HC Deb 01 May 1885 vol 297 cc1286-312

Order for Second Beading read.

Motion made, and Question proposed, "That the Bill be now read a second time."—(Mr. Dodds.)


said, he had placed a Notice on the Paper, which had now been there for some time, of his intention to move— That it is not expedient to pass any Railway Bill which involves the payment of interest out of capital during the construction of works, pending the introduction of a public measure on this subject, as recommended by a Committee of this House in 1882, especially where such a Bill practically makes the alteration of the Standing Orders of this House retrospective in their action. In moving that Resolution as an Amendment to the second reading of the Bill, it was scarcely necessary to explain that it was, of course, a direct attack upon the second reading. He would state to the House at once the position in which he stood in regard to this measure. He had taken up the question entirely as a matter of public duty. Whatever might be the opinion of the Railway Association, which he had sometimes represented in that House, he did it without regard to any resolution which they might have come to upon this subject. He had nothing whatever to do with, the Railway Shareholders' Association. He was not a member of that Association; but, on the contrary, he had declined to become a member of it, as he felt that his own work was more particularly connected with railway direction and management generally than it was with railway shareholders in particular. He had always maintained that it was the duty of a Railway Director to try and hold the balance as carefully as possible between the traffic senders and the shareholders. He had, therefore, declined to become a member of that Association, which, he believed, had sent out a Circular that afternoon, stating reasons why the House should support him in the Motion he had just made. He had been under the impression that the Motion of his hon. Friend the Member for Cambridgeshire (Mr. Hicks) stood first on the list that afternoon, and the proposal of his hon. Friend was a direct negative to the second reading of the Bill. His (Sir Joseph Pease's) ground was a somewhat different one; and probably his hon. Friend would be able to explain the different reasons for opposing this Bill much better than he could. His hon. Friend the Member for Gloucester (Mr. Monk) had in 1882 also opposed the Regent's Canal Bill upon the same ground as the hon. Member for Cambridgeshire (Mr. Hicks)—namely, that the operations of this Company would probably result in the closing of the old Regent's Canal, and if that were done that the practical effect would be to close some of the important branches of inland navigation, which his hon. Friends considered to be for the public interest to keep open with a view of benefiting the trade of the country generally. His (Sir Joseph Pease's) argument was altogether different. It was an argument entirely based upon principle, and it had nothing to do with the railway accommodation of the district traversed by the Canal Company. He opposed the Bill, because he considered it to be wrong financially to pay interest out of capital during the construction of works. He would now endeavour to explain the position in which the matter stood, and he hoped that he would be able to lay a clear statement before the House, so that the whole matter might be thoroughly appreciated. The line was about 18½ miles long, and it ran from Paddington along the old Regent's Canal bank—which would be familiar to many Members of the House—as far as Islington, reducing the width of the Canal navigation in certain portions. The Canal was protected, as far as he could see, by clauses in the Company's Act of Parliament. Those clauses were undoubtedly inserted in the first instance, whatever might ultimately become of them, for the purpose of protecting the traffic upon the Canal. At Islington, the Railway divided itself into three distinct lines. No. 1 branched off south to the Barbican; No. 2 branched off north to the Midland and Great Northern Goods Yards; and No. 3, which was the main line, ran eastward from Islington, over Plaistow Marshes, to the Albert Docks. The Act authorizing those lines was passed in 1882, and the ordinary shares authorized by that Act were set down at £8,100,000, and the borrowing powers at £2,390,000; making a total of £10,490,000. Of this sum, £1,500,000 had been relegated to the Regent's Canal purchase, and of that £1,275,000 had already been applied to the purposes laid down in the Act of Parliament. As he understood the present Bill, it authorized the raising of an additional share capital, with the consent of Parliament, to the extent of £660,000, which was to pay interest out of capital during the construction of the works. The total amount of capital involved, which would be handed over to the care of the Directors of the Regent's Canal Company, would thus be about £11,150,000. Now, immediately to the north of this line was the North London Railway, which had cost £3,900,000, and towards which the North-Western Railway Company was a contributor to the extent of £168,000. Over the line of the North London Railway the North-Western Company had power to run, and there were junctions with the Midland, the Great Northern, the Great Eastern, and the London, Tilbury, and Southend Railways, which, together with the North London Railway, all had thus access to the Albert Docks. Immediately to the south of the western end of this line, from the Harrow Road, at Paddington, to Aldersgate Street, close to its termination at the Barbican, was the Metropolitan main line, over which ran the Great Western Company. This railway had four lines of rails all the way from St. Pancras to Moorgate Street Station. The Midland and Great Northern Companies ran over two of those four lines of rails, the Metropolitan having constructed them for their special traffic. That line ran parallel with the Regent's Canal line, and had been made at a considerably less cost than the estimate for the corresponding section of the Regent's Canal line. The cost of the three miles of railway had been less than £3,000,000, or about £1,250,000 less than the estimate of the line proposed to be made by the Regent's Canal Company. Where the east end of the Canal lines ran through Plaistow Marshes, there already existed the Great Eastern line, the London, Tilbury, and Southend Railway, and the North London line, all being more or less in connection. These were the Companies with which, the new line, when made, would have to compete for all its traffic. He did not wish to enter at all into the merits of these railway systems; but they were there already, and they were lines with which the new line would have to compete for the traffic of the locality. After entering upon this competition, could it go on paying 4 per cent? He put it to the House plainly whether they thought it at all likely, judging from past experience, and with the competition of the Metropolitan Railway, that this line would pay the original shareholders? What, however, he particularly objected to was that the House of Commons should take upon itself to guarantee, as it were, 4 per cent for the payment of interest out of capital while the works were in the course of construction. In his humble opinion, the House would not be justified in authorizing the payment of 4 per cent, while the