§ MR. MOLLOY (King's Co., Birr)
Sir, I beg to move the Motion which stands in my name with regard to this Bill—namely—That it be an Instruction to the Committee on the Sutton District Water Bill, to insert a Clause in such Bill by which provision shall be made for the offer of any additional capital by public auction or tender at the best price which can be obtained, unless the Committee on the Bill shall report that such provision ought not to be required, with the reasons on which their opinion is founded.Now, Sir, in 1877 the right hon. Gentleman the present Postmaster General (Mr. Raikes), when occupying the position of Chairman of Ways and Means, introduced a Motion into this House having for its objects exactly the same provision as that which is contained in my Motion, with this exception—that he proposed to change the Standing Orders in their then state for the purpose of inserting this Auction Clause, as it is called, into all Bills promoted by Gas Companies. Perhaps I may be allowed to explain, in two or three short sentences, what this meant. When a Gas Company or a Water Company come to this 10 House with a Bill asking for powers to create a Company, or to carry an undertaking on in a particular fashion, a monopoly is granted; and Companies established under such conditions—conditions similar to those laid down in the present Bill—have been able to pay a dividend of from 7 to 10 per cent on their share capital, and the shares of such Companies are quoted on the Stock Exchange and in the public market at from 50 to 75 per cent premium. I will take this particular Company. The shares of the Company now stand at something like 100 per cent premium—that is to say, that £25, which is the price of an original share in the Sutton Water Works Company, can be sold for £50. The same thing was the case with regard to Gas Companies; but in 1877 the right hon. Member (Mr. Raikes) brought in a Standing Order which provided that any Gas Company coming to this House to ask for powers under a new Bill to raise additional capital should be compelled by the terms of that Bill to offer the capital to be subscribed by the public at large—that is to say, by auction, and the clause now known as the "Auction Clause" was inserted in Gas Companies Bills. The object of the clause was this. If the Directors of a Gas Company desired to raise additional capital, and were not required to issue the new shares to the public, they might issue them to themselves at par. That is to say, that they might issue a £100 share at £100, and the next day sell it for £125, £150, or £175, as the case might be, with this result—that the Directors, supposing they took these shares themselves, would mulct the unfortunate people who had to pay either the gas or water rates the difference between the par value and the premium value obtained from the sale. This was felt to be unfair to the public, and an injury to the public, as well as being injurious to the fair working of the large monopolies conferred upon Companies in reference to the supply of gas and water; but in 1877, at the instance of the right hon. Gentleman opposite, all that was altered in the case of Gas Companies, and I remember that the Motion made at that time was supported by the then Chancellor of the Exchequer, the late Earl of Iddesleigh, whose loss we all so much regret. What I propose now is that the sumo rule 11 which applies to Gas Companies now when they desire to raise additional capital should be made to apply to Water Companies. I am obliged to take this action, in the first instance, against one particular Water Company; but when the Motion is carried, as I have no doubt it will be, I propose to submit a Motion to amend the Standing Orders so as to include all Water Companies who may in future come to this House. The only argument ever used against this change was that it might be injurious to the public in restraining undertakings of this kind; but I think I shall be able to show the House how forced that argument is. It matters nothing to the public so long as the Water Companies get the amount of money they require; but the cheaper the rate at which they raise their capital—that is to say, the smaller amount of money at which the shares are absolutely issued by the Company—the greater the benefit will be to the public. But there is another very serious matter which comes into consideration. For instance, in this very case of the Sutton Water Works—and here let me say that I know nothing about the Company, nor am I even, acquainted with the names of the Directors—but what I wish to mention is that a leading member of the Local Authority in that district wrote to me yesterday informing me that it is the intention of the district to purchase out the present Company who are to receive these powers under this Bill. Now, how will the Local Authority be affected? I do not say that the Directors of the Company intend to do anything wrong; I know nothing about them, and I desire to make no accusation against them; but I presume that they will issue the £60,000 they require to raise in shares to themselves and their friends at par; and, if so, they would then be able to sell them on the following day for £90,000. Therefore, when the Local Authority comes to purchase these water works they will be in this position—that they will not only have to purchase the shares at the price at which they were issued, but will have to pay the value of the premium at which they will stand in the market. As a matter of fact, they will have to recoup the shareholders and re-purchase the £30,000 or £40,000 that will have gone into the pockets of the Directors and 12 their friends. The present share capital stands at £60,000, although only £40,000 have been paid up, and the new shares that it is proposed to issue will also amount to £60,000, and will stand at £90,000, so that between £40,000 and £50,000 will represent the profit which will go into the pockets of private individuals, and will eventually have to be purchased by the Local Authority when it desires to buy up the works. I know it will be said that the same thing happens in the case of every Water Company; but that is the reason why I take the earliest opportunity of endeavouring to correct what I think was a great mistake committed by the right hon. Member for the University of Cambridge when he introduced his Motion for the alteration of the Standing Orders by applying it only to Gas Companies. It was evidently an error, and the new Order ought to have applied to Water Companies as well. Therefore, I propose to put this Motion to the House to-day in order that it may be applied to Water Companies as well as Gas Companies; and then I propose to follow it up immediately by another Motion to amend the Standing Orders, so that in future it shall apply to all existing Water Works Companies. By this means we shall save a large sum of money to the Local Authorities under any future Local Government Bill which may be proposed for England and Wales from having to purchase profits made by individuals contrary to the interests of the public at large. I beg to move the Motion which stands in my name.
