§ Order for Second Reading read.
§ Motion made, and Question proposed, "That the Bill be now read a second time."—(Sir Charles Forster.)
§ MR. CODDINGTON (Blackburn)
Sir, I feel it my duty as an independent Member of this House to oppose the second reading of this Bill, and in doing so I think it is necessary that I should tell the House what the history of this Hull and Barnsley Railway is. I believe it is very well known to the House that there have already been some extraordinary proceedings, giving rise to great scandal, in connection with this line. The Company were incorporated in 1880 for the purpose of making and maintaining railways in the West Riding of Yorkshire, and thence to Hull, with a dock and other works in connection with them at Hull. The share capital was fixed at £3,000,000, with a borrowing power of £1,000,000. In 1882 the Company were authorized to extend their railways to Huddersfield and Halifax, to raise further capital amounting to £2,400,000, and to borrow £800,000. In 1883 the Company were authorized to raise an additional sum of £600,000, and to borrow on mortgage £200,000. In the following year—1884—the Hull and Barnsley Railway Company applied for power to borrow £1,500,000 on debenture stock, which was to be first debenture stock; but the Committee to whom the Bill was referred decided that it should be second debenture stock, and at that time it was stated by the representatives of the Company that no further money would be wanted. The Company now, however, come to Parliament again and ask this House for power to raise further capital to the extent of £500,000. They do not seek to raise this £500,000 in the ordinary form by the issue of stock to the amount of £500,000, but they ask the House to allow them to raise the money in the following form:—That the Company may, from time to time, create and issue preference shares or preference stock to such nominal amount as shall 1471 be sufficient to produce at the price at which the same are issued the sum of £500,000.So that if this Company is, as it is notorious it is, in a state of bankruptcy and cannot raise this £500,000 at the ordinary price, they must raise it at any price they can. I think they will do very well if they raise it at 50 per cent discount; and, presuming that they succeed in raising it at a discount of 50 per cent. they will have to create preference stock over the ordinary shareholders to the extent of £1,000,000. That £1,000,000 will in reality only produce £500,000; but I think I am even taking a most favourable view of the prospects of the Company in regard to the raising of the money when I say that they will be able to raise it even at a discount of 50 per cent. Some people estimate that they will have considerable difficulty in raising it even at a discount of 75 per cent. so that it may require the creation of preference stock to the extent of nearly £2,000,000 before the Company will succeed in obtaining the £500,000 they ask for. There is another fact which I desire to place before the House. The railway was opened for traffic in July, 1885, and the traffic receipts have been £54,000, but out of that sum £48,000 are estimated to be necessary to cover the working expenses of the line. If so, the net receipts of the first five and a-half months after the opening of the line have amounted only to £6,000. Even that is simply an estimate, after allowing for certain sums which ought to have been placed to the account of revenue, but which have really been placed to the capital account—consisting of auditors' fees, rates and taxes, land tax, interest on bank balance, and various other items. The total amount of these items is £12,700, so that instead of the Hull and Barnsley Company having made a net profit of £6,700, which they show upon their balance account, they have made an absolute loss of £6,000—that is to say, that the working expenses were £6,000 more than the absolute receipts. Out of the working expenses of £48,000, it is estimated that more than £20,000 go in the salaries of directors, secretary, manager, clerks, and other officers, so that nearly one-half of the whole expenditure upon the line is consumed on what is called non-profitable work. The amount of money already received by the Company 1472 has been £5,500,000, and allowing £1,485,000, which they say the dock works at Hull cost, there has been an expenditure of £4,000,000 of money upon the construction of the line alone. The line is 66 miles in length, so that it has cost upon the average £58,000 a-mile. When I tell the House that this line runs entirely through an agricultural district, that the town of Hull is the only important town which it touches, that in that town there is as yet only a temporary station, that with the exception of Hull there is not a single town of any importance, or containing more than 2,000 inhabitants, upon the line, that all the rest of it runs through a purely agricultural district, and that the present terminus of the railway is in the middle of a field, I think the House will be prepared to agree with me that an outlay of £58,000 a-mile is a most extravagant one. Then, again, this expenditure includes nothing on account of rolling stock, because almost the whole of the rolling stock has been bought on deferred payments, and the money is still owing for that stock. While this line, passing exclusively through a purely agricultural district, has cost for construction £58,000 a-mile, the Lancashire and Yorkshire