works were being constructed, unless they were perfectly and morally satisfied that after the railway was opened the same rate of dividend would be continued. The sole object of this Bill was to create £660,000, which was to be drawn from shareholders' subscriptions, and then returned to them during the construction of the works, and to be called interest out of capital. Instead of holding their own money, and using it as they liked and as they desired, the shareholders were to intrust it to the Canal Company, and to receive it back again, little by little, as the Directors were prepared to pay what they called interest out of capital during the construction of the works. He could not conceive how any advantage whatever could be obtained by this class of shareholders. There might be some advantage in this process to the financial arrangements of the Directors; but it was absolutely without any advantage, as far as he could see, to the deluded innocents who consented to receive their money back again out of their own capital. The old Canal shareholders got £130 for a £100 share. That, so far as he knew, was a fair and proper arrangement. But there was one curious transaction to which he should like to call the attention of the House, because it showed how some of these schemes were got up. The Canal Directors secured seven years' purchase on their fees, notwithstanding that some of them, as it was stated before the Committee on the Bill, were already 75 years of age. Beyond the Canal shareholders there seemed to be very few shareholders, and the only object the Directors had in bringing the Bill before the House was to secure additional shareholders. He could not find that there were any landowners who wanted the Bill. There might be some Local Authorities in favour of it; but no residents, as far as he could ascertain, were asking for it. In the three years which had elapsed since the Bill of 1882 was passed there had been no shareholders registered who were willing to take hold of the scheme and work out the railway. When the Bill was brought before the House of Commons in 1882 it contained a clause—No. 117—authorizing interest to be paid out of capital. That clause was struck out by the Committee of the House of Commons as a condition precedent to the passing of the Bill at all. That took place on the 23rd of May, 1882, and Clause 201 was put in to provide that no interest should be paid out of capital during the construction of works. On the 20th of July, 1882, the Bill was in the House of Lords; and Mr. Pope, the eminent Queen's Counsel, who had charge of the Bill, in addressing the Committee of the House of Lords, said— The promoters of this measure are responsible, and respectable, and enterprizing magnates of the City of London. True; but the learned counsel went on to tell their Lordships that such a Directorate, and such a scheme, would be abundantly able to raise the sum required (£8,000,000). It must be borne in mind that this statement was made after the clause providing for the payment of interest out of capital was eliminated from the Bill by the Committee of the House of Commons. He believed that the right hon. Gentleman in the Chair would have a lively recollection of the proceedings of that Committee, as he had happened to be a Member of it. It was, therefore, after the Committee of the House of Commons had designedly and pointedly struck out the clause, and after their Lordships had been assured, as positively by counsel as they could be, that without any such clause the Bill would be in safe and good and rich hands, and that the money would be forthcoming, that the Bill passed the two Houses. Therefore, he alleged that the promoters of the scheme, after this circumstance had occurred, in asking that the decision of Parliament should be set aside, were not keeping good faith with Parliament, seeing that the Bill had been readily accepted by the Company without this clause. A new Standing Order had been passed in 1883 by the House subsequently to the promotion of this Bill. It was proposed by the Committee that there should be general legislation upon this subject. Such legislation had never been attempted. The new Standing Order said that the Committee on the Bill might, in certain cases, if they thought fit, allow interest. The Committee before whom this Company made their proposal was a strong Committee. It had the whole of the facts before it, and went fully into the question, and yet the result was that the clause was omitted. The promoters of the Bill alleged that they were acting in conformity with the Standing Order on the interest question adopted by the House of Commons in 1883. This was manifestly not the case. The Standing Order in question was not retrospective; and, moreover, provision was made that interest should only be permitted when the Committee charged with the inquiry into the merits of the Bill reported in favour of such a practice. In this case, the Committee decided just the reverse; and it would be most unjust to the numerous Canal Companies, and other opponents who then opposed the Bill, if a question of this magnitude, after having been decided by a Committee, where opponents could be heard, was to be re-opened before another Committee, where the same opponents would have no right to be present. This was a case in which the Committee clearly decided that interest should not be paid out of capital. The present Bill was a Finance Bill; and no inquiry as to works, or the position of the Company, or the probability of paying dividend hereafter, had been made, or could be made. As a practically unopposed Bill, it would go before his hon. Friend the Chairman of Ways and Means; but that was not what was intended by the Standing Order. It was intended by the Standing Order that every application of this kind should be thoroughly investigated by a Select Committee, in order to see whether there was a reasonable prospect of being able to pay 4 per cent during the construction of the works, and whether the same amount of interest was likely to be paid after the line was opened to the public. In 1883, under much more special circumstances, the House declined to pass a provision of this kind in the case of a Bill brought in on behalf of the Hull and Barnsley Railway Company to enable them to pay interest out of capital. His hon. and gallant Friend who sat not far from him, the Member for Wycombe (Colonel Smith), stated the case of that Company with great fairness; and although there were special reasons for passing the Hull and Barnsley Interest Bill, the House considered the principle a bad one—namely, the principle of paying interest out of capital, and they declined to pass the measure. The decision come to at that time had, he thought, been amply justified by subsequent facts. He was not concerned in these railways; but he was concerned in maintaining commercial integrity, especially in the railway world; and, looking at this as a matter of principle, he might say that all our great financiers had objected to the proposal to pay interest out of capital. Mr. Hume and Mr. Ricardo were both opposed to it—Mr. Ricardo saying that when the Directors wanted £2 10s. they called it £2 15s., and paid 5s. back again. Sir Charles Wood, Sir James Graham, and Sir Robert Peel were all opposed to it. He came now to our own times, and there had certainly been some great men who had left the House of Commons for the other branch of the Legislature who were strongly opposed to this principle. What did the Lord Chancellor say on the 26th of June, 1883, in the House of Lords? He said— I cannot help thinking that we ought to proceed with great care, for it is a very serious thing to change, without ample deliberation, a Rule founded on the sound principle of letting it be understood that when Parliament sanctions a certain amount of capital it means what it says, and not something else. If you are to permit the deduction of £20 per cent from £100 of nominal capital as a dividend, that will reduce the real capital to £80 instead of £100, and will be a delusion; it is simply returning to the subscriber 25 per cent out of the money which he has nominally invested. He might just as well keep the £50 in his pocket, and let the capital be called £80."