§ MR. RICHARDS KELLY (Camberwell, N.)
I rise for the purpose of seconding the Motion, and in doing so I will simply call the attention of the House to the fact that the conditions imposed by the Resolution are of a very moderate character. There is one thing I desire to say in justification of the course which I took the other day. I stated that no notice of the intention of the Sutton Water Company to apply for a Bill had appeared in any local paper until the 22nd of January. I find that I understated the case. As a matter of fact no notice whatever has appeared in any local paper; but there was a notice in a paper published many miles off at Guildford. Therefore, I challenge contradiction to my assertion that the Bill was brought in with a secrecy which I 13 think ought to excite the suspicion of the House.
Motion made, and Question proposed,
That it be an Instruction to the Committee on the Sutton District Water Bill, to insert a Clause in such Bill by which provision shall he made for the offer of any additional capital by public auction or tender at the best price which can be obtained, unless the Committee on the Bill shall report that such provision ought not to be required, with the reasons on which their opinion is founded."—(My. Molloy.)
§ MR. CUBITT (Surrey, Mid)
On behalf of the promoters of the Bill I think we have no reason to complain of the manner in which the hon. Member for King's County (Mr. Molloy) has brought this matter before the House. The only reason which the Directors could have for opposing a provision of this kind, if it is proved to be for the public interest, would be that it would be applied to an exceptional case; but I understand that the hon. Member proposes to introduce a new Standing Order, which is to be inserted in the Bills of all Water Companies. It is scarcely necessary for me to say that if such a proposition receives the concurrence of the authorities of the House I shall not be prepared to offer any opposition to its acceptance. The hon. Member stated that he had received a letter from some Local Authority at Sutton, informing him that the district intends at some future time to purchase the Sutton undertaking. Now, I wish to say that this is a District Water Company; that it is not connected with any single parish; and that at the present moment there is no Local Authority in existence which would be able to purchase it. The President of the Local Government Board may have some measure in contemplation which may make the purchase practicable, and in that case the Resolution proposed by the hon. Member may be of some value. With regard to the observations of the hon. Member for North Camberwell (Mr. Kelly), I do not think the House would wish me to enter into any discussion new as to the circulation of different local papers; I will only say that the notices of the Water Company were inserted not only in a local paper of large circulation, but also in The London Gazette. However, as we are all agreed in regard to the Resolution proposed by the hon. Member, I will only add that I trust the 14 Sutton Water Company will continue in its present prosperous career.
§ THE CHAIRMAN OF COMMITTEES (Mr. COURTNEY) (Cornwall, Bodmin)
I am glad to hear that the promoters of the Bill are willing to accept the proposal of the hon. Member for King's County (Mr. Molloy). There is no reason to doubt that the Instruction involves a principle which, ought to be considered by every Private Bill Committee to which a Bill of this kind is referred. As a matter of fact, it is already within the province of a Private Bill Committee to go into such matters, and in some cases Committees have inserted such a clause. I am glad that the Sutton Water Company accept this Instruction, and I