Railway, which goes through a series of large towns from one end to the other, only cost the same sum per mile; the London and North-Western Railway cost £48,000 per mile; the London and North-Eastern, £41,000 per mile; and the Great Northern, £32,000 per mile; so that it must be clear to the House that the expenditure upon the construction of the Hull and Barnsley Railway has been at a most extravagant rate. The contractors and everbody connected with it must have got enormous sums out of it. But what is the object of raising this additional capital? The original capital of the Company was fixed at £3,000,000, and the original debenture stock was £1,000,000. At the time of the passing of the Act in 1883 to authorize a second issue of debenture stock to the amount of £1,500,000 the original shares were worth from £35 to £40 per £100. Therefore, out of the £5,500,000 of capital the original shares were only worth £1,100,000. To-day they are marked at £17, so that the total value of the original shares is only some £510,000, 1473 thus showing that the issue of £1,500,000 of Debenture Stock in 1884 with the sanction of this House has resulted in the depreciation of the ordinary share capital from more than £1,100,000 to something like £500,000. The interest upon the two Debenture Stocks amounts to £120,000 a-year, and the Company propose to pay out of the capital which they now propose to raise—namely, £500,000—a sum of £180,000 forThe payment of interest already due or about to become due upon any Debentures or Debenture Stock of the Company for the time being, but not exceeding in the whole £180,000.It must, therefore, be quite clear to the House what the object of the Company is in raising this additional £500,000—namely, to enable them to pay interest upon the Debenture Stock, and thus prevent them from going into bankruptcy. Now, I admit that this may possibly enable them to carry on the line for a year and a-half or two years; but I maintain that they will be doing so at the expense of the original shareholders. The £3,000,000 of original Stock, now worth £500,000, will probably, if this additional sum of money is raised, not be worth £100,000. But it is incredible to suppose that if this Bill is passed the public will be induced to subscribe their money. But we know how dull they are; and, therefore, I feel it my duty, as an independent Member of this House, to raise my voice against what I consider to be a Bill which, if passed, will lead to the total loss of the money which these unfortunate people have been induced to subscribe towards the capital of this railway. I think it is only right that the House should protest against any such unfair proceeding, and I therefore trust that the Bill will be thrown out upon the second reading. In order to afford the House an opportunity of expressing its opinion I beg to move, as an Amendment, that the Bill be read a second time upon this day three months.
§ Amendment proposed to leave out the word "now," and at the end of the Question to add the words "upon this day three months."—(Mr. Coddington.)
§ Question proposed, "That the word 'now' stand part of the Question."1474
§ MAJOR DICKSON (Dover)
I rise for the purpose of moving the adjournment of the debate. The opposition to this Bill has taken the promoters entirely by surprise. They were not aware that there was going to be any opposition raised to it until about 3 o'clock this afternoon. Perhaps I may inform the House that the Bill has already passed through the House of Lords, where it was carefully examined, and all its provisions investigated by the late Lord Redesdale, and we all know with what a critical eye he looked into these matters. It has also passed through a Committee under the Duke of Buckingham; and, therefore, I had hoped that when the Bill came on for a second reading in this House the House would have been prepared to endorse the action of those two noble Lords. In order to give time to the promoters of the Bill to meet the opposition which has been suddenly sprung upon them, I beg to move that the debate be adjourned until Wednesday next.
§ Motion made, and Question proposed, "That the Debate be now adjourned."—(Major Dickson.)
§ SIR JOSEPH PEASE (Durham, Barnard Castle)
In reference to the Motion of the hon. and gallant Member for Dover (Major Dickson), I wish to point out that the adjournment of the debate until Wednesday next would entail considerable inconvenience upon Members of the House, many of whom, in the peculiar circumstances of the hour, feel it incumbent on them to go down into the country to look after their constituents. It certainly seems to me that if the House is to deal with the provisions of this Bill it is better to deal with them at once, while there is a good attendance of Members in the House, rather than a week hence, when the attendance of Members is likely to be very much less. If the Bill has any merits at all they had better be discussed now. As my hon. Friend the Member for Blackburn (Mr. Coddington) has pointed out, there is no objection to the working provisions of the Bill; but the measure also involves a question of railway morality and finance. That is the question which my hon. Friend has brought before the House, and I believe that we are in a position to consider it fully now. I 1475 therefore trust that the hon. and gallant Member for Dover (Major Dickson) will allow us to go on with the discussion, and withdraw the Motion for the adjournment of the debate.
