpretation of the contract had been accepted, which was the most unfavourable to India and the most advantageous to the Company. Of course, by far the most important point to be determined was the payment which was to be made in the form of an annuity running for 73 years; by far the most important point to be determined was what was to be the rate of interest at which the annuity was to be calculated. So important was that that he had made a calculation, and he had ascertained that every shilling in the rate of interest made no less a difference than £400,000 in the amount which would have to be paid for the East Indian Railway. Consequently, considering the financial position of India at the present moment, and all that had been said about the importance of strict economy, why, of course, that was a subject on which there ought to have been the most scrupluous care, instead of which there had been the most extraordinary laxity. Now, what was the interpretation of the interest clause that was accepted, and how was the figure of £4 6s. 0d. arrived at? He scarcely thought that the House would believe that what he was going to explain had ever taken place. The words of the contract were said to be obscure. He would quote them, and then the House could judge of their obscurity or not. It was said in the contract that the rate of interest to be allowed in calculating the annuity Shall be the average rate of interest during the preceding two years received in London upon public obligations of the East India Company; and the rate of interest Shall be ascertained by reference to the Governor and Deputy Governor of the Bank of England for the time being. In the first place, the Governor and Deputy Governor of the Bank of England were never applied to, and he wished the House to consider what were the express words of the instruction— Which shall be ascertained," not which may be ascertained, " by reference to the Governor and Deputy Governor of the Bank of England. Well, that was the first instance in which there was carelessness. Now, what would be the common-sense interpretation to be put on the words The rate of interest received on the public obligations of the Indian Government in London during the previous two years. Why, as his right hon. Friend the Member for the City of London, who had great commercial and financial experience, had admitted, the interpretation to be placed on those words was this—the rate of interest at which the Secretary of State in Council could have borrowed, in that period, money in the London market. That would have given a rate of interest of £3 18s. 3d. What, however, was the rate which the Government had accepted? Why £4 68., and that extra 7s. 9d. made close upon £3,000,000 difference in the amount that was about to be paid for the railway in question. And now, how did the Indian Office arrive at the sum of £4 6s.? They took every Indian Stock at par, added them up, and then divided them by the rate of interest. If the calculation had been made two years ago, before the 10 per cent Stock had been paid off, a rate of interest would have been made of something like 8 per cent. To show the absurdity of the Government's interpretation of the contract, he would suppose that the French Government had French Renters bearing interest at the rate of 3 per cent and 5 per cent, and that the Spanish Government had also Rentes in England bearing the same rate of interest. According to the interpretation of the Indian Office, the interest received on obligations of the French Government in London, would be precisely the same as the interest received on the obligations of the Spanish Government, because they would take each of the securities at par, and would not consider the market value of the Stock. What the Indian Office did was this. They arrived at what was the rate of interest on which the Indian Government had raised all their existing loans; and it was only by the most strained interpretation that anyone could come to the conclusion that that was the same thing as a rate of interest received on obligations of the Indian Government during the two years preceding the purchase. Even admitting there was some doubt as to the interpretation of the clause, why did the Indian Government, if there was any doubt, before they accepted the interpretation, which, of all others, was most unfavourable to the Indian taxpayer—why did they neglect to do that which they were strictly enjoined to do—namely, consult the Governor and Deputy Governor of the Bank of England? Why did they not take some legal advice? The Committee to which the Bill was referred felt that so strongly that, although on the Committee there were, of course, supporters of the Government who would not, willingly, censure the Secretary of State in Council, as he would not himself, in their Report there would be found this censure on the proceedings of the Secretary of State in Council, and it was a very severe censure— This Committee, after considering all that has been alleged in favour of the interpretation of the interest clause, by the Indian Government, cannot help expressing their regret that some independent legal authority was not consulted as to the meaning of this clause, before an interpretation was accepted, which largely increases the cost of acquiring this railway. But it was not only with regard to the interest clause that the contract was a bad one. His right hon. Friend (Mr. J. G. Hubbard) said that they anticipated the purchase of the Jubbulpore branch by four years. Now, the Government admitted that, according to their own interpretation of the interest clause, in consequence of certain financial transactions, the rate of interest would be so much lowered that if they had only waited for four years the Jubbulpore branch would have been acquired at a cost of something like £250,000 less than that which had been paid for it. Then, again, there was great obscurity about the sinking fund. He thought it might be fairly contended, although, on this point, he did not wish to express a positive opinion—he thought it might be fairly contended that, in providing a sinking fund, they ought not to have to provide for the enhanced value of stock. There was one point which the right hon. Gentleman opposite had admitted, and about which there was no doubt whatever. And, in this respect also, the Indian Government had departed from strict injunctions. Nothing could be more precise than that the price at which the shares were to be estimated was their average price in the London market, during the preceding three years. It was said by the Representative of the India Office that the price was £125. He (Mr. Fawcett) would Lave accepted it as a correct price, had his suspicions not been roused by the roundness of the sum. He was prompted to ask if that was the exact calculation. " Oh, no':" it was replied, as if it was a matter of very little importance; "the exact figure was £124 3s. 3d., but we thought we might as well pay them £125." Now the difference between that £124 3s. 3d. and £125 increased the price of the railway undertaking by no less than £200,000; and he ventured to assert, as he had always done, that, to play ducks and drakes with £200,000 of the money of the people of India, was a much more serious thing than to waste £2,000,000 of English money. But it might be said — " If you hold these strong opinions about the manner in which this transaction has been carried out, is not the Resolution which you are about to move very inadequate to meet the occasion? " [" Hear, hear "] He was not surprised at that response, and he could assure his hon. Friends who felt that his Resolution was inadequate that he had never been more perplexed in his life—and he believed that that was the feeling of every Member of the Committee—as to what was the right course to take with regard to the present Bill. There were obviously three courses open to them. They might try to reject the Bill point blank; secondly, they might try to censure the Secretary of State and his Council for the manner in which they had carried out the bargain; and, thirdly, they might try—and that was what he was endeavouring to do—to prevent, as far as possible, that unfortunate transaction being used as a precedent to regulate future purchases. Now, with regard to the first of these proposals to reject the Bill, there were many difficulties in the way. The Government said that if the House rejected the Bill, they would have to encounter endless difficulties; all kinds of obstacles would be thrown in their way; and, of course, when people had to carry out an arrangement, it was proper that they should not be fettered. It would he the Indian Government who would have to carry out the arrangements, and if they anticipated difficulties beforehand, those difficulties would be sure to present themselves. There was another difficulty in the way of rejecting the Bill, and that raised the consideration which showed the importance of the debate. This was a very serious matter, and he felt, considering the whole circumstances of the case, that the Bill could not be rejected without laying the Indian Government, to a certain extent, open to a breach of faith, and the reason why was simply this. Legally and technically there would be no breach of faith; but when the arrangement was entered into, no great care seemed to have been taken, either by the Government or by the Company to tell the outside shareholders and the general public that that was a mere provisional arrangement, and that it might be upset by Parliament. It was assumed in every money market that the arrangement was complete, and that the Bill would be a mere matter of form. So much so was that the impression that he knew that the promoters of the Bill told some of the officials connected with the House that the Bill was an entirely formal matter—that the whole thing was so complete that the investigation could not take more than an hour. He knew that was the opinion of the right hon. Gentleman the Member for the City of London the first day he sat on the Committee; but his opinion on that subject was very quickly changed; for he soon saw that there were questions involved in the Bill of the greatest possible importance. Now, if they did not reject the Bill on the present occasion—and, of course, it was for the House to consider whether or not they ought the resort to such an extreme step—they could do so upon the next stage or third reading of the Bill if they were so minded; but, at any rate, when the next Indian guaranteed railway was purchased, the public would know that any arrangement that was entered into between the Government and the Company was simply provisional, and depended upon its ratification by Parliament, and that Parliament reserved to itself the right to upset the arrangement if it felt so disposed. The second course which could be adopted would be to ask the House to pass a censure upon the Secretary of State and his Council. They all knew what would be the result of that. The; debate would assume a Party character, and no practical good would be done. I They would be divided in opinion, and he thought that the Secretary of State I and his Council had been sufficiently censured already in the Report of the Committee over which a Member of the Government presided. But now, what was the third course that he ventured to suggest? He said, at the outset of his remarks, that the importance of the Bill was not simply confined to the Bill itself; but that its importance arose from the fact that that was the first of a series of transactions which might involve, and would involve, an outlay of something like £100,000,000. What, therefore, the House of Commons could do, and what seemed to him to be the most practical and business-like thing to do, was to place on record, in the most authoritative way possible, that they would wipe out of recollection all traces of the present measure, and that in no single respect should any clause or any provision of the Bill be used as a precedent to define the terms on which railway undertakings of a similar character might in future be acquired by the Indian Government. Perhaps it would be said—" If you press your Resolution to a Division "—and such was his intention—" and it is carried, that being an Amendment to the Motion that the Bill he now considered, it will virtually defeat the Bill." Ho had taken great pains to ascertain what would be the effect of carrying the Resolution he was about to propose, and he found that it would not have the effect of defeating the Bill. It was simply an Amendment to the Motion " that the Bill be now considered;" and if it were carried, there would be nothing, according to the Rules of the procedure of the House, to prevent the Bill being again considered on the succeeding day; it would simply postpone the consideration of the Bill for a single day. It might also be said—" What your Resolution does has already been done by the Committee, and why introduce it? He would at once tell the Government and the House why he did not think the recommendation of the Committee was, in itself, sufficient. The Committee, no doubt, had, in the most positive way, recommended that the Bill should not be regarded as a precedent to regulate future transactions; but if the House took no notice of that recommendation, what might the Secretary of State say when he had next to negotiate an arrangement with some Company owning a line he desired to purchase? He might say, it was true, that it was the recommendation of the Committee, but the House of Commons took no notice of it, they did not endorse it; and, therefore, it was impossible for him to say that it was the opinion of Parliament. If, however, the recommendation of the Committee were supported and backed up by a Resolution of the House, it would be an injunction which the Secretary of State could not disregard, and, in his next transactions with a guaranteed Company, with the Company who came forward and said to him—" Oh, you must do this and that; it was done with regard to the East Indian Railway Company; " then he would be safeguarded by the Resolution of the House, and he would say—" I have been instructed by Parliament to declare that what was done with regard to the purchase of the East Indian Railway should, in future, be not looked upon in the least degree as a precedent." He thanked the House for the patience with which they had listened to the long statement he had felt bound to make. The subject was a complicated one, and he had endeavoured to explain it with as much clearness as possible, his only object being to discuss it in a practical and business-like spirit, and in that spirit he commended his Resolution to the House.

Amendment proposed, To leave out from the word " That " to the end of the Question, in order to add the words " this House, adopting the recommendation contained in the Special Report of the Committee to which this Bill was referred, is of opinion that its provisions should not be regarded as a precedent for defining the terms on which the Indian Government may hereafter exercise its right of acquiring possession of the other guaranteed Railways in India,"—(Mr. Faweett,) —instead thereof.