—(3 Hansard, [280] 1541.) The Marquess of Salisbury, who, whatever his politics, was a man of astute intellect in regard to railway matters, and had solved some of the most difficult railway problems that had been brought forward, said— Considering the enormous amount of property affected, this is one of the gravest Resolutions this House could pass as regards it. There is an obvious objection which must strike everyone, for it is really a proposal to enable a certain number of investors to practise upon themselves a species of wholly innocent self-deceit, and to take, in the form of interest, what is really a little of their own capital returned to them. This is entirely a question whether the kind of railway, which its friends call a contractor's railway and its enemies call a bogus railway, is a kind of railway which it is desirable to multiply."—(Ibid, 1544.) Earl Granville said— A good many years ago, Parliament came to the conclusion that it was unsound in principle to sanction a nominal payment of interest, which was only a return of a portion of the capital."—[Ibid. 1545.) Lord Kimberley also said, in the course of the same debate, that the proposal to repeal the law which prohibited the payment of interest out of capital was neither made by nor supported by the Government. Our whole Statute Law was opposed to it, and every Bill passed by Parliament, with this power in it, was a repeal insomuch of wise and good Statute Law. Our financial laws had been well tried, and were, for the most part, founded on sound principles. They de- clared that it was unwise and financially immoral to pay interest out of capital. The Limited Liability Companies were prevented by law from paying interest out of capital during the construction of works. Our financial laws had done much to build up the commercial standing of this country. There was no reputation in trade so high as that of an Englishman; and wherever he went he received the highest credit for the manner in which he carried out his financial engagements. To repeal these laws in whole or in part, unless some very good cause were shown, would be an infraction of principle for the sake of expediency; and was there in this case such an expediency as ought to be allowed to conquer principle? Surely, when they were framed upon right principles, these laws ought to be kept as they were. Whenever the House pursued a different course, they established dangerous precedents in regard to the credit of the commercial community. Whenever this plan was resorted to, the House might be quite certain of two things— that the rich and knowing would not make the investment, because they did not see its soundness; but that the poor and ignorant would be led into it. Those who had money to invest, and who were looking out for substantial investments, would not touch shares of this description; and it was only by putting forward proposals of this character that Companies were able to induce poor and ignorant persons, with a little capital in hand, to become shareholders. He did not wish to say anything in any way to hurt the feelings of his hon. and gallant Friend the Member for Wycombe; but he had mentioned the case of the Hull and Barnsley Rail-way, and he would refer to it again. When that line was brought out, his hon. and gallant Friend fairly and boldly stated to the House that it was a line which promised 5 per cent to the shareholders. He found, from the list of shareholders, that it was contributed to by persons all over the country—from Hull, Birmingham, London, York, Harrogate, Bedford Square, Nine Elms, Barnsley, Cornhill, Manchester, Easing-wold, and many other places, who were described as fish curer, gentleman, broker, spinster, ship broker, innkeeper, cabinet maker, manager, painter, artist, builder, architect, far- mer, engine driver, city agent, bank manager, bank clerk, and cooper. Those were the class of persons who were deceived by these investments; and although in this case, during the construction of works, the shareholders received 5 per cent, in whole or in part, there was hardly a man in Yorkshire who imagined that the line, although paying 5 per cent during construction, would even pay 2 per cent to the shareholders when at work. His right hon. Friend below him, the President of the Board of Trade (Mr. Chamberlain), when a similar question to this was raised on a previous occasion, spoke of the shareholders as being able to take care of themselves. He (Sir Joseph Pease) thought he had proved to the House by the list he had read that, in the instance he had referred to, that was scarcely the case; and he, therefore, thought that the law ought to make the matter perfectly clear. Could it be for a moment believed that when this Regent's Canal line, nursed as it was by other lines, was opened, it would pay the dividend proposed to be paid during construction? It was well known that the dividends on all the great railway properties in the Three Kingdoms together were not worth much more than 4 per cent, or, at any rate, not more than £4 3s. 4d. The money invested in railways during the last 10 years amounted to £210,000,000; and if this particular investment was a good one, there could be no reason for supposing that the necessary amount of capital would not be readily subscribed. Nevertheless, out of £280,000,000 of ordinary Stock, £60,000,000 did not pay 2 per cent. The principle was bad; the expediency was bad; but it was worse still when it was as clear as reason could make it that the dividend paid during construction could not be maintained when the line was opened. He had now stated all that he considered it necessary to lay before the House on this subject. He believed that his right hon. Friend the President of the Board of Trade would contend that competition generally was good; but in this case, as soon as competition was entered upon, they would have no 4 per cent, but if competition became combination away would go all the arguments of his right hon. Friend in favour of competition. He thought he had proved that this Bill was not in accordance with the Standing Order which at present existed; that it went against the decision of their own Committee on the original Bill—that the principle of paying interest out of capital was fictitious and a trap for the unwary, and that no sound undertaking required this expedient; and, therefore, he hoped the House would affirm to-day—as it had affirmed in 1883—a principle which all our leading financiers and statesmen had approved. He begged to move the Amendment which appeared on the Paper in his name.