§ THE CHAIRMAN OF WAYS AND MEANS (Mr. COURTNEY) (Cornwall, Bodmin)
I think the hon. and gallant Member for Dover (Major Dickson) should have stated same more adequate reason than that which he has given for proposing the adjournment of the debate. No doubt, under ordinary circumstances, it might be a good and sufficient reason that the opposition raised to the Bill has come upon the promoters by surprise; but I am afraid that the House will not be in any degree in a better position to consider the provisions of this Bill next Wednesday than it is now. I would, therefore, suggest to the hon. and gallant Member that he should withdraw the Motion, and allow the Bill to be discussed on its merits. There is nothing whatever to prevent the House from coming to a decision now. No doubt, this is the case of a Railway Company which finds itself in a very embarrassed position; but although the facts stated by the hon. Member for Blackburn (Mr. Coddington) are undoubtedly correct, it must be remembered that the Bill has already been carefully considered and passed by the House of Lords. It therefore appears to me that it would be a rather strong measure to reject the Bill, which, after all, may be the best way out of a serious difficulty. It is quite evident that something must be done if this Railway Company are to be prevented from falling into bankruptcy.
§ MR. COURTNEY
That may be so; but, nevertheless, it may be the best course to defer it for a time. The only question, however, that is now before the House, is whether we should come to a decision upon the merits of the I Bill at once, or delay it until Wednesday. Although the hon. Member for Blackburn has shown that this is the case of an embarrassed Railway Company, he has not shown that this is not the best mode of dealing with the difficulty.
§ SIR WALTER B. BARTTELOT (Sussex, North-West)
I had not the 1476 slightest intention of saying a single word on this question; but I was a Member of the Committee which sat upon the Bills which were promoted last year and the year before in reference to this railway. We made, as we thought, a very fair and equitable arrangement in regard to the Hull and Barnsley Railway; and we were in hopes that the Directors might be enabled, under the provisions of those Acts, to have tided over their difficulties. But it appears that this line has been most unfortunate in more than one respect.
§ MR. SPEAKER
I must remind the hon. and gallant Gentleman that the Question now before the House is the adjournment of the debate.
§ SIR WALTER B. BARTTELOT
Then I will turn to the other point. Considering the magnitude of the interests at stake in a railway of this kind, I think it would be hardly right or justifiable to propose to discuss it on its merits to-day without anyone being prepared to state the case of the promoters. I do not think the hon. Baronet the Member for Durham (Sir Joseph Pease) will feel that it would be quite right to reject a scheme which has cost so much money, and in which the interests of so many people are at stake, or that it should be dealt with in a hurried way in a thin House. It may be that Wednesday next may be an awkward day for taking the discussion. I say nothing upon that point; but, unfortunately, we have no other day—no other day is so available; but it might be put down for Thursday or Friday if that is thought better. I have no interest whatever in this railway. I do not care a single farthing about it, except in the general interest of the public. At the same time, I think it would be both unwise and unfair, considering the magnitude of the undertaking, to deny to the Company the only opportunity they may ever have of making, at any rate, another attempt to place the railway upon a satisfactory basis.
§ Question put.
§ The House divided:—Ayes 57; Noes 67: Majority 10.—(Div. List, No. 128.)