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

MR. FRESHFIELD

said, he understood the hon. Member for Hackney (Mr. Fawcett) not to wish to oppose the passing of the Bill, nor to move a Vote of Censure upon the Secretary of State for India; but what he did desire was to give the Secretary of State for India, through the authority of that House, a piece of advice in reference to the conduct of future unknown transactions. He (Mr. Freshfield) did not see that there could be any great objection to the Resolution; but he confessed that he did not see anything to render it necessary. The hon. Member found fault with the contracts as originally framed, and also with the arrangement made by the Government, which was involved in the Bill. Now, with regard to the criticisms of the hon. Member for Hackney upon the original contracts. He (Mr. Freshfield) did not think anyone could form a clear conception of the merits or demerits of the contracts, without knowing something of their history and the circumstances under which they were made. He was acquainted with all those circumstances, and he would give that information to the House in a few words. He was one of the survivors of the parties who conducted the negotiations with the Court of Directors of the East India Company in 1843, now 35 years ago. The first individual who introduced the subject of the construction of Indian railways was Sir Macdonald Stephenson, who went out in 1843 to make inquiries and obtain information on the subject of the adaptability of the railway system into India. He returned in 1844, having satisfied himself that the proposition was feasible, and that railways would be of incalculable benefit to India. On his return, Sir Macdonald Stephenson put himself into communication with men of high commercial and financial standing, and, without any such qualifications on his own part, he (Mr. Freshfield) was asked to join in the negotiations. They went to the East India Company, who then constituted the Government of India. They had many interviews, and found great divergence of opinion in the Court of Directors. There was, however, unanimity on one point, and that was that if railways were to be constructed at all, they must be selected and controlled by the Government. Every element of speculation was thus eliminated from the contract, and the first basis of the negotiations laid down was, that the Government of India should guarantee a minimum return to the shareholders for the money raised. Negotiations proceeded slowly, a Company was formed with a capital of £4,000,000, and Sir Macdonald Stephenson was sent out with a staff of engineers. He returned in 1847. In the meantime, there had been a great commercial crisis in London, and afterwards political convulsions throughout all Europe. These events formed great drawbacks to the negotiations, and made it necessary to increase the demand for the guarantee from 4 to 5 per cent. But a further difficulty awaited them. The Court of Directors, in a letter addressed to an official of the Stock Exchange, stated that they had never professed to guarantee a fixed dividend. This last blow seemed as if it would be fatal to the cause. In this state of things, it occurred to a gentleman, acquainted with all the facts, to address a letter to the then Prime Minister, Earl Russell, containing a narrative of the negotiations. The pamphlet got into the hands of Mr. Wilson, the then Secretary of the Board of Contract, who took up the subject and mastered it; and the result was that he proposed to them that they should raise £1,000,000 towards an experimental line and pay it into the Treasury; that the Government should pay them 5 per cent per annum; and that the Company should construct the line and work it for 99 years, it being in every respect under the control of the Government. It was pointed out that a guarantee on the part of the Government would be necessary, and he proposed two additional terms. One was, that if the line so constructed and worked did not pay its working expenses the Company should have the power, at any time in the course of their lease, of surrendering it to the Government, and receiving back the money expended upon the line, as audited from time to time. The other condition was that the Government, on the other hand, should have the power of giving notice to the Company at any time after the first term of 25 years had run out, or after 50 years, that it was their intention to acquire the property in the line, and to take it into their hands; in which case, they were to pay for it the value of the shares in the London market for the three years preceding the notice. Those were the two terms upon which the arrangement turned. It did not constitute an actual guarantee, but something very near it. On the other hand, there was the provision that in 25 years—long before it was expected the line would be fully developed—the Government should have the power of acquiring it, in exchange either for money or for an annuity. Now, the intention of the arrangement, no doubt, was that the Government should pay the value of the shares as ascertained by their price during the three preceding years, the principle being that the amount should come to, as near as possible, the actual value of the line. It would be asked, if that were so, why it was not so stated in terms. The answer was, if they had put such a clause as that in the contract it would have been too indefinite, and would have led to litigation. But he had no doubt at all that the intention was that the Company should receive the fair value of their line. The Company raised the first £1,000,000. The contract worked admirably, and they were soon called upon to execute the line to Delhi, and four years afterwards to make the branch to Jubbulpore, which finished the undertaking. Of course, in the first instance, it did not yield any profit, and it was not until 1867 that the line began to pay more than its 5 per cent guarantee. When that event took place, by the terms of the contract, one half the profits over 5 per cent went to the Company and one half to the Government. The line went on progressively increasing in receipts until 1877, when they had attained 9 per cent. In that year it became necessary for the Gevernment—the Secretary of State then constituting the Government—to determine what course they should pursue. They came to three conclusions. The first was, that they should acquire the property; and they could hardly come to any other conclusion than that. The line was then paying 9 per cent, and it was a grand acquisition for any Government to make. The next conclusion was equally inevitable—that they would acquire it through an annuity. Then they came to a third conclusion, and he thought they were right in it. They could not themselves manage the line half as well as the Company managed it, for a commercial working was always superior to an official, and they decided to commit the continuance of the working of the line to the Company, if they possibly could. But then the difficulty intervened that the line must be taken as a whole; while the lease of the Jubbulpore line had four years longer to run than that of the main line. There was another difficulty in the fact that the time for giving notice to acquire the main line would not arise until the 17th February, 1879, and this was only the middle of 1878. In that state of things the course pursued by the Secretary of State was to open negotiations with the Company. He knew Mr. Crawford, the Chairman, a gentleman well known in this House as Member for the City of London, and who had been Chairman of the Company for 25 years. Accordingly, the Chairman of the Company, Mr. Crawford, was sent for, and put in communication with Sir Louis Mallet, the permanent official Secretary of the Government, and they discussed the matter. Mr. Crawford could make no objection to the power to take over the main line; that was matter of contract, and was not a question of election at all. There was no doubt on that point, nor that the Government were entitled to pay for the line by the way of an annuity. But the continued working of the line by the Company was an entirely new proposition. Mr. Crawford had no objection to the principle, and he said so. Then came the question, what was to be paid—how could they ascertain it? The powers of the contract could not be acted on, because the contract could have no force as to the Jubbulpore line until April, 1883. That being so, what they decided upon was—and in this he thought they were right—to go as near the contract as they could; and a calculation was made for the preceding two years and a-half of the value of the shares in the market. Mr. Crawford, in preparation for this arrangement, had had a daily account taken of the price of the shares from the 17th February, 1876. It began very low — at 115, he (Mr. Freshfield) thought — and it rose up to 133; and it was about 133 in June or September. He did not remember the dates precisely; but the price ranged up to 133, and it gave for a period of 2½ years very nearly £;125 as the mean value. Mr. Crawford said in his evidence before the Committee that if the time had been allowed to run on, and if there had been nothing to interfere with the mean price of the shares, it would have risen, undoubtedly, to more than 125. He said— As regards that price of 125, it is not at all an inquiry at the present moment whether that is right or wrong; but, as a matter of fact, on that day on which the average began to be collected—which was the 15th February, 1876—I ordered the account to be taken and kept up daily, and it was so taken and kept up for a space of three years, showing the actual price. When we came to negotiation with the Government, the actual average of the daily quotations in the market was close on 125. Pad it not been for the negotiations that took place, which had the effect of disturbing the market, I have no doubt the average would have been above 125. I, acting for the Company, was quite content to take 125, as representing what appeared to me to be a fair average return of the market for three years. That was the account which Mr. Crawford gave the Committee of the circumstances, and he did not think anyone had offered to question it. Sir Louis Mallet and Mr. Crawford were negotiating on reasonable, fair, and commercial principles. Sir Louis Mallet thought 125 was a fair price to offer, and Mr. Crawford thought it was a fair price to accept. Now, if the view were correct, that the intention of the contract was that the shareholders should get the fair value of the property, he (Mr. Freshfield) thought no one could find fault with the arrangement, seeing its effect was that the Government had obtained a line now paying about 9 per cent. [" No, no !"] The hon. Member for Hackney seemed to object to that statement. The fact was, that the line produced more than 9 per cent in 1877, and only 7.15 per cent in 1878; but the receipts this year were likely to bed greater than in 1878, and this was not the culminating point of the railway. Quite the contrary; it had been in work less than 20 years, and the branch only 16 years, and there was not the least doubt it would go on developing. Therefore, the Government obtained a valuable property on easy terms. As to the rate of interest regulating the annuity, by the terms of the contract, it was to be calculated on the rate of interest received on the public obligations of the Indian Government during the two years preceding the notice to take over the line, to be ascertained by reference to the Governor and Deputy Governor of the Bank of England; but, of course, that calculation could not be made six months beforehand, the fact being that all the arrangements were made in anticipation of the time when the powers of the Government to take over the line would come into operation. The period had not arrived when they could refer to the Governor of the Bank; and, therefore, the Secretary of State and Sir Louis Mallet, knowing perfectly well what they were about, made their arrangements with the Company, and, he conceived, made them much in favour of the Government. Then, the Proviso that the working of the line should be committed to the Company was one which the Secretary of State had very much at heart, and rightly so. The Secretary of State thought the Company would manage it more economically than the Government, and it was proposed with that view. As to the one-fifth of the capital of the Company, the Secretary of State wished that the shareholders should be still interested in the line; but, in that case, they must submit for 20 years to a diminution of their guarantee to 4 per cent, and they were to take the chances of the line for giving them anything beyond that amount, as an equivalent for their annuity of £5 12s. 6d. Besides that, the line was made subject to sundry charges and payments. Well, he had considered the proposition as affecting the shareholders, and he did not see that it was one of very certain advantage; and he was not sure whether the shareholders would exercise their opportunity to the extent of one-fifth of the capital. But he was quite sure of this — that the arrangement, upon the whole, was one which was beneficial to the Government. He had not entered, at length, into the arrangement, under which £4 6s. 0d. was taken, instead of £4, as suggested. The terms of the contract were not absolutely clear on that point; but as to the price of 125, he was quite sure that was a very fair and reasonable arrangement. His hon. Friend (Mr. Fawcett) complained of the original contract. He did not think any arrangement could have been made at the time more advantageous on the whole; and if they were trying to make a better contract at present, he did not know how they could do so. They had to raise £30,000,000 for this Company, and he thought £100,000,000 was required for all the railways; and he did not see how it would have been possible to get the money without a guarantee. Now, the contract had merged into a taking over of the line, and it seemed to him no Government or individual had ever made a fairer arrangement. The telegraphs had been referred to. Perhaps, the less that was said about the telegraphs the better; but here great judgment had been displayed. The line had been acquired at a cost not more than half its value; and when it was said the terms were voluntary, he would reply, so much the better, because they showed the disposition on both sides to make a fair arrangement. The hon. Gentleman (Mr. Fawcett) proposed to pass something like a censure upon the Government. That reminded him (Mr. Freshfield) of the story of the Welsh jury who found the prisoner not guilty, but told him not to do it again. He (Mr. Freshfield) would rather find the Minister guilty on this occasion, and beg that he would do it again as often as he could. It was a grand thing to find a Minister who possessed the courage of his own convictions. The Secretary of State came to the conclusion that the arrangement would be good for the Government. He (Mr. Freshfield) thought that conclusion was right, and he must say he thought India was to be congratulated on the arrangement which had been made.