Amendment proposed, To leave out from the word "That" to the end of the Question, in order to add the words "it is not expedient to pass any Railway Bill which involves the payment of interest out of capital during the construction of works pending the introduction of a public measure on this subject, as recommended by a Committee of this House in 1882, especially where such a Bill practically makes the alteration of the Standing Orders of this House retrospective in their action,"—(Sir Joseph Pease,) —instead thereof.

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


said, that it was altogether impossible for the House to enter into the details of a Bill of this kind. He considered it a monstrous thing that people should not be allowed to take care of their own money, and invest it in such concerns as they thought desirable, and in the mode which they thought most expedient. He understood that the object of this Bill, and of the Standing Order, was to enable a certain class of persons, who had funds at their disposal for investment, to have interest paid to them during the time the works were in progress. But the proposition of the hon. Baronet opposite was that persons who were disposed to make investments of this sort should not have their money returned in the shape which they themselves desired. The hon. Baronet said he wished to protect the poor by throwing the mantle of that House over them, and preventing them from, adopting their own independent action in regard to the investment of their own money. If a man chose to say—"I have £100, and I desire to invest it in an undertaking which I think will be profitable; but I cannot forego the income which that £100 now brings me in, and, therefore, I must have some return while the works are being carried out," why should he not be able to give effect to his wishes? It was a principle that was now carried out in the ordinary affairs of life. Take, for instance, the case of a farmer. A farmer had £3,000 to invest in land, and he said—"While the crops are growing I must have something to live upon, and something to enable me to clothe myself with." The proposition of the hon. Baronet amounted to this—that the farmer must invest the whole of his £3,000 in the farm, according to some great principle, and he must not use any portion of it in any other shape, but must wait until the proper time came round for realizing a profit upon his produce. Until that moment arrived the farmer would be required to starve. But, altogether apart from that point, he was prepared to support the construction of this particular railway. He knew nothing more than what the hon. Baronet had himself stated; but he gathered, from the remarks of the hon. Baronet, that the line was designed for the benefit of the working classes. The House was aware that the Commission, in which his hon. Friend the Member for Finsbury (Mr. W. M. Torrens) took an active part, and which contained among its Members some of the highest persons in the land, was engaged at this moment in ascertaining what measures could be carried out for improving the condition of the working classes. He understood that this line was designed mainly for the purpose of connecting certain outlets with the City of London, and to facilitate the conveyance of the working classes, who, of necessity, must be employed in the Metropolis, to and from their homes to certain points at a cheap rate—an object of great importance in connection with the problem of how to house the labouring population properly. The only argument against the line was that there were certain other railways with which it might run in competition. He thought it was a most important object to house the working classes cheaply, and to do so comfortably, with a fair amount of space in their dwellings, and in situations where they could obtain the advantage of fresh air. That in itself was, to his mind, a far higher moral object than the principle of preventing the general public from using their own money as they pleased, by providing that they should receive no portion of it back again for a certain number of years while the works were being constructed. If the House read the Bill a second time, the Standing Order would be fairly considered by a Select Committee upstairs. That was all that the Bill asked; and the hon. Baronet was endeavouring to throw a mantle of Parliamentary prevention over persons who wished to cut their cloth according to their own fashion, and to enter into what, according to their own judgment, they regarded as profitable investments. He trusted that, for the sake of laying down an abstract principle, the House of Commons would not consent to stifle a Bill which ought to be inquired into through the ordinary tribunal established by the House.


said, he opposed the Amendment, for he contended that the Bill ought to be allowed to go before a Select Committee, instead of being disposed of on the second reading. The object of the hon. Baronet (Sir Joseph W. Pease) was, no doubt, a laudable one; and among other reasons which the hon. Baronet assigned in support of it was the ground that the Bill was unopposed. The hon. Baronet, however, was entirely in error in that respect, seeing that there were four strong Petitions against the measure. He, therefore, ventured to submit that the time of the House would be saved by allowing the Bill to go to a Committee upstairs in the usual way, instead of fighting it on the second reading.