§ Original Question again proposed, "That the word 'now' stand part of the Question."1477
§ SIR JOSEPH PEASE (Durham, Barnard Castle)
In the few remarks which I made just now on the Motion for the adjournment of the debate, I pointed out that the question before the House is really one of railway morality. By the general Railway Law, as the House is probably aware, a Railway Company is allowed to issue one-fourth of the amount of its capital in Debenture Bonds. This Hull and Barnsley Company, in its original Act, obtained power to raise capital to the extent of £3,000,000, and £1,000,000 in Debenture Stock on the strength of that ordinary share capital. They next came to the House of Commons with an application to allow them to pay interest out of capital during the construction of works; but that proposition was negatived by a considerable majority. They next came to the House, as my hon. Friend opposite (Mr. Coddington) has pointed out, with a Bill empowering them to raise a preferential sum of £1,500,000 in addition to the £1,000,000 already authorized to be raised in the original Bill. That proposal, as introduced, placed the new Preference Stock practically upon the same level as the original Debenture capital. The House sent that Bill to a Committee upstairs, by whom the provisions of the measure were amended. It was also altered by making the additional sum of £1,500,000 a second charge. The financial position of the Company, at the present moment, is this. It has an ordinary share capital of £3,000,000, but the shares are only worth £500,000; £1,000,000 of Original Debentures and £1,500,000 of Second Security Shares in Debentures, which are a second Preference Stock. The present Bill proposes to enable the Company to raise a further sum of £500,000 in any way they can, and it provides that one-fifth of the amount of a share shall be the greatest amount of a call; that three months at least shall be the interval between successive calls, and three-fourths of the amount of a share shall be the utmost aggregate amount of calls made in any year upon any shares; but the shares may be issued at any premium required to get them out. Therefore, it is quite possible that the Company may have to incur liabilities to the extent of another £ 1,000,000 before they are able to obtain the £500,000 they desire to raise. And when they have got that £500,000, 1478 how do they propose to expend it? £180,000 is to be spent in paying interest upon the first and second charge of £2,500,000 for Debenture and Preference Stock. My hon. Friend the Chairman of Ways and Means, who spoke upon the question of adjournment, seemed to think that this may be the best means of enabling the Company to get out of the mess in which they find themselves involved. That may be so; but what I wish to call attention to is that this is another instance of the inconvenience and danger of allowing interest out of capital during the construction of works. I believe that the original Stock of £3,000,000 is held largely by the working classes of Hull. The average holding in the Company is £250 per shareholder, whereas the ordinary range of the shareholders' obligations extends to £1,700 per shareholder. These poor people are almost ruined at present; but if this additional charge, which may probably, in the end, amount to £1,000,000, is to be placed in front of them, there can be nothing left of the original shares. There may be nothing left whether we pass this Bill or not; but I desire to point out to the House that while the general law allows a solvent Railway Company to raise Debenture Stock to the extent of one-fourth of its share capital, this Company was, in the first instance, allowed to raise £1,000,000 upon a share capital of £3,000,000, and that it has since been permitted to supplement its Preference Stock by an additional sum of £1,500,000. The House is now asked to sanction the creation of further Preference Shares or Stock to such nominal amount as shall be sufficient to produce £500,000, so that the preference liabilities of the Company will then be exactly equal to the amount of the original share capital. I may add that, whether the House consents to pass this Bill or not, it will make very little difference to me, or to the Railway Company with which I am connected in the immediate neighbourhood of this line. I have simply felt it my duty, in the interest of the general public, to point out these considerations to the House.
§ MR. C. H. WILSON (Hull, West)
The hon. Baronet who has just addressed the House is the Representative of another Railway Company which is connected with the district through which 1479 this line runs. The hon. Baronet is a Director of the North-Eastern Railway, of which I at one time was also a Director; and I know as well as he does that the reason this railway and the Docks at Hull were made was on account of the dissatisfaction of the people of Hull with the conduct of the North-Eastern Railway Company as to the way in which they conducted their business at the Port of Hull. The North-Eastern Railway possesses an unfair monopoly of the railway system of the North-Eastern Coast of England, and they have a connection with other Docks which are in direct competition with the Port of Hull. But Hull is an ancient port, with longstanding mercantile connections, and it has an enormous trade. But what have the North-Eastern Railway Company done? They have endeavoured to divert the trade of Hull to their own Northern ports, not to create a new trade, but, to a great extent, to take away the trade from Hull and to prevent its natural development.
§ SIR JOSEPH PEASE (Durham, Barnard Castle)
Allow me to interrupt my hon. Friend. I think he is labouring under a mistake. The rates of the North-Eastern Railway at Hull for goods are exactly the same as those of the Hull and Barnsley Railway.
§ MR. C. H. WILSON (Hull, W.)