MR. RATHBONE

was sorry to say he was not in the same position as the right hon. Member for the City of London who opened the debate (Mr. J. G. Hubbard), because he had a considerable interest in the line, which would prevent him, as a matter of form, from marking, by his vote, the strong opinion which he held that the shareholders would receive under the contract far more advantageous treatment on the part of the Government than they were in strict law entitled to receive. He thought that in all arrangements that were made on behalf of so poor a people as the people of India with the rich capitalists of this country the bargain should be strictly enforced. He wished to say nothing against the Chairman or management off this Company. The Chairman had shown in these and other matters great ability, and had done no more than he was bound to do as acting for the Company. Nor could he agree with the hon. Member for Hackney (Mr. Fawcett), in the strong terms with which the hon. Member had characterized the transaction; there had been many transactions which were far more lax and disadvantageous to the public. He quite admitted there were difficulties connected with this transaction; but what he contended was that those who had conducted it on the part of the Government had not shown their accustomed ability. He had nothing to say against the new contract with the Company. In such a partnership, where so much depended on the exertions of the Company, any man of business would make a favourable arrangement with those on whose exertions the mutual profit of the undertaking depended. But there was no reason whatever for going so far as the Government had gone with regard to the original contract, although, of course, Mr. Crawford could not be expected to refuse it. On behalf of the Government, it was said that the intention of the old contract had been substantially fulfilled. He maintained that it was not so, and he would take up the important point of the average rate of interest as an instance. The clear intention was that the Government should pay cash, or the equivalent of cash in securities. That did not mean taking 5 per cent annuities which were at a high premium as a basis. It was intended that the Company should receive Indian securities to pay the average rate received by those who had held them for three years previous. Surely, before the Government made an arrangement which gave everything to the shareholders, and put everything against the inhabitants of India, they should have taken every means to make sure they were right, either by taking the opinion of the Governor of the Bank of England, or the highest legal advice. He also objected to any allowance being made for the alleged depreciation in the value of the shares, consequent upon the knowledge that the Government were about to exercise their powers. Of course, it was a disappointment to the shareholders, who thought they were going to receive 9 per cent or more, that all their prospective profits were to be given up; but it was the right of the people of India to receive the full advantage, not only of the actual contract, but of the effect which the knowledge that that contract was going to be enforced, had upon the stock, whatever it was. They had a right to take advantage of any circumstances which were favourable to them, just as the shareholders would have a right to take advantage of circumstances in their favour. He only wished to dwell on these two points, and, as a man of business, looking at the contract and all the circumstances, he did not think the Government of India had secured for the people of India those advantages that people had a right to expect. The shareholders had the best of the bargain, and there was no reason why they should have received more than, under the strict letter of the contract, they were entitled to.

SIR HENRY PEEK

, as one who had very carefully followed the evidence given before the Select Committee, of which he had been a Member, agreed that it was a wise policy to make the purchase, and in continuing the present management; but he altogether disagreed from the assertion that the interests of India had not had clue consideration. He wont into the Committee Room as a man of business in the habit of well considering both sides of a question, and quite agreed with the Report presented to the House. Indeed, if he wanted to alter that Report at all, he would almost be inclined to adopt the final words of the Resolution which the hon. Member for Hackney (Mr. Fawcett) brought forward as an Amendment. The Company ought to be dealt with in a liberal way, and this price allowed—£125 — he regarded as a just rather than a liberal arrangement. The bargain was to be made under a contract of 25 years ago, and under a totally different state of the money market. That contract of 25 years ago, for which nobody alive was now responsible, was as awkwardly worded as could be. According to that contract, the then Government, if they were not in a position to pay the £30,500,000 in hard sovereigns, made a bargain equally fair to the Indian and the British public, and the time had now come to carry it out in the same spirit. He was glad to hear the hon. Member for Hackney say he had no wish to upset the Bill. He said he only wished to postpone it; but what would be the effect of postponing the Bill on the 1st of July? Every day, every hour, remaining of the Session was of the utmost importance, and to postpone the Bill now would bring about that which the hon. Member said he had no wish to see. An exception had been taken—why did not the Government wait in the exercise of their power? but if they had waited, they would have been unable to exercise their power for another 25 years. But for sanitary, as well as strategical reasons, they wanted to acquire the railway; and, therefore, it was a fair matter of bargain between the Government and the Company. He could only repeat that, as a man of business, and having gone into the Committee with a mind perfectly blank on this question, he now gave to the House his firm opinion, based upon the evidence given, that a very fair and straightforward bargain had been made.

SIR GEORGE CAMPBELL

observed, that the hon. Member for Dover (Mr. Freshfield), who was a man of great experience, capable of giving the Government good advice, in discussing this subject at length, had left one point without scarcely touching it at all, and that was the calculation of the rate of interest at £4 6s. per cent. In his prudence, he passed lightly over that point; but it really was the gist of the whole matter. He (Sir George Campbell) would come to that presently, and, in the meantime, with regard to the Motion of the hon. Member for Hackney (Mr. Fawcett), he would say he had listened to his speech with the greatest admiration and agreement, only disagreeing with the conclusion, for it seemed to him that the hon. Member, having led up to an inevitable conclusion, started and recoiled, seeing a " lion in the path," from the conclusion to which his speech must lead. The preliminary objections to the rejection of the Bill were really not so serious as seemed to be supposed. The reason which the right hon. Gentleman the Member for the City of London (Mr. J. G. Hubbard) seemed to think a conclusive one why the bargain should now be made on terms favourable to the East India Company was, that although the Government could take over the main line of the Company, they could not take over the branch line for another four years. But that was not a conclusive objection. It was quite competent for the Government to take over the main line and say to the Company—" If you like to keep the Jubbulpore branch for another four years, you can do so," and no great evil would result from that. More than that, it was not at all likely that the East India Company would accept that. All the loss they had was on the Jubbulpore branch, and not on the main line; and so they would simply be accepting the unpaying line for four years longer, and at the end of that term they would get a worse price than they could get now, because the 5 per cent loan, on which they based their favourable view of the contract, would be expired. Then, it had also been said, as a reason for doing this, that if a voluntary arrangement was not come to with the Company, the latter might throw the railway into the hands of the Government, and the Government would find great difficulty in taking it over in 1880. But to this it might be said that all the servants of the Company would be glad to take service with Government; and all Government would have to do would be to send an order to the Government of India, and there would be no difficulty in doing that. The hon. Member for Hackney said he was not prepared to propose the rejection of the Bill; but he wished to place on record a Resolution that, so far as the pecuniary arrangements were concerned, thins Bill should not be regarded as a precedent. To that he (Sir George Campbell) would say, with the greatest confidence, there was no other case in which this Bill could be followed as a precedent; so that it was shutting the door after the steed was stolen. The 5 per cent loan, which was a loss to the people of India of several millions sterling, expired in 1880. It could not affect any other railway; and, therefore, so far, the Resolution would be of no avail whatever. He agreed that the other portions of the contract with the Company were, on the whole, not disadvantageous; it was only this arrangement regarding the rate of interest to be taken in the calculations that inflicted a loss on the people of India; but this resulted from the circumstances of the loan, which expired in 1880, and would not affect subsequent sales of railways to the Government. It might not, improbably, happen that, from the bad state of the finances, their borrowing powers in the money market became less favourable; it might be that this particular condition of the contract might be favourable to the people of India; on the next occasion the question must be considered as regarded this particular case; and they should not pass a Resolution meaning nothing at all. As regarded. the several points raised in the discussion—the price at which the average of the shares was to be calculated, and other things—he was quite ready to say it was fair enough, to a certain extent, that the benefit of the doubt in these small matters should be given to the Company; therefore, he would not quarrel with the decision that gave £125 instead of £124 and a fraction; and also with regard to the sinking fund, and other matters, it was graceful, and not unfair, to give them the benefit of the doubt. But when he came to the rate of interest at which the annuities should be calculated, then there was a matter involving a sum of nearly £3,000,000 sterling. Before that was decided, let it be considered what an enormous sum that was in connection with the people of India, and how often much smaller sums had been the subject of serious debate. The finances of India were in an involved state; and they had heard how, by cutting, clipping, and pruning, Her Majesty's Government hoped to save £250,000 annually. But the gift to the Fast Indian Railway would absorb the whole of these savings for a long period of 12 years. The Government had undertaken to limit the public works by which the trade of India was developed; but this sum would amount to the sum thus saved in three or four years. So it was a matter of enormous importance; and the House should not pass the Bill, unless they felt satisfied they were not inflicting a grave injustice upon the people of India. He was somewhat in the position of the hon. Member for Liverpool (Mr. Rathbone); he was a shareholder in the Fast Indian Railway Company, and if he had not been in that position, he might have had a doubt what course to pursue. But, being in the position with which personal pecuniary interest was connected, and, on the other hand, holding a strong opinion that the interests of the people of India were being sacrificed to an unfortunate degree, he felt he could not justify himself and his own character, in forming the strong opinion he held, if he did not state that, whatever the result of the Motion of the hon. Member for Hackney, when the Question was put, " That the Bill do pass," he should feel bound to say " No." For, as he had already stated, there were no real difficulties in rejecting or postponing the Bill. An objection had been made that the shareholders had been led to suppose that this transfer would not require the sanction of Parliament. That was not so. It would be a grave implication upon the Company if they had allowed this false impression to get abroad. The bankers who had to do with this matter stated distinctly in their circular that this arrangement was entirely contingent upon the sanction of Parliament. Now, suppose the Government acceded what, he thought, was the outcome, the necessary outcome, of the Report of the Select Committee? Suppose the House acceded that Report, being of opinion that there was considerable injustice in the matter to the people of India, and that it involved a gift to the Fast Indian Railway Company of £3,000,000, to which, under the strict terms of the contract, they were not entitled, then there would be no particular difficulty in throwing out the Bill, and falling back upon the contract. Now, with regard to the terms of the contract under which interest was to be paid on the money. He observed there was an important word in the Report of the Committee omitted by inadvertence; that was the word "received." It would be found, on referring to the contract as recited in the Bill, that the words ran— Such annuities to be determined by the average rate of interest received on the public obligations of the East India Company. But the word " received " had been omitted; and without it the meaning might be construed Avery differently. It might be construed to mean that the price should be determined by the nominal, and not the actual rate of interest; but with the word " received " it was difficult to attach any other meaning to the clause than that the amount of interest should be that received by those who had invested money in these obligations. It was the natural common-sense view to take that as the intention of the clause. Let the House think on this question of interest as involving no less than £3,000,000 sterling, and say if it was not better not to pass the Bill as it stood. Possession might be secured under the contract; the Secretary of State was entitled to give notice of the intention to take over the railway compulsorily within six months of February, 1880. This was clearly set forth—that Government could, at the expiration of the first 25 years of the term of 99 years, give the notice and take possession under the terms of the original contract. Therefore, if the House thought fit to reject the Bill, the Secretary of State could then proceed to give notice to the Fast India Railway Company that he intended to take advantage of the terms of the contract. The Secretary of State would then have the opportunity of taking legal advice, which the Committee regretted he had not taken; he could repair that error; and if that legal advice induced him, he could make more favourable terms for the people of India. Seeing there would be no difficulty in this course, and that it would save £3,000,000, a sum of enormous importance in the present financial embarrassments of India, he, shareholder though he was, would vote against the Bill.