said, he wished to make one or two remarks upon the Bill, and upon the Amendment proposed by the hon. Baronet opposite (Sir Joseph Pease). The hon. Baronet appeared to take exception to the principle of paying interest out of capital while an undertaking was in the course of construction. Now, he (Sir Whittaker Ellis) submitted to the House that there was no great undertaking in this country which did not pay interest during the construction of works. Why was a railway to be treated differently from a public street? If the Board of Works were making a new street, they raised the money to pay the cost of that street, and to make provision for the poor who were unhoused by their operations, and to compensate others who were disturbed in their business arrangements, and the money so raised paid interest until the new street was opened. He ventured to say, if the Board of Works were to propose not to pay interest until a new street was opened, they would find that it would be necessary to pay a very much higher rate of interest on the money required, or they would have to issue their bonds at a much lower rate than they were able to do under present circumstances. Then, again, take the case of the new block of public buildings which Her Majesty's Government intended very shortly to commence. He took it that the Government would have to obtain the money necessary for the erection of the new offices from the public, and that they would pay interest upon the money they obtained while the buildings were being constructed. In that case the principle was entirely analogous, and he could not understand why the Amendment of the hon. Baronet had been placed on the Paper. He had been appealed to by a great many persons to vote against the present Bill, and he had written to some of them to know why they did not wish the Bill to pass in its present form. They told him that if interest was to be paid out of capital while the works were being constructed there would be a great many more railways laid down than there were at present. Now, he did not know whether the House or the public would care to prevent the construction of great railways; and certainly it would be a monstrous thing that a railway should be treated differently to other undertakings of a similar character. If a man built a house, he had to use his capital during the construction of that house; and if he lost the interest on the money he was thus utilizing, if he understood finance in a proper way, he would necessarily add that lost interest to the cost of the house. With the provisions that were contained in the amended Standing Order, No. 167, there was no reason whatever why this or any other railway should not be allowed to pay a reasonable rate of interest while it was being constructed, and it would be a great injustice if the line were not permitted to be made. The clause in the Bill provided that only 4 per cent per annum should be paid; and it would be monstrous to prohibit this railway, or any other railway, from paying interest in that way during the progress of the works. There was one other practical point which he wished to put to the House; and it was that if they debarred this Railway Company from paying interest and adding it to capital during construction, they would compel the Company to issue their bonds and securities at a very much lower rate per cent than they would otherwise obtain for them. What he meant was that, instead of getting 90 per cent for their issue, they would have to take 80. He opposed the Amendment of the hon. Baronet, because he thought it was undesirable that public enterprize should be checked for the benefit of the shareholders of the large existing undertakings.


said, he rather regretted that his hon. Friend behind him (Sir Joseph Pease) should have thought it necessary to move this Amendment. He knew that his hon. Friend was a man of great public spirit, and he was sure that he was controlled by a sense of duty. But at the same time he thought he would be able to show that the course proposed by his hon. Friend was inconvenient, and would be attended with considerable disadvantage. They were not now dealing with one of those bogus Companies about which his hon. Friend was so very anxious. This was a very large and important concern, involving a capital of something like £10,000,000, and it was intended to connect the whole of the Docks at the East End of London with the Great Northern, the Midland, and the North-Western Railways, and therefore it was an enterprize of first-rate importance in regard to the convenience of trade. There was another consideration which at that moment was not altogether unworthy of the attention of the House. If this Company went on and capital was raised, a very large amount of employment would be given to the working classes of London; and just now, when there existed so much depression of trade, it would be a serious thing to throw any obstacle in the way of such employment being afforded. What was the reason his hon. Friend proposed that day to take the unusual course of refusing to allow a Select Committee to consider the provisions of this Bill? It was, he said, because the Company proposed to pay interest out of capital. The hon. Member, then, was proposing by a side-wind to reverse the solemn decision of the House, because the whole question of whether such Companies should be allowed to pay interest out of capital was decided in June, 1883, when, by a majority of eight, the House passed the amended Standing Order permitting that practice. It was quite true that about a fortnight later the Hull and Barnsley Railway Bill was thrown out on the second reading; but that was because the Hull and Barnsley Railway Company did not coin-ply with the Standing Order, but proposed a larger rate of interest than was sanctioned by the Standing Order. What happened? It did not prevent the construction of the Hull and Barnsley Railway, because the Company obtained powers in the subsequent year that enabled it to evade the decision of the House by raising Debenture and Mortgage Stock, which attained practically the same result as paying interest out of capital, and he believed the works were now approaching completion. Why, as a matter of principle, should that privilege be denied to Railway Companies? It was not denied to numerous other undertakings. There were numberless undertakings in which it prevailed. It prevailed without exception in foreign trade, and in almost every commercial speculation. For instance, there had been a very large enterprize entered into on this principle in reference to the refinement of sugar in Brazil. There was a State guarantee given, and that guarantee applied to payments during the construction of works. The Indian Railway Companies had a guarantee from the Government for the payment of interest during construction. His hon. Friend, speaking with the authority and position of one who represented the great established railway lines, was very hard on the new undertakings which required a provision of this kind to induce their Stock to be taken up. After all, it was a great convenience to the shareholders. In some way or other a man who had not got a large sum of money at his bankers upon interest, but had to contrive to be able to live, must provide something like an annual income, and by an investment of this sort it was very convenient for him that payment of interest should go on during the construction of the line. His hon. Friend told the House he was not now acting in the interest of the widows and orphans, but in that of high financial morality. But there was another explanation, not of the action of his hon. Friend, but of the opposition offered by some of the other opponents of the Bill. Now, he himself happened to be a shareholder of the South-Eastern Railway Company, and in his capacity as a shareholder he had received a Circular signed by the Secretary of the South-Eastern Company; and in his capacity as a Member of Parliament he had received another, both of those documents containing this statement— This Bill is promoted by a Company of which Mr. J. S. Forbes is Chairman, and it seeks power to pay interest out of capital upon £10,000,000. If the precedent for such an objectionable practice be once set in this case, it will be followed by many more instances of a similar character. The result will be loss and ruin to vast numbers of shareholders, without any compensating advantages to travellers or traders. You will materially help the Directors who are assisting to oppose this Bill if you will kindly write at once to your Representatives in Parliament, requesting them to oppose this Bill on second reading. He had not written to his Representatives in Parliament; but he thought that Circular threw a great light upon this opposition. The interests of these great lines were opposed to competition. Were the interests of the country opposed to competition? There had been a great agitation lately in favour of a reduction of railway fares, and the only chance of obtaining that reduction was in the existence of competition, actual or potential. Everything, therefore, that tended to check competition and to keep up a monopoly helped the Companies in resisting any attempt on the part of the public to gain a reduction. He confessed that he was more anxious to protect the public than the foolish investor, even if the result was to establish competing lines; and he thought that the House would do wisely in passing a Bill of this kind, the proposal of which was undoubtedly a bonâ fide one, and one which involved a largo and important addition to their means of communication.