May I give an instance? The North-Eastern Railway carry from Hull to the Barnsley Colliery District, a distance of 120 miles, by their system; whereas by the Hull and. Barnsley Railway the distance is only 60 miles; but yet rates in both cases are the same. The consequence of the operations of the North-Eastern Company is that the trade which would naturally go to Hull is diverted to the Northern ports. The North-Eastern Company have also another advantage—that they have another district to serve, and they are enabled to get cargoes of coal at a cheaper rate than they could procure them in Hull, and the tolls they impose on the carriage of coals to Hull are higher than those which they impose in other parts of their Northern system. For these reasons, Hull has always been intensely dissatisfied with the conduct of the North-Eastern Railway Company, and they have endeavoured to get rid of the monopoly which that Company has so long enjoyed. At length they have succeeded 1480 in doing so by establishing the Hull and Barnsley Railway and Dock Company. But the works of the Hull and Barnsley line, like those of too many other railways, have cost a great deal too much in construction; and I do not know whether the North-Eastern Railway Company have not been, to a considerable extent, responsible for the position of the Hull and Barnsley Company at this moment in increasing the costs to which that Company have been put. It is quite true that the shares of the Hull and Barnsley Company are at this moment very much depressed; and, unless this Bill is passed, the effect will be that the Hull and Barnsley Company will have great difficulty in carrying on their business at all. No doubt, that would be all very well for the North-Eastern Railway Company, because they would got rid of a formidable competitor, and very possibly the North-Eastern Railway Company would only be too glad to continue their monopoly by buying up the Hull and Barnsley undertaking at a great sacrifice to the Hull and Barnsley shareholders. At the present moment the Docks of the Hull and Barnsley Railway at Hull are the finest on the East Coast of England. They can afford accommodation for ships of very great draught of water, and, indeed, are capable of taking in the largest of Her Majesty's ships of war, which no other Docks on the East Coast can do. The undertaking has been one of great enterprize. The arrangements made by the Bill are the best for the interests of all concerned; and I trust and feel convinced that, in making this appeal to the House in favour of the second reading of the Bill, the House will not consent, by refusing its sanction, to play into the hands of the North-Eastern Railway Company.
§ THE CHAIRMAN OF WAYS AND MEANS (Mr. COURTNEY) (Cornwall, Bodmin)
I spoke just now on the question of adjournment, and I shall be glad now, if the House will permit me, to say a word or two on the merits of this Bill. After all, the case is a very simple one. This Company is extremely embarrassed. It owes money upon its Debenture debt, and if it is unable to effect this, or some other arrangement, the railway will be obliged to be placed in the hands of a receiver, and will have to be liquidated in bankruptcy. That, 1481 I am afraid, is the only alternative. This Bill is promoted in order to increase the borrowing powers of the Company. It proposes to create Preference Stock to the extent of £500,000 in cash to enable the Company to pay the interest already due upon the Debenture Stock of the Company, to discharge the liabilities of the Company in respect of rolling stock, and for the purchase of such new rolling stock as may be necessary for the efficient working of the line, to pay for the purchase or compensation money for lands acquired or to be acquired, and to defray the expenses of constructing warehouse and other buildings in connection with the Docks at Hull. It is believed that this sum will enable the Railway Company to weather the storm and to get into smooth water, which is impossible without this Bill or some such arrangement. The Bill itself comes down to us from the House of Lords, where it was first considered by the late Lord Redesdale, and since by the Duke of Buckingham, both of whom approved of its provisions. It is further approved by the shareholders and creditors of the Company. That being so, it does appear to me that it would be rather a strong measure for the House to refuse to this Company, dealing with its own affairs, the power of entering into a satisfactory arrangement, and to say—"You shall go into bankruptcy." Therefore, I think the burden of presumption is in favour of reading the Bill a second time. The Bill came before me some time ago; but in the event of the House consenting to read it a second time it will have to come before me again. I have no doubt that everything that ought to be considered has been considered carefully in "another place." I do not know whether what I am going to throw out will meet the views of the opponents of the measure. The proposal is to raise £500,000 in cash upon Preference Stock; but there is no limit fixed as to the terms upon which the money is to be raised. It may be that the Company are too sanguine in their anticipations, and that they think they can raise the money in the market at a lower rate of interest than will be possible. I will, therefore, make this promise to the House—that if the Bill does come before me I shall require the promoters to give me some good ground for believing that the 1482 money will be raised at something less than a ruinous rate of interest. I shall certainly be prepared to suggest that there shall be some limitation of the terms upon which the money is to be raised. These are my views upon the matter, and I have felt it my duty to explain to the House the conditions under which I should be prepared to approach the consideration of the Bill. On the whole, considering the exceptional and peculiar circumstances of the case, I think the best course would be to assent to the second reading of the Bill.
MR. J. ELLIS (Leicestershire, Bosworth)
I only desire to say a word on behalf of the second reading of the Bill. I believe that the new railway was an absolute necessity, and that its construction has been for the great convenience of the traders in the centre of England. Whatever may be said about the money question, I am certain that it would be a great public advantage if the Bill should pass.
§ Original Question put, and agreed to.
§ Main Question put, and agreed to.
§ Bill read a second time, and committed.