MR. E. STANHOPE

said, this measure which had been proposed by the Secretary of State for India in Council, for the purchase of the East Indian Railway, had been characterized by the hon. Member for Hackney (Mr. Fawcett), as giving evidence of gross carelessness and laxity on the part of the Indian Government; but, on the other hand, the House should hear in mind by whom this particular Bill was recommended. First, his noble Friend the Secretary of State was responsible for the Bill; secondly, his noble Friend was assisted by a Committee of his Council, specially appointed to investigate the matter independently, and who made a recommendation to the Council as a whole; thirdly, this Council unanimously recommended the Bill; and, last of all, the exact terms of the arrangement having been communicated to the Indian Government, the Governor General in Council expressed unanimous approval of them. But, without entering into the details of the Bill, there seemed to him to be two great questions which the House would desire to have answered. These were, why, in the first place, was the strict letter of the contract departed from; and, secondly, was it true or not, that too much had been paid for the purchase and to secure the objects of the Bill? These questions he would answer at once. First, it was not possible, and it was inadvisable for the best interest of India, to proceed under the contract; and, to the second question, he would say a fair sum had been paid for the purchase, a sum far less than the real value of the property. The first consideration was, was it desirable for the Secretary of State in Council to take the first opportunity of purchasing this railway? On that point the House, as well as the Government of India, appeared to be practically unanimous; everybody who had spoken acceded that as a proposition not to be disputed. On political, as well as financial grounds, that purchase could be defended; and when it was said the Government were making a speculative bargain, the answer was, there was a solid basis of experience to go upon, placing it beyond all doubt that they were acquiring a good and valuable property. In addition to that, he attached the greatest importance to the purchase of the Jubbulpore branch; the same reasons applied to this branch as to the main line, and it became an object of the Secretary of State to obtain possession of both together. It was also the opinion of the Secretary of State in Council and the Government of India that the lines purchased should continue to be worked by the Fast Indian Railway Company, and, but for the speech just delivered, he should have thought this was generally acceded by the House. He did not desire to enter at length into the question of State management as against private management; but there were many reasons why it was more desirable this railway should be worked by a private Company, rather than by the State. The hon. Member who had just spoken said, only throw out the Bill, and the effect would be that the servants of the Company would be transferred to the service of the State, and all would go on as before. That proposition he doubted from beginning to end. Of course, the servants might be transferred to the State; but, with this transfer, there must be an increase in salaries, in pensions, and in establishments, which could not be controlled in the same manner under the State. There was also a grave objection to the working of a large concern like this by the State in times of difficulty. Pressure difficult to resist would be used to induce the State to carry goods at reduced rates; but with the Company working the line, there was a convenient buffer between the Secretary of State and the public. Then, the hon. Member for Hackney (Mr. Fawcett), and the hon. Member for Kirkcaldy (Sir George Campbell), said if it was desired to achieve these objects, was it not enough to give the Company a share of the profits and proceed on the lines of the contract? But he would point out that only one-fifth of the proprietary would receive a share of the profits, the remaining four-fifths receiving no benefit whatever. And, therefore, as regards the bulk of the proprietary, there would be, in that case, no inducement to them to depart from the exact terms of the contract for the convenience of the Government. They would simply have said — " We get no more than we must eventually get by law if we refuse to anticipate the end of the contract," and they would have refused to co-operate. These being the objects which the Secretary of State in Council desired to secure, he would now consider whether those objects could have been secured under the terms of the existing contract. Let them not forget that that contract was made with the old Fast India Company. The hon. Gentleman the Member for Hackney was very fond of comparing the management of the old Fast India Company with the management of the affairs of India since the transference of the Government of India to the Crown. When that contract was made by the old East India Company, and when the hon. Gentleman talked of that contract as being extremely favourable to the Company, he should remember that that favourable state of things was one that had only arisen within the last few years. If they were to look back beyond the last few years, they would see that it had been very doubtful indeed whether the undertaking of the Fast Indian Railway Company was likely to turn out successfully. The Fast India Railway had only of recent years become a great success; and with regard to the other guaranteed railways they were only at the present moment in the course of becoming a success. A few years ago, however, there was a very different state of things; and he did not think it was quite fair to throw on the old East India Company the imputation that they had made, years ago, under all the circumstances then known, an im- provident contract with the Fast Indian Railway Company. But, as far as the action of the Government was concerned, he could put the reason for the course they had taken in a very simple way; because ho might state that under the circumstances in which the Government were placed the contract was, practically, unworkable. They were, in the middle of last year—or, let him say, in the month of August last—in this position. They were desirous of having possession of the two lines belonging to the Fast Indian Railway Company, and also of intrusting the working of them in future to the existing Railway Company; and they found that if that arrangement were to be carried out at all, it was necessary that it should be entered into at that time, because, not only would the Railway Company have to consider the provisions of the Bill that was necessary to carry out such an arrangement, but it was incumbent on them to introduce the measure during the present Session of Parliament for the purpose of giving effect to it. Therefore, it was absolutely necessary that the arrangement between the Secretary of State in Council and the Railway Company should at the latest have been made in the month of October last. That being so, it was utterly impossible that the Government could de, what more than one hon. Member had suggested—namely, refer the question of terms to the Governor or Deputy Governor of the Bank of England. The period for making such a reference had not arrived—the moment at which any reference was to be made to the Governor or Deputy Governor of the Bank of England was to be at the end of the term fixed by the contract; and, moreover, a different Governor and Deputy Governor were in office than would have been at the head of the Bank of England at the time the contract expired. The Government, on full consideration, arrived at the conclusion that to attempt to carry out the objects they had in view was utterly impossible, if they adhered to the exact terms of the contract; and they, therefore, determined to anticipate its expiration by an agreement, following, indeed, the lines of the contract, but making the purchase distinctly independent of it. That being so, the Government felt that they could not stand on what were their strict rights under the contract. Had they attempted to do so, what would have happened would have been this. Mr. Crawford, the Chairman of the East Indian Railway Company would have said—"I have obtained the opinion of counsel as to what my rights are, and if I do not get every shilling to which the Company are entitled, and something more, what am I to gain by making any fresh agreement with the Government? I am prepared to wait until the contract has run out; and then, if the Government do net agree to the terms I ask, and which my legal advisers say are justified by the clause, I will fight them—I will carry the matter up to the House of Lords and get a proper and authoritative interpretation of the terms of the contract." But, during during all this time, what was to become of the railway? If the Government were to achieve their object of putting the working of the railway under the existing Company, it was utterly impossible to do this without having first arrived at a reasonable and proper compromise with the Company in the month of October last at the latest, instead of waiting until the contract had naturally run out. Then, it was said—" But when you did make a compromise, it was favourable to the Company." " Why, of course it was, and. naturally enough, because the Government were asking the Company to secure to them certain advantages which the Government regarded as of importance, and if they wished to acquire those advantages, it was clear that in one way or another they would be obliged to pay for them. They had followed the lines of the contract as far as they could under the circumstances, and they had agreed to pay what they believed to be a fair value for the property. In the first place, there arose the question of the price at which this purchase should be made, and the Government had offered to take the shares at the sum of £ 125. This sum had been, in reality, but very little objected to; and, as a matter of fact, he believed that the hon. Member for Dover (Mr. Freshfield) was perfectly correct in saying that the effect of these negotiations being carried en in anticipation of the term at which the contract would cease had been to depreciate the value of the property; and, therefore, making all reasonable and fair allowance for any such depreciation, to fix the sum at £125, instead of at £124 3s. 3d., was not giving anything unreasonable to the Railway Company in regard to the terms of the purchase. But the Secretary of State in Council had the alternative of paying that sum to the Company either in cash or by means of annuities, and those annuities were to be based upon a rate of interest to be calculated on certain terms set out in the contract. The first objection taken to their mode of dealing with the matter was that the Government ought to have referred to the Governor or Deputy Governor of the Bank of England. He had already pointed out to the House that such a reference was utterly impossible at the time it became necessary for the Government to enter into the arrangement, and, in the next place, the Government were advised—and they took upon this point the best opinion they could possibly obtain—that it was not necessary to refer the matter in any way at that time to the Governor or Deputy Governor of the Bank of England. The fact was, that they were not proposing to purchase under the contract at all; and even if they had proposed so to do, as far as he was able to understand the terms of the contract, the reference to the Governor or Deputy Governor of the Bank of England was only to be for the purpose of ascertaining certain definite facts, and not to enable them to put a legal interpretation upon the clause. With regard to the clause which fixed the rate of interest, it could not be denied that to anyone who examined it for the first time it was a clause which raised a good deal of doubt; and he was very much surprised to hear the hon. Member for Liverpool (Mr. Rathbone) say there was no doubt about the matter, because no one with whom he had spoken on the subject took that view.

MR. RATHBONE

I said there could be no doubt as to the intention, not as to the words.