said, that if one thing would have done more than another to prevent the encroachments of the great Railway Companies and keep them perfectly in check, as far as the fares were concerned, it was the adoption of the strong and unanimous recom- mendation of the Joint Committee of the Lords and Commons which sat about 20 years ago, and of which he had had the honour to be a Member. That Committee recommended that the Canals should not be allowed to fall into the hands of the Railway Companies; but he was sorry to say that that unanimous recommendation of the Joint Committee had not been acted upon when Private Bills came before the House. He thought it would have been very much better if the Committee, which sat upon this Bill two or three years ago, had borne that recommendation in mind, and had kept up this Canal, instead of allowing it to fall into the hands of the Railway Company. If the right hon. Gentleman the President of the Board of Trade had the question really at heart, he might yet do much good by putting the Board of Trade in action, whenever it was desirable, to give effect to the recommendation of the Joint Committee.


said, the right hon. Gentleman had appealed to him. He thought the right hon. Gentleman could not be aware that there was in the present Bill a provision for keeping-open the navigation of the Regent's Canal.


said, that the Canal was practically handed over to the control of the Railway Company, and the Proviso referred to by the right hon. Gentleman would have very little effect except in misleading the House. ["Oh!"] He did not for a moment suggest that the right hon. Gentleman himself intended to mislead the House; but what he felt was that the statement of the right hon. Gentleman was calculated to mislead many Members who were not aware of the real provisions and scope of the Bill. The question came before the House in this way. This clause, having reference to the payment of interest out of capital, had been in the original Bill, and when the Bill was before the House of Commons it was thrown out. Therefore, although in the first instance the Railway Company tried to get the benefit of the clause, the House would not allow them to have it; and when they were questioned upon the subject when the Bill was before the House of Lords, their Chairman said that he had no fear about being able to raise the money, whether the Standing Order was enforced or not. He added that the Company probably might have a little more trouble in persuading people to subscribe; but that was all. What had been the result? The Company got the Bill without that clause, and they had not been able, during the last three years, to persuade people that this was such a good undertaking that they ought to invest their money in it. If any hon. Member would look at the Preamble of the Bill now before the House, he would find that the Railway Company had itself inserted that fact in the Bill. They said— And whereas by the Act of 1882 it was provided (Section 201) that the Company should not out of any money by that Act authorized to be raised pay interest or dividend to any shareholder on the amount of the calls made in respect of the shares held by him, but that nothing in the said Act should prevent the Company from paying to any shareholder such interest on money advanced by him beyond the amount of the calls actually made as was in conformity with the Companies Clauses Consolidation Act, 1845. The next paragraph said— And whereas the practical effect of the said Section 201 of the Act of 1882 has been to render it impossible for the Company to raise any part of the capital (other than the Canal capital) required for the execution of their authorized works, and it is expedient that the said section be repealed and the Company be authorized, subject to the provisions hereinafter in that behalf contained, to pay interest or dividends upon the amount paid up from time to time in respect of shares or stock in their capital, and for that purpose to raise further money by shares or stock as by this Act provided. The Bill now came before the House in this way—the Company had obtained a railway which they thought would attract investors. But although it had been before the public for three years the public refused to invest; and, accordingly, the Railway Company had arrived at the conclusion that unless they could get the insertion of this particular clause to enable them to pay interest out of capital during the construction of works their undertaking was not likely to be a success. The Company said that there was a Standing Order in existence which would enable them to do this, and that they ought to have the benefit of it; but he would point out that the Standing Order was not retrospective; that the original Bill had been carefully considered by the House; and that, notwithstanding what had fallen from hon. Gentlemen in support of the Bill, there was no certainty and no guarantee that if the House allowed the second reading to pass, the Company would not be in a position to buy up the opposition with which it was threatened. In that case it would become an unopposed Bill, and would not come under the consideration of a Select Committee at all. Therefore, this particular question of whether interest was to be paid out of capital would run the risk of being virtually withdrawn from the cognizance of the House. He had been glad to hear the hon. Baronet the Member for South Durham (Sir Joseph Pease) take such strong ground, because he believed that if they held out inducements to people that they were to have interest at 4 per cent until the railway was made, there were a great number of persons who did not thoroughly understand the matter who would be misled. They would invest their money in the belief that they were certain to receive a fair rate of interest for a good many years. He was now speaking entirely in behalf of a number of persons of small moans who were constantly having prospectuses of this kind sent to them. He happened to have been Trustee for a number of poor ladies at different times, and they had sent to him many prospectuses offering them, as an additional inducement to invest, the payment of interest at the rate of 4 or 5 per cent out of capital during construction. What was the result? They invested their money, and they received 4 or 5 per cent during the time the works were being constructed, and then, when they expected their income to be increased, they found that it was suddenly diminished, and that what they had received in one pocket had been, in reality, taken out of another. He thought, as a matter of commercial honesty, that the House of Commons was bound to protect that class of people who were so easily induced to invest their money in these undertakings. He, therefore, hoped that the House would assent to the Amendment.