MR. E. STANHOPE

said, he must venture to join issue with the hon. Gentleman; but, at the same time, it was sufficient to say that anyone reading the clause for the first time would feel that it was somewhat doubtful in its wording. But it was said, this being so, why had not the Government obtained independent legal advice before they entered into any negotiations with the Company with a view of seeing what was the course to be taken? Well, in reply to this interrogation, he would ask what was the nature of the Council of the Secretary of State? Why, they had among the members of that body gentlemen whose opinions on legal points were second to those of no person in the Kingdom, and on all the legal points on which the Secretary of State required to be advised those gentlemen were able to give him really good and sound advice. An hon. Member opposite had suggested that the rate at which the Secretary of State had actually raised money during the two years preceding the negotiations with the Company, or £3 18s. 5d. per cent, was the proper rate of interest to be taken; but here an interpretation had been put upon the clause which laid down the mode of ascertaining the rate of interest which it was impossible to support by argument, which no one else had seriously put forward, and which he did not think the House would be disposed to favour. That interpretation seemed to him to be obviously inconsistent with the plain meaning of the clause, and it was open to this further objection—that he might during the two years never have found it necessary to raise any money at all. Although the actual terms of the purchase were discussed backwards and forwards in the India Office during several years, such terms as had been hinted at had never been suggested, and, in the opinion of those who had closely considered the matter, they were absolutely inconsistent with the real interpretation of the clause. There wore other interpretations of the clause suggested, which were more worthy of consideration; and they were, that the Government ought to have based the terms on the average rate of interest paid on loans of the Secretary of State during the two previous years, either taking the nominal value of the stock or taking the market value. But if it were intended that the market value of the stock should be taken the clause would have said so, and the fact that the words " market value " were used in the clause relating to the price and were omitted in this clause seemed to him an unanswerable conclusion that this was not intended. And, surely, the meaning of the reference to the Governor or Deputy Governor of the Bank of England was that it was intended that they should determine something that came specially within their cognizance, and upon which the Governor or Deputy Governor of that Bank would be deemed specially qualified to pronounce. But the interpretation of the terms of the contract was a matter entirely outside the intended reference, and there was' no more reason to refer that matter to the Governor or Deputy Governor of the Bank of England than there was to refer it to any other outside party. But the true intent and meaning of the clause was perfectly plain. The House would remember that the contract was drawn up by the old Fast India Company. Well, what was their practice? They raised money, from time to time, by Exchequer Bills and Bonds, and they declared what rate of interest they would pay, endeavouring to fix such a rate as would keep their bonds pretty nearly at par, so that if the price went up they reduced the rate of interest, and so on. And he would venture to say that this was in the minds of the framers of the clause when they laid down the principle upon which the rate of interest must be calculated. It was quite impossible to apply the same principles now; but the interpretation put upon the clause by the Government was, at any rate, that which approximated most nearly to what must have been the original intention of the framers. They believed — and they had the highest authority for the belief—that their mode of calculation was the right one, and the only one which they could fairly ask the country to accept. If there was one thing that was clear about the matter it was this—the Secretary of State in Council was able to pay for the property of the Company in two ways—first of all, he might pay for it in cash, and, in the next place, he might pay for it by means of annuities. The construction the Government put upon the clause was that it must have been intended to apply to the fair value of the property and not to two modes of value, one of which gave the fair value and the other a value very much lower. It would be an act of spoliation on the part of the Government to take the property without paying its fair value, and the Government had acted on this construction. They thought that the intention was that if they did not pay the Company in cash they should give them the fair value of the property in another shape; and, in fixing the rate of interest as they had done, they had, as a matter of fact, given the Company what was fairly their due. It was said that they had given more than the fair value, and his answer to this was, that the price given had been fully justified by the quotations of the shares in the market. There were no shrewder judges of a bargain than some of the gentlemen in the London Stock Exchange; and what was the opinion they had formed? Why, that the Government had offered the Company no more than the fair value of their property. They found, as a matter of fact, that as soon as the intended purchase was announced, the value of the shares remained exactly the same as before; but if it were true, as affirmed by the hon. Gentleman the Member for Hackney (Mr. Fawcett), that the Government had made a sacrifice of £3,000,000 to the Company, how was it that hundreds of people in the City of London, who were shrewd enough to have found this out for themselves, had not gone in and bought the shares in the market for the purpose of getting their share of the plunder? The fact was, that those who operated in the Loudon market had rightly appreciated the bargain; they had perceived that the Government intended to give only the full value, and had given it, and, therefore, the value of the shares had remained very much what it had been. Why, what was the value of this property as compared with the value of the shares of other Companies? The Eastern Bengal Company was paying a less, or no better, dividend and their shares were quoted at a considerably higher price than the shares of the East India Railway Company. He did not think he need say anything further on this subject. The Government believed they had made a purchase of the Company's property on fair terms. They were told by the Government of India that they had bought the property at a price which was, at least, 30 per cent below its real value. [" Oh! "] That was the conclusion at which the Government of India had arrived after fully investigating the circumstances of the case. It was a purchase that at any rate, in their judgment, would commend itself as much to the House as it did to themselves; and, acting on this conclusion, the Government were prepared to sustain to the utmost of their power the terms on which the purchase had been arranged. The hon. Member for Hackney had put on the Paper an Amendment which, if carried, would not have the effect of defeating the Bill before the House. Looking at the terms in which that Amendment was couched, he (Mr. E. Stanhope) was not prepared to object to it. It seemed to him to be a reasonable proposition. The Government did not propose to purchase the railway under the terms of the contract, and he did not see why they should not tell the other Railway Companies that in future purchases each case would be considered on its own merits; and it did not follow that the Government would have the same object in purchasing other lines as they had in the present instance, nor would they necessarily pay the same price. Every case would, in fact, be dealt with separately as the time arrived; and, therefore, if the hon. Member for Hackney thought it desirable to put his Amendment to the vote he (Mr. E. Stanhope), for one, would certainly offer it no opposition.

MR. CAMPBELL - BANNERMAN

said, if any hon. Members were not present at the beginning of this debate they would be somewhat astonished to find the House still engaged in the discussion of a Private Bill; but they would speedily perceive that there was au excuse for this in the great importance of the measure. The hon. Member for Hackney (Mr. Fawcett) had already stated that not only did the Bill involve a question of the expenditure of upwards of £32,000,000, but that the circumstances of this case would almost certainly furnish a precedent for other cases of a similar kind. There was also this point to be considered—that while the Bill ought to be fully discussed by that House, it was introduced as a Private Bill and referred to a Hybrid Committee, who found that, owing to the forms which governed the proceedings of such Committees, they had the greatest difficulty in dealing with the matter. Such a Committee had no power to express an opinion on questions of general policy, and in many other respects the proceedings of the Committee were beset with difficulties from which, he thought it only right to say, he questioned whether they would ever have extricated themselves had it not been for the tact and spirit of impartiality displayed by the noble Lord whom they were happy enough to have as their Chairman. As to the two questions of public policy involved, he agreed with his hon. Friend who had just spoken (Mr. E. Stanhope), that there would be very little difference of opinion whatsoever—that was to say, the question, in the first place, whether Her Majesty's Government were right in exercising their power of purchasing the East Indian Railway; and, in the second place, whether they were right in refraining from attempting to manage the railway themselves, and in intrusting that task to the private Company from whom the property was to be purchased? The reasons that had been given for continuing the management of the railway in the hands of the Company appeared to him to be perfectly conclusive; but, apart from them, there was the general consideration that the Government of India, more, perhaps, than any other Government, had its hands perfectly full; and when they found an enterprize like the present, distinct and separate from everything else, it was certainly desirable that the Government should be relieved from the task of undertaking its control and management. The third question that arose was, however, one full of difficulty, and that was the question whether the terms of the agreement with the Company were in themselves fair and reasonable. There were, he thought, altogether four points in that agreement upon which there was some difference of opinion, and he would mention them in succession, although he should not dwell on any of them, with the exception of one. In the first place, there was the price given to the shareholders, which was £125, instead of £124 3s. 3d. The defence which was urged for the adoption of this course before the Committee was that, owing to the near approach of the period when the railway could be purchased, the shares were unduly depressed in the market. But he would remark, in regard to this argument, that this was a circumstance which must have been present to the minds of those who framed the contract. It was no new or accidental circumstance that had arisen; whatever effect the power of compulsory purchase might have must have been understood at the time the contract was made. With reference to the fact of the price of the shares having risen as high as £132, and then having fallen, he was not sure that that was, necessarily, in consequence of the step taken by the Government. The fluctuation in the earnings of the Company might have had as much to do with the variation of the price of the shares as anything else. But they were also told that they ought to deal with the Company in a generous spirit, and that the Government ought not to take a fractional advantage. He, for one, was not at all anxious to take advantage of the Railway Company, either fractionally or otherwise. But he could better have understood this argument being employed if a hard bargain had been driven with the Railway Company in all other matters; but the fact was that where the rigid application of the contract was found to bear somewhat hardly upon the Railway Company, the House was told that concessions must be made; while in other instances, where the rigid application of the contract would have the opposite effect and prove unfavourable only to the Indian Exchequer, they were ad to be told that the contract prescribed such a course, and, therefore, the arrangements must be made in exact accordance with its terms. The next point on which there was a difference of opinion was as to the sum which was to be involved in the sinking fund contained in the annuity, which was to include au annual sum for the re-payment of the capital and interest. This, it would appear, ought to be calculated on the amount that would be recoverable at the end of the lease. At the end of a period of 99 years the whole of the property of the Railway Company would fall to the State; but it had been pointed out that up to the period of six months from that date the Railway Company had the power of renouncing their property and. recovering from the State, not, as in the present instance, the whole of its market value, but merely the capital expended on the line; therefore, there was some degree of force in the argument that if they were going to have a sinking fund for the re-payment of the capital, they ought to base it on par value of the stock, and not on the proposed sum of £125. There was also the question of the Jubbulpore branch. The period for purchasing that line had been anticipated, and the consequence was that £10,000 a-year more had to be paid in respect of that branch, because if the four years still unexpired had been allowed to run out, a certain 5 per cent loan, which greatly affected the amount of interest, would have been extinguished; and, therefore, the rate of interest payable on the Jubbulpore branch would not have been so great. That, of course, was a necessary part of the arrangement, and he would not complain of it; but what he wanted to point out was, that in all the instances where the literal application of the contract bore hardly on the Indian Exchequer and was favourable to the Company, the literal acceptance and strict letter of the contract had been insisted upon. Where, in the one instance he had quoted, the matter was the other way, they were told that an allowance ought to be made. But the main point, undoubtedly, was the question of the rate of interest, which was a matter not only of greater intricacy, but a much larger sum was involved, and great attention was required. The words which were used in the contract were— The rate of interest used in calculating the annuity is to be determined by the average rate of interest during the preceding two years in London received upon the public obligations of the East India Company. He thought there was something in the argument of the hon. Baronetthe Member for Kirkcaldy (Sir George Campbell) as to the meaning imparted to the clause by the use of the expression " received; " and he was bound to point out to the right hon. Member for the City of London (Mr. J. G. Hubbard), who quoted the rate of interest in Calcutta as an element in the calculation, that the clause distinctly said—" the rate of interest in London; " and, therefore, what, in the least, had the average rate of interest received in Calcutta to do with the question? The meaning given to these words in the Bill was this. The rate of interest was arrived at by this computation—all the Company's stock, and all their obligations in London, were taken at par, and divided by the total interest payable thereupon. There was so much stock at 4 per cent, and so much at 5 per cent; they struck an average between them, and said that should be the rate adopted. The two other alternative interpretations that had been mentioned were either the rate of interest received on investments on Indian securities, or the rate of interest at which money had been actually raised during the two years by the Secretary of State. Surely, at any rate, the intention in placing these words in the contract was to ascertain something that was affected by the circumstances of those two years; they wished to ascertain what rate of interest should be employed in borrowing the money; they, therefore, wished to know hew the credit of the Government of India stood in the market. For that purpose, they took certain events connected with those two years into consideration; but it appeared to him to be quite unnatural to accept the interpretation which had been adopted by the Government, because it had nothing whatever to do with the two years; it had only to do with the circumstances under which the loans were issued 10 or 20 years ago. If they took the nominal rate at which new obligations had been issued during the two years, or if they took the amount of money received on investments in old obligations, then they ascertained the facts which indicated the present state of the credit of the Indian Government. But if they, on the other hand, used the interpretation which was acted upon in the Bill, they were fixing a rate of interest for the next 73 years according to something that happened 10 or 20 years ago. That, he admitted, was an à priori argument, and he would not for a moment set it up against any legal obligation strictly binding upon the Indian Government. But it had been avowed by the India Office that the original contract was, in reality, set aside and superseded; and they, therefore, need not be particular about the strict technical application of the words, but ought to be guided by the spirit and intention in the minds of the framers of the contract. He asked the House to allow him for a moment to accept the interpretation which the Government had put upon the words, to assume that it was true. and that the meaning they had acted upon was the right one. What was the account they themselves gave of it? Sir Louis Mallet, who gave evidence before the Committee on the part of the India Office, made a statement of the history of the matter which was extremely instructive. He said— At the time when this clause was drawn the only securities of the East India Company on the London market were bonds which bore a fluctuating rate of interest—that is to say, that the value of the bond was not allowed to vary, but the interest was raised or lowered according as the price sunk below or rose above par; and, therefore, the consideration in the minds of the drawers was just this—they thought they had got the whole thing before them; that the conditions of the problem were undisturbed by the considerations of price. If they had foreseen that the Government would have taken over the Company, that we should have heaped up our London debt and issued larger loans for a number of years, bearing different rates of interest, but the price varying infinitely, it would have been very imprudent not to have inserted words which would have referred to the market price; but I think the fact I have stated shows that it was not in the minds of the drawers of the contract, and that, therefore, they drew their clause with reference to the facts before them, and did not foresee that, as applicable to a different state of things, the effect of those terms would have been injurious. It amounted to this—that the thing with which they were dealing was opposed to two elements, either of which might vary—capital and interest. At the time those words were inserted in the contract it was the interest only which varied; but, now-a-days, it was quite the reverse. Now, there might indeed be different rates of interest; but it did not fluctuate from year to year, and it was the market price of the stock that showed the whole variation, and therefore indicated the credit of the Government. This was an excellent historical account of the matter, and a perfect defence of the good faith and good sense of the framers of the contract; but it appeared absolutely subversive of any claim to equity on behalf of the bargain now proposed in the Bill. It amounted to this—that the criterion or gauge of the credit of the Secretary of State which was adopted in the contract was no longer applicable; the facts which were ascertainable 25 years ago, by consideration of the interest alone, were no longer so ascertainable; the calculation, which was then complete, was now incomplete; and yet it was with that confession in their mouths, and with a light heart, that the India Office, at a cost, it might be, of £2,000,000 or £3,000,000 to the Indian Exchequer, accepted the literal interpretation of the words of the contract, though they themselves admitted it was contrary to the spirit and intention of the framers. He never knew a more extraordinary instance of recklessness in a matter of that kind. He could have understood the India Office coming forward and saying—" The meaning which we give to the words governing the interest is quite right and proper; we think it a fair, and reasonable, and natural thing that the interest which is to be paid for the next 73 years should be governed by the rate at which loans were issued 20 years ago." Or he could understand them saying—" These are unfortunate words; our agents were outwitted; these words were put in, and there they are, and we must abide by them." But the Government did not say that. They said that this was the literal meaning of the contract; but that the effect of the words was never in the mind of those who framed the contract. He would not argue against the ample fulfilment of every legal obligation under which the Secretary of State for India might find himself; but this he would say—that when the effect of that clause was fortuitously enhanced in the interest of the Company, surely a reason might be found in the windfall which had thus come, unexpectedly, to the Company for, at all events, insisting upon a rigid application of the contract in other respects where it was more unfavourable to the Company. But what would they say when they found this extraordinary interpretation adopted by the Government, without ever having sought independent legal advice, or without going, as prescribed in the contract, to the " Governor or Deputy Governor of the Bank of England? " The hon. Gentleman who had just addressed the House said the Government could not consult the Governor or Deputy Governor of the Bank of England, because different Governors were in office at the end of the time to those in office at the beginning. The Governor of the Bank of England was like the King, he always reigned; and what was meant in this instance by the word " Governor" was the functionary, and not the individual. And, surely, when those words were explicitly in the contract—if the contract was to be of any force—that was a very good reason for, at all events, taking the opinion of the Governor or Deputy Governor of the Bank of England, although the 24 months might not absolutely have expired. The duty of the Governor or Deputy Governor of the Bank was not to interpret the clause, but to ascertain certain figures. The figures that were necessary to be ascertained in order to arrive at the facts required for the Government's interpretation of the clause were very easily ascertainable. He imagined it would be the simplest matter possible; indeed, he should be surprised if the lowest class in a Board school would not be on that point as good an authority as the Governor or Deputy Governor of the Bank of England. Those officials, however, were mentioned in the contract because they were eminent authorities, who would be able to vouch for the quotations in the money market which were involved in the calculations. That appeared to be the natural interpretation, whatever might be the legal interpretation, of the words. As to the question of independent legal advice, it had been said that there were legal members of the Secretary of State's Council. They never knew whose opinion had been taken, and it would have been more satisfactory if they had seen a copy of a special legal opinion obtained before the arrangement with the Company was concluded. But the most important fact of all was that the literal meaning of the contract was no longer strictly binding, because the contract was superseded, and was pronounced by the India Office witnesses to be no more than a "basis" or a " guide." It was, therefore, an open, and, as the right hon. Gentleman (Mr. J. G. Hubbard) had said, an " amiable " bargain; and, in that case, they were thrown back on the natural fitness of things; and who could say that the natural fitness of things justified the Secretary of State for India borrowing money for the next 73 years at the rate of £4 6s. per cent, when his 4 per cent stock was quoted at par? The difficulty they had had all through the consideration of the question had been that sometimes the contract was quoted, and sometimes it was not. If they were to be guided by the strict letter of the contract, let them know what they were doing. If the contract were not binding, then, surely, they were entitled to apply the ordinary principles of business in discussing the matter. His contention was three-fold. He doubted whether the words could bear the literal meaning ascribed to them; in the second place, he was certain—in fact the Indian Office had told them so—that they were never intended to bear that meaning; and, thirdly, if the matter was to be judged as an open bargain, then it stood self-condemned. It might, indeed, be alleged that it was necessary, in order to induce the Company to come into the arrangement, to offer them large and generous terms. He did not think that was an argument that could be sustained for a moment. What was the commodity that the Government had to offer to this Company? The Under Secretary of State for India talked about the necessity of giving liberal terms, because the Government were asking the Company to sell some advantages. What they were doing was asking the Company to take something, and not to sell it. They offered the Company a one-fifth share of the clear profits of the undertaking for the next so many years. Was this a good or a bad thing? Was it a lucrative property to which the shareholders were being admitted, or was it a burdensome service chat they were being asked to undertake? Obviously, it must be a good thing; for, otherwise, the whole case of the Government fell to the ground. In order to secure the good management of the line, there must be a substantial interest on the part of the shareholders; and they believed that it would be a lucrative concern, and that, therefore, the one-fifth share would furnish that substantial interest. The theory of the Government, therefore, was that it was a good thing; and, if so, why give the shareholders any extra advantage? If it were a bad thing, Lad not the Government better manage the line themselves? As to the whole question, lie was not disposed to use the strong words that had been applied to the India Office in some quarters; but he would say he thought that they had been distinctly overridden by the Railway Company; that they had been too much impressed with the idea that they were in a difficulty, and that they were obliged to conciliate the Railway Company. The Company were just in as great a difficulty as the Government. Supposing the matter had been allowed to run out to the bitter end; supposing the change had been made on the terms of the contract; supposing it had been necessary to go to law; all of that would have been as difficult for the Company as for the Government. The Government had done quite rightly in endeavouring to avoid it; but it was quite as much for the interest of the Company that there should be no recourse to law. He, therefore, could not see how, on the ground of the difficulty, a case had been made out for giving extravagant terms in the purchase of the railway. The hon. Baronet the Member for Kirkcaldy, in his usual bold and courageous manner, said they ought to throw out the Bill at once, and disregard the consequences. Ho (Mr. Campbell-Bannerman) had never been prepared to take that course; in the first place, because he approved of the principle of the Bill, and, in the second place, because the bargain had been made and published, and stock had passed hands on the faith of it, and to upset it would cause great inconvenience. Again, if the Bill were thrown out, the Government would have to make another bargain with the Company; but they would be the last persons in the world to make a good bargain now, because they had already committed themselves. Neither did he agree with the hon. Baronet (Sir George Campbell) in thinking it would be desirable to purchase the line, and take over the management. He thought the Resolution of the hen. Member for Hackney (Mr. Fawcett) was a sound one; and he expected that great benefit would accrue from the discussion of the question in the House, and from the thorough inquiry which took place before the Committee. They ought to be content with these advantages such as they were, and he advised the House not to support the hon. Member for Kirkcaldy in absolutely opposing the measure.