said, he was bound to say that the main argument used by his right hon. Friend was not one which had impressed him very strongly. The right hon. Gentleman commenced his remarks by telling the House that it would be very much better if Parliament would prevent Canal Companies from being bought up by Railway Com- panies. But that was not the question which the House had to consider at the present moment. The Committee of the House of Commons had, as he understood, permitted this operation to be carried out after a full and adequate examination; and, so far as the Bill itself was concerned, they were told that it made adequate provision for keeping up the navigation of the Canal. That, however, was not the point which the House had to discuss. The main argument used by his right hon. Friend was that the Company, not having been able to persuade people that their undertaking was a good one, desired now, in order to induce the public to invest, to obtain a clause empowering them to pay interest on capital during the construction of works. Surely his right hon. Friend must have a poor idea of the intellect of the investing public if he imagined that a power of paying 4 per cent during the progress of construction was likely to convince those who had formerly thought the undertaking a bad one that it was now a remarkably good one. That was the main contention of his right hon. Friend; but he thought it was not sufficiently strong to induce the House to throw out the Bill. This was a Bill in which considerable interest was felt in the East End of London upon two grounds. In the first place, it would connect the Docks in the East End with the great railways in a way which would prove beneficial to the East End of London. There was another ground which to his mind, at the present moment, was of even greater importance. It had already been touched upon by the right hon. Gentleman the President of the Board of Trade. During the present time of distress he had several times formed part of deputations which had waited upon Ministers of the Crown with reference to the employment of the working classes; but it had been very properly pointed out by the President of the Board of Trade that it was impossible for the Government themselves to take any step in the direction indicated. At the same time, the deputations had been reminded that there were great undertakings before Parliament which it was hoped would, if carried, provide employment for the working classes. This was certainly one of those undertakings, and he imagined that it was in the mind of the right hon. Gentleman the President of the Board of Trade when he gave that advice. It was an undertaking which the House of Commons had declared to be a good and sound one, and one that ought to be carried out. Hitherto a difficulty had been experienced in raising the necessary capital, because the Company were unable to pay a small percentage of interest out of capital during the construction of works. That had nothing to do with the question whether the undertaking was good or bad. There was a vast number of people who could not afford to subscribe to an undertaking unless they received some interest in the meantime before the scheme was in operation, and it was for that reason that the capital in this instance had not been subscribed. If the Bill were passed, it would undoubtedly give ultimate employment to a large number of persons. It was a good undertaking in itself, and he could not imagine that any of the arguments which had been used against it that day would induce the House of Commons to throw out the Bill.


said, he did not propose to enter into the merits of the Bill, or to discuss the question raised by hon. Gentlemen who objected to the Bill as to the financial morality of paying interest out of capital during construction; but he must tell his hon. Friend the Member for South Durham (Sir Joseph Pease) that he was mistaken if he supposed that there was a general concurrence in the views he had expressed. That question had been fully investigated by a Committee, which had reported to the House. Their Report showed that their opinion was very different from that which the hon. Baronet had expressed. He (Sir Arthur Otway) could hardly see anything financially immoral in a proposition which at the present moment governed commercial undertakings abroad, and was adopted with the sanction of Her Majesty's Government in reference to their own Dependencies in India. Nor did he propose to enter into the other questions which the hon. Baronet had brought under the notice of the House. His hon. Friend had been quite eloquent on behalf of the cooper, the painter, the managing clerk, and the spinster, who were about to be deluded into investing their money on the promise of being paid 5 per cent during the construction of the works. His hon. Friend was quite in error as to the amount proposed to be paid as interest; it was 4 per cent, and not 5.


said, he had been referring to the payment of interest under the Hull and Barnsley Bill; and he had stated that the proposal to pay so high a rate of interest had probably induced many investors to subscribe.


said, the right hon. Gentleman the Member for South-West Lancashire (Sir R. Assheton Cross) had also been eloquent on behalf of certain poor ladies for whom he was Trustee; but the point which he (Sir Arthur Otway) wished to bring before the House was that there was already a Standing Order deliberately sanctioned by a Committee which dealt with the subject. This proposal had been discussed in connection with several Public Departments, and it was considered absolutely necessary to do something to prevent the constant violation of the Standing Orders of the House. When he first took the Office of Chairman of Ways and Means, he found that the Standing Order was constantly evaded; and after much consideration he came to the conclusion that it was desirable, and even necessary, to deal with the matter by amending the Standing Order. The hon. Baronet the Member for South Durham (Sir Joseph Pease) seemed to forget altogether the protection afforded to the public by the existing Standing Order of the House. The Select Committee before whom the Bill would come would have it in their power to refuse their sanction, if they thought fit, to the payment of interest out of capital. Moreover, a Report of the Board of Trade was required, and there was no prospect of the public being deceived, or for any deception of any kind, he apprehended, to be practised. All the circumstances would have to be made known. In fact, so far as the public were concerned, every protection was afforded to them by the Standing Orders which now existed; and he thought that the House, having amended the Standing Orders only two years ago, seeing that no complaint was made of the way in which they worked, would be acting most unwisely if they were now to reverse their recent decision. His hon Friend had certainly made one statemen which, if correct, would be important He had said that the Bill would be an unopposed Bill, and, therefore, that there would be no Committee to decide whether it was proper that this privilege should be conceded or not. That was, no doubt, a very important point; and if the Bill came before him as an unopposed Bill, all he could say was that a measure involving such large and important considerations would not be one that he would undertake to adjudicate upon. As a matter of fact, however, the Bill was not unopposed, and it would go upstairs to a Select Committee, who would be perfectly competent to decide the various questions involved in it, and would be able to say whether this was an undertaking to which the privilege of paying interest during construction should be applied or not, or whether the sanction of the House should be refused to it. Therefore, there was on this point also no ground for the apprehensions of his hon. Friend. It was not necessary that he should detain the House by going into details further; but he thought he had said sufficient to induce the House to read the Bill a second time.