LORD GEORGE HAMILTON

said, that as the was Chairman of the Committee to which the Bill was referred, he might be pardoned if he trespassed upon the time of the House for a few moments. He believed the Committee acted in a thoroughly impartial manner, and they felt exceedingly the difficulty of the task before them. The House would allow him to point out what would be the consequence if the Bill were rejected. The Bill provided for the purchase by the Government of a valuable property, the Fast India Railway. Everybody would adroit that the Government were right in exercising their power to purchase the railway. The next feature of the Bill was the manner in which the Government were to get possession of the property. They proposed to obtain possession by means of annuities, and he did not think anyone would consider that the Government were wrong in arriving at that conclusion. Thirdly, it was determined that the present Company should be continued as the working authority of the line, and that was a point to which sufficient attention had not been called. The hon. Member for Kirkcaldy said that the railway officials ought to be placed on the permanent Staff of the Government of India. Of course, the officials would approve of that, because they would receive higher pay, and very materially improve their position. But if the Government had at once undertaken the working of the line, no one could estimate how far the receipts would have fallen off. If the Government had decided to undertake the management, and had been able to keep the expenses within 10 per cent of those at present, they would have succeeded very well. The Government had found it necessary to anticipate the contract, and they wished to maintain the present Company as the working authority of the line. It was the intention to adhere to the contract, except in two particulars, the exceptions being the price for the stock, and the acquisition of the branch line. And this last, though it involved a payment of £10,000 a-year, must ultimately be a greater gain to the Government than it had been to the Company. As to the price to be given for the stock. According to the contract, this was to be the average market value of the stock for the three years preceding the date at which the Government might take over the line. According to the terms of the contract, the three years would be those antecedent to February 20, 1879. By anticipating the contract, the term of years was from November 1875 to November 1878. There was no doubt whatever that the mean rate would have been higher during the period mentioned in the contract than it was during the period the Government took; and, therefore, when it was found that the mean market value of the period taken was £124 4s. 3d. it was agreed to give £125 as a compensation for the higher price the stock would have attained, if there had been a literal adherence to the terms of the contract as to the time of purchase. That the price of the stock was prejudicially affected by the operation of the Government was beyond question. The average price of East India Stock for two years was £125; and the average price of Eastern Bengal Stock was £134; but the dividend paid on East India Stock was 6¾, and on Eastern Bengal only 6, so that, though the dividend was ¾ higher, the value of the stock was considerably lower; and this diminution was unquestionably due to the prejudicial effect of the negotiations with the Government. Therefore, he thought, the case of the Government was perfect on these two points. Then, as to the rate of interest, the Indian Government contend no concession was made. In the careful discussion, and many calculations, as to whether or not it would be advisable to buy the line, one element was always involved—that, according to the terms of the contract, higher rates would have to be paid for the East India Stock than for that of other Companies, because of the 5 per cent loan which was redeemable next year. The Indian officials maintained that this 5 per cent loan was an element not to be eliminated. But, after all, they were upon the same footing as they were in the Committee, for the question was one for legal interpretation, and no one had a right to interpret it except a Court of Law. Without going into this at length, he might fairly say that, whether the India Office were in their interpretation right or wrong, it was quite clear that had any other interpretation been adopted it would have been open to doubt, and, probably, would have led to a law-suit. Was it worth while for the Government to decline to treat with the Company, because of the interpretation the latter put upon the contract, leaving the settlement to a Court of Law? Assuming that the Government ultimately proved their case, the damage to the line and the loss of revenue would have been great; while, assuming that they lost, their position would be much worse than it was now. Therefore, he confessed, as regarded himself, he had been influenced less by the consideration of whether they might be charged with a breach of faith than by the conviction that if the House threw out the Bill tomorrow, it would be difficult to make arrangements more advantageous to the people of India. The whole question must be taken together—not merely the question of annuities to be paid, but how far the Government could recoup themselves out of the railway to compensate for the charges the annuities entailed on the Revenues of India. According to the calculations the Committee had before them, assuming the continuance of the present management, there was no reason to doubt that the revenues of the railway would be amply sufficient to meet the amount of the annuities, and to put, besides, a considerable surplus into the pockets of the Government. They would be in possession of one of the most valuable railways in the world, and, instead of paying towards it for 73 years, they would during the time be actually making a profit out of it. Therefore, he hoped the House would not attempt to upset the Bill either by opposition to the consideration of the Report, or, by the insertion of Amendments here and there, upset the framework of the Bill. The Committee went at length, and with great care, into the details of every clause, and it was their unanimous opinion that the House must either accept the Bill as it stood, or else throw it out. A great difficulty the Committee were under was owing to the mode in which the Bill was presented to them. It was essentially a question of public importance; but the Committee had to follow the procedure and practice of Private Bill legislation, by which the Preamble of a Bill was first considered. But the Preamble in the present Bill occupied 19 pages, and was full of contentious matter. It embodied a despatch from the Secretary of State, all the terms of agreement, the details of purchase, and the proposals for working the line. It was found impossible to alter one detail of this despatch, and the Committee were compelled to pass the Preamble or throw the Bill out. After a long and anxious consideration, the Committee came to the conclusion it was best to pass the Preamble, and then amend the Bill as best they could, and in this sense they reported to the House. He quite agreed with the terms of the Motion of the hon. Member for Hackney (Mr. Fawcett), for, practically, it supported the words of his own Report. Guaranteed railways would understand in future negotiations that the present action settled nothing as regarded the interpretation of the annuity clause. He would even go further, and express an opinion that if the Governor or Deputy Governor of the Bank of England were to be the sole judges of the clause —and no one could say what views these officials might hereafter hold—if their decision was to be absolute, then that would be putting enormous power into the hands of those gentlemen, without giving power to the contracting parties to appeal to a Court of Law. The Governor and the Deputy Governor of the Bank were mentioned in these old contracts probably because they kept the official records of the Fast India Company, and they were only to be applied to as to the facts upon which the contracting parties were to agree; but it was unjustifiable, in his opinion, to assume that in any essential points of the contract both parties should not appeal to a Court of Law. Another difficulty might occur in cases where the Governor and the Deputy Governor gave independent opinions. Suppose one party appealed to the Governor for his interpretation of the clause, and the other party referred to the Deputy Governor; and supposing the two opinions to conflict, who was to decide? There was no provision for settling this difficulty. Rather strong and unfair language had been applied to the Secretary of State in Council in respect to these contracts; but it must be remembered he did not make the contracts—they were a legacy from the East India Company. The hon. Member for Hackney had often praised the finance of the old Company; and, as a matter of fact, this contract was drawn up by Mr. James Wilson, one of the ablest men of his day, and though it might now seem ambiguous and difficult of interpretation, at that time these contracts were considered models of lucidity. But they were applied to the different circumstances of 25 years ago, and that was the main cause of the divergence of opinion now. He hoped the House would assent to the Motion of the hon. Member for Hackney, and then pass the Bill without alteration. The arrangement had been shown to be altogether of an exceptional character, inasmuch as the loan bearing 5 per cent was redeemable next year, and would be altogether eliminated from future calculations as regarded the rate of interest. It was exceptional, inasmuch as the Company had reduced their working expenses to a lower amount than they had ever been before, and, in consequence, the property had become so valuable that it was necessary that the Government should acquire possession of it. Under the circumstances, he hoped the House would accept the Resolution of the hon. Member for Hackney, and then pass the Bill without alteration.

MR. COURTNEY

said, when the noble Lord argued in favour of the Indian Government dealing in a liberal spirit with the Company because it was due to this purchase that their stock stood at a diminished price in the market, he used an argument of a somewhat extraordinary character. The fact was, there was the power of pre-emption given to the Government by the original contract with the Company, and the existence of this had the effect of bringing down the price of stock in the market. Yet, when the Government proceeded to exercise the power given by the contract, then it was proposed to take into account the depreciation of stock which resulted from this right of pre-emption. Take a parallel ease. Suppose the Government had two stocks at 5 per cent; one redeemable in 20 years, and the other next year. Of course, the 20 years' stock would be selling at over £150 in the market, while the other would be £101 or so. And suppose the Chancellor of the Exchequer came with a proposal to give these people a bonus next year because their stock could be redeemed at a depreciated price. That was the whole gist of the comparison the noble Lord made between the East India Railway and the Eastern Bengal.

LORD GEORGE HAMILTON

explained what he had said was, that by the operations of the Government during the three years antecedent to the date the Government entered into the arrangements the price of stock was lowered.

MR. COURTNEY

said, that the argument went further than the three years antecedent to the period when the right was exercised. The price would be depreciated, the price of stock would begin to fall as the period approached for the right of purchase. This had the effect of depreciating the stock, and now it was proposed to give an extra price to the Company in consequence. What was this, but giving away that very power of pre-emption the Predecessors of the Government had secured 25 years ago? Then came the question of the conversion of the capital sum into annuities. This was divisible into two points. The railway stock was to be paid for at £125 for £100 of stock, and what followed was supplementary, not, of course, to be affected by the course of fair and easy dealing with the Company. Then arose the question upon what terms this should be converted into annuities terminable in a certain number of years. As the hon. Member for Hackney (Mr. Fawcett) said, this conversion was not made in pursuance of the contract. Here they were acting outside the contract, and only acceded the contract as a guidance in the transaction. Taking that to be true, the question was, what was the meaning of the contract as guiding this conversion of the capital sum into Terminable Annuities? It was at once obvious that since they were not taking it as an imperative direction, they were entitled to look at the intention rather than at the words themselves, if the words were ambiguous and incapable of direct interpretation. It had been conceded by everyone speaking from the Government Benches that the obvious intention was that the conversion of the capital sum into Terminable Annuities should be made upon such terms as the annuities would sell in the market, so that the railway should suffer no loss from this form of the bargain. That was regarded as the intention of the contract by the Chairman of the Company himself. It was obvious that if they wanted to discover the rate at which these securities would sell, they must go to the market and find out what was the interest on current Indian Annuities. There could be ascertained at once the exact rate at which the £125 could be converted into its equivalent in Terminable Annuities. More than this, there was a guide to be found by reference to the antecedent practice of the East India Company. The Fast India Company were in the habit of borrowing from time to time in the London market, and they offered such terms as floated their obligations at par. According to the Under Secretary, they were not bound by the exact terms of the contract, but could work outside it, only following its spirit. Then, recurring to the rate at which the Fast India Company borrowed, he found it was £3 18s. 5d. per cent, instead of the £4 6s. 0d., by which now the Government would throw a loss upon the Indian Exchequer of between £2,750,000 and £3,750,000. They had been told that this had been very carefully considered by the Indian Government, and there had been an unanimous opinion in favour of dealing with the Railway Company in the manner proposed by the Bill; but it appeared to him the Indian Government were liable to very grave censure for the sacrifices they had made of the Indian Treasury—first, by giving a greater capital sum than ought to have been given; and for the still more flagrant sacrifice by converting this sum into annuities at an unnecessarily high rate. What was to be done now? The hon. Member for Kirkcaldy (Sir George Campbell) had been somewhat misunderstood. What he (Mr. Courtney) understood him to say was that the cardinal fault of the Indian Government in carrying through these transactions was that they thought they were " under the thumb " of the East India Railway Company, whereas the reverse was actually the case. The Government had the power in February of this year of compulsorily buying the main line of the Company, though they could not buy the Jubbulpore branch for four years to come. But they could easily have waited four years for this, the main line being the profitable line. If they had said to the Company —" We are going to buy your main line under our compulsory powers, but if you are willing we will enter into agreement for the transfer of the Jubbulpore line also," then they could have secured terms very much more favourable than they had now. If the Company had stood out, then the Government need not have bought the Jubbulpore branch line at all, but have gone on with the main line independently. As the hon. Member for Kirkcaldy said, the compulsory power was still open; it ran for six months from February, so that it would not expire until August. Even then, if the Bill were put aside summarily—which, however, he did not advocate—it would not follow that the policy of purchasing the railway would be negatived, or the power of purchase negatived. The Government might still give notice of their intention to purchase the main line, and might enter into a new contract with the Company; this might be easily and profitably done. The House was much indebted to the hon. Member for Hackney for bringing forward his Resolution, and demonstrating as he had done that the Indian Government, in two ways, had shown deplorable laxity in guarding the Revenues of India.

MR. MUNTZ

doubted if any Committee had more difficulties to contend with than the Committee to whom this Bill had been referred; but if they had a difficulty there, it had now been increased by the extraordinary statement of the Under Secretary, in which he had informed the House that this contract was not binding, but merely put forward for guidance. [" No, no!"] Then he was glad to hear it was legally binding; but that was precisely what they had been told all through, that it was not. Then, let the contract be adhered to, and there would be no sacrifice of this £3,000,000 or £4,000,000. Either the contract must be binding or not. It was absurd to say the contract should be adhered to where it suited the Indian Government, or where it suited the Company, and where it did not suit the Company it should be overturned. The Committee were informed that the contract was not binding, but that it was to be made the basis of an arrangement; otherwise, the contract was binding on both sides. In the first place, the Committed were in a difficulty from having the Bill laid before them as a Private Bill, and being told to discuss the matter on ground of public policy, and they were obliged to call evidence to this public policy. The question of finance was clear enough, supposing the contract to be binding. On the subject of general policy, ho had himself put questions to Sir Louis Mallet, and received for answer that the advantages contemplated, if the Bill became law, were twofold. The witness believed that, in future years, Government would derive a large revenue from the railway; and, in the next place, the longer the transfer was delayed the larger the sum Government would have to pay. For military purposes, it was not absolutely necessary to acquire the line; in fact, the only advantage was, that the property ought to be secured because it might increase in value. In reply to another question, Sir Louis Mallet said this was not a speculative opinion; but it was formed on solid reason and experience as a basis. That was precisely the case with all railways, and when they gauged it they found their net receipts were so much in excess of the expenditure that they could afford to pay very large dividends; and if hon. Members would recollect, they would remember hew some railways that had paid 10 per cent, 7 per cent, or 6 per cent, were now paying only 5 per cent, 4 per cent, 2 per cent, and even nothing at all. If they would consider how they commenced, they would know very well those railways, in their first operations, had everything new—new engines, carriages, rails, new bridges, and everything else; there were no repairs, there was everything to receive, and nothing to pay.