said, that, as one who had opposed the Regent's Canal Bill in the first instance, he would ask the indulgence of the House while he explained the ground of his opposition, and while he called attention to one or two points which had not been fully raised. Of late years the House had been extremely jealous of the absorption of the inland navigation by Railway Companies; and in regard to this very Company, so recently as 1882, a Select Committee refused to sanction the payment by it of interest out of capital. When the scheme first came before the House for the purpose of taking possession of the Regent's Canal, and converting it into a railway, an opposition was raised to it on the ground that if this Canal, the head of all the English navigation, were once allowed to fall into the hands of the Railway Company, the North, North-East, and West of England would be cut off from the Metropolis. It was then said that the great object of the promoters of the Bill was to make a cheap railway for the purpose of taking the labouring classes from the East End of London into cheaper districts, where they would be able to reside more economically, and enjoy purer air. On the faith of that representation the House passed a Bill, and it went to a Select Committee, who, in consenting to the measure, refused their sanction to the clause for the payment of interest out of capital. That was in the year 1882. What had happened since? In the very next year, this Company, which professed to make a railway for the purpose of carrying passengers at a cheap rate, came to the House to ask for fresh powers to enable them to raise their rates and charges for carrying goods. Thus they tore a portion of the mask from their faces. It was still, however, to be a goods line or a passengers' line, and nothing was said about the way in which the money was to be raised. But now, at the end of three years, finding that they had been unable to raise the money, they came again to Parliament and asked for power to override another important Rule of the House, which prevented them from paying interest out of capital during the construction of works. The right hon. Gentleman the President of the Board of Trade told the House that they ought to grant this privilege for two reasons, one of which was that the principle was sanctioned in connection with foreign undertakings, and the second that it was also done in connection with the East India Railways. He did not think the House ought to be governed by foreign precedents; and as to the East India Railways, unless he was very much misinformed, the dividends were not guaranteed during construction, but were guaranteed in perpetuity after the construction was complete. He therefore failed to see what that argument had to do with the case. It was an attempt to throw dust in the eyes of the House. This was a proposal to pay dividends out of capital during the construction of the railway; but there was no guarantee whatever of any payment after the works were completed. Then, again, another reason assigned by the President of the Board of Trade, and a reason supported by his hon. Friend the Member for the Tower Hamlets (Mr. Ritchie), was that there were a great many persons out of employment in London to whom the construction of this railway would give employment. They all knew that there were many of the working classes out of employment in London, and the circumstance was much to be lamented. But, he would ask, was this the first time that Her Majesty's Government had heard that the working classes were suffering from want of employment? Had it never occurred to the right hon. Gentleman, or to Her Majesty's Government, that there was another way of getting out of that difficulty? Had they never heard of the great distress which prevailed among those who suffered from the Sugar Bounties; and would not the Government at once seek in their Budget to put a duty upon foreign sugar? By so doing they would give abundant employment, and very much relieve the deficit which the Chancellor of the Exchequer had to meet—a deficit which the right hon. Gentleman the Prime Minister had described as "grossly immoral."


I must ask the hon. Gentleman to confine himself to the Question before the House.


apologized for appearing to have wandered from the subject, and said, that he was only replying to the remark of the right hon. Gentleman the President of the Board of Trade that the Bill would find employment for a large number of the working classes. What he ventured to ventured to say was, that if they could find employment for the sugar industries by not allowing sugar to come in upon foreign bounties, the labourer of the East End of London would find abundant employment and the deficit would be avoided.


said, he had had some little experience of public Companies, and he ventured to protest against the Amendment of the hon. Member for South Durham (Sir Joseph Pease) upon general principles. If it were adopted it would put a stop to the progress of all public Companies. The hon. Baronet said that he brought it forward in the interest of the innocent and unwary, who might be deceived into subscribing to these public Companies if interest were guaranteed during the progress of works. But there were £700,000,000 subscribed to railways on similar principles, the holders of which must all have been innocents when they subscribed. The large and wealthy Railway Companies had no occasion to exercise this privilege, as when they wanted to carry out new lines they borrowed money on debentures or on preference stock, and paid interest thereon from the date of borrowing, which practically amounted to the same thing as that of new Companies paying interest during construction.

Question put.

The House divided:—Ayes 187; Noes 117: Majority 70.—(Div. List, No. 145.)

Main Question put, and agreed to.

Bill read a second time, and committed.

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