MR. F. STANHOPE

These have occurred since the Famine.

MR. MUNTZ

said, he was now talking not of the Fast Indian Railways, but of what was the result on the receipts in this country. He said they would have the same occur with respect to all railway property in India; and, therefore, it was unfair to make such a commercial arrangement as the one that had been made. At the present moment, there had been received up to June, 1878, the sum of £518,000; the year before it was £630,000. He had no doubt it had fallen off from the exigencies of circumstances; but it showed that the increase was not going on as was anticipated. At this moment, the Railway Companies worked the railways under a guarantee of India 5 per cent. They received five-tenths now, and they were going to give two-tenths to the Indian Railway Companies for their management; that was, some £200,000 a-year, and all they gained by that was three-tenths; they got three-tenths of the surplus beyond the 5 per cent, and was it worth the while of the Government incurring the great risk by taking the burden of the Company upon themselves? He did not wish to trouble the House with financial opinions; but the hon. Gentleman the Under Secretary of State for India made this remark—he said, after the purchase, it could not be disputed—no one in that House, and, he believed he said, or out of the House, could doubt the policy of the purchase. Now, he was one of those who did doubt the policy of it; be believed the purchase of railways was a fatal mistake. He thought the noble Lord who had spoken, the Vice President of the Council, stated distinctly they were never expected to give the amount to the old railway, because they felt it was impossible to carry on the railway on terms that were advantageous to the Government. They were not competent to compete with private individuals, and, therefore, the less they had to do with them the better. He objected altogether to the purchase, and he had seen some little of the working of those purchases. Let them look at the commencement of that contract; what was it? It was originally a 99 years' lease. His hon. Friend the Member for Dover gave them some figures as to how they began; but he forgot to tell them about the 22nd clause—how that get into the contract. Then came a little clause touching the payment, to the effect that any time during those 99 years the Railway Company should have the right of payment, to demand the payment of the whole of their capital. He did not find fault with the Government; but he could not understand how the clause should have got into the Bill. There was nothing new in a 99 years' lease; the French Government did it, but the French Government took possession of the lines; and they should have done the same in India, if it had been properly arranged. But here, after guaranteeing five-sevenths, having done that, they allowed that clause to be introduced, stating, to the astonishment of mankind and all who read it, that those gentlemen to whom they had guaranteed the 5 per cent and granted a 99 years' lease should have the right to come and demand the whole of their capital. They might say, " Why did you pass the Preamble to this Bill? " And there he agreed, without hesitation, with the noble Lord, in saying they could not do otherwise; the inextricable counfusion that would have arisen made it impossible to do otherwise. He agreed entirely with the Resolution of his hon. Friend the Member for Hackney (Mr. Fawcett), and he was extremely glad that Her Majesty's Government were willing to accept it, as it would, in the future, prevent contracts being made like the present one.

MR. CHILDERS

said, he merely rose to address himself to one point in his hon. Friend's case, and he should merely speak to that one point. He thought there was some misunderstanding. His hon. Friend the Member for Hackney had moved an Amendment expressing the sense of a portion of the majority of the Committee, expressing the sense of those who had looked into the matter, and the Government had accepted that Amendment; therefore, there was really no question before the House, except to reject the Bill altogether, and into that question he would not go. There was, however, one point, and that was, on what basis should the annuity be calculated? If, instead of accepting a cash payment, an annuity should be demanded, on what basis should that be calculated, under the terms, not only of the railway contract, but of the present arrangement? He wished to call attention to the circumstances existing during the term of Sir Robert Peel's Government. It was then proposed that all of them should revert to the State. That was considered, by a most able body of men, to be the best; and it certainly was the view taken at the time, and was done in France and other foreign countries. It was desirable that the Government should acquire the railway property of that kind, if necessary, and it was held that Railway Companies should not acquire the actual soil; they should not be the proprietors, but only hold a long lease, terminable, according to the French practice, at 99 years. The railways were constructed by Companies on the old basis of a former Act—upon an Act passed in the year 1844, or 1855, he was not sure which—under which the Government had power to acquire all the railways after a period of 21 years, on giving certain notice, on a certain basis of valuation. Although that compromise was accepted by Parliament, it had never been put in execution at all, and the plan of the French Government was adoded—that was to say, they only had property in their line for 99 years, and, at a certain interval, Government could acquire those lines upon paying an adequate compensation. But there was this difference. In the case of English railways, the Companies were to hold the lines absolutely; but in the case of India, the Companies were only to hold them under a 99 years' lease, and the amount to be paid was fixed by Government. There was an alternative. Instead of paying the capital sum down, as for English Companies, the Government should be empowered to pay an annuity, current over the remainder of the period of 99 years; and that was the origin of the special clause which had been the subject of so much discussion to-day. The question he wished to ask he dared say the Chancellor of the Exchequer could answer satisfactorily; and, if so, it would, perhaps, clear up the matter. In the agreement which they now had under consideration, and which was explained in the Bill, but which was still more explained in the portion of the evidence to which no reference had been made, the owners of stock in the East India Railway had an option—they might either accept the annuity during the remainder of the 99 years, or they might accept a perpetual annuity. If they referred to the evidence, they would see it was stated by Mr. Crawford—and if they referred to the Preamble of the Bill, they would see it there—that they had the option of taking either a perpetual annuity, or an annuity for the remainder of the 99 years. In the answer given by Mr. Crawford, they would see that 2,427 proprietors had agreed to accept the perpetual annuity, instead of the annuity for the remaining period of 70 years, or whatever it was. It was the option of receiving cash, or the equivalent of cash, at the present time, fairly represented by the annuity; and the railways, representing nearly £4,000,000, had acceded nearly £4,500,000 of stock in the nature of that annuity. The question he wanted to ask was this, If the railways had the option of taking a terminable annuity at a fixed term of 70 years, or a perpetual annuity terminable by the Government at a certain date, why, he wished to ask, was the rate of interest different one from the other? It seemed to him that if all the proprietors were to be put on a level, as had been so strongly put by the noble Lord, those two were not upon a level. That was the only question he wished to ask, and, perhaps, the Chancellor of the Exchequer could give him an answer.

MR. LAING

said, he did not wish to prolong the debate; but there was one point that had not been touched upon, and which he thought should be referred to. It was unanimously agreed that, as to the main point, there was no difference of opinion; and he believed the majority of the House were satisfied that the Government had acted wisely in making the purchase; that they acted very wisely in making arrangements with the Company to work the line instead of attempting to work the line themselves, and he did not think there was any great dissatisfaction as to the payment of the £125 per cent stock; but there was a great amount of dissatisfaction at the confusion that had been effected in the terms that had been so unfavourable upon the Government, and which had imposed a needless burden of £3,000,000 upon the taxpayers of India. Rightly or wrongly, that had been interpreted at the India Office to mean they were to take the amount of interest paid, and not the interest that would be yielded by stock. He could hardly imagine that interpretation could hold good, and he could not see any meaning in the reference to the Governor or Deputy Governor of the Bank of England, unless it was for ascertaining what the rate of interest should be. The whole difficulty might have been avoided by standing on the other alternative, never offering an annuity, but paying off the amount in cash or in stock, which would be equivalent to cash. He should have thought the natural mode of proceeding was this. When the India Office found they were fettered by the wording of the clause, they should have offered the payment in a different form, and have said — "Here is £125 in cash, or its equivalent in 4 per cent stock;" and they should have given those who liked to take the opportunity of participating in one-fifth of the profits a less amount in cash or stock. They might have said they could either take £125 in cash, or £100 in cash or stock, and scrip for £25, representing the profits, and, in that way, they would have got rid of the annuity altogether. As regarded finding the requisite cash, a loan for an equivalent amount, specially secured on the purchased railways, could easily have been raised in the market; but, practically, a fair offer of stock would have been taken by nearly all the shareholders, and the operation would have been an ordinary one of the conversion of a loan into one of lower interest. Therefore, if he might say so, under all the circumstances, it was no excuse to say the annuity clause had placed them in a disadvantageous position.

MR. GRANTHAM

said, he would venture to answer the question that had been put by the hon. Member for Orkney (Mr. Laing). It was self evident that if the purchase could have been made in that way, it would be the better course to adopt; but the Committee was told by all the responsible advisers of the Indian Department that it was felt, in financial circles, that the Government could not take such a course without disarranging the finances of India. It was unanimously felt it would not bed wise to go to market at the present time, with finances that were considerably disarranged, to borrow the £30,000,000, which would be required to pay them off in cash, when there was the certainty of having to raise £17,000,000 next year to pay off the per cent loan. It had also been stated they should have had stock itself. The shareholders would not have accepted stock; and, that being so, it became a matter of " Hobson's choice." It had been assumed the Government were net bound to pay anything as the sinking fund, and that the 4s. 6d. given for the sinking fund was not necessary. Now that, ho thought, was a mistake, because the annuity clause came in. It was true there was a clause in the contract giving the Government power to purchase at the end of 25 years; but if the Government where to come in before the Company had derived the full benefit of their outlay, which they would do at the end of 99 years, then there was a reason why the property should be treated as freehold, and not as leasehold, and should be taken at its full value. They were told, therefore, that if the Government purchased the line, it would be very difficult for them to raise money in cash, and that it would he cheaper to pay a larger sum in the shape of an annuity. That being so, there was no choice on the part of the Government at all; for the construction put upon the annuity clause as to the necessity of providing a sinking fund was, he had no doubt, the correct one. He quite agreed with the hon. Member for Birmingham (Mr. Muntz), and the hon. Member for Orkney (Mr. Laing), that if the Government could have paid in cash it was their duty to have done so; but, under the circumstances, they had done the best they could, and, indeed, they had no other course open to them than the one they had adopted.

THE CHANCELLOR OF THE EXCHEQUER

I merely rise in consequence of the question put by the right hon. Member for Pontefract (Mr. Childers), and I rise rather to say that I should prefer to have that question answered by my hon. Friend (Mr. F. Stanhope) or my noble Friend (Lord George Hamilton) who sit near me, and who are familiar with these matters. I think it would be more convenient if the question were put to-morrow on the Report. The position in which we now stand is this. The Bill has been laid before the House with a view to the consideration of it. The hon. Member for Hackney has moved an Amendment upon the question of its being taken into consideration, and that Amendment the Government are prepared to accept. Therefore, instead of considering the Bill now, we shall pass the Resolution of the hon. Member for Hackney; and, to-morrow, we will endeavour to proceed with the consideration of the Bill, when the hon. Member for Kirkcaldy has one or two Amendments to propose.

MR. CHILDFRS

I will repeat my question to-morrow, and put it more clearly, so as to give the Chancellor of the Exchequer a fair opportunity of replying to it.

Question put, and negatived.

Words added.

Main Question, as amended, put. Resolved, That this House, adopting the recommendation contained in the Special Report of the Committee to which this Bill was referred, is of opinion that its provisions should not be regarded as a precedent for defining the terms on which the Indian Government may hereafter exercise its right of acquiring possession of the other guaranteed Railways in India.

Consideration, as amended, deferred till To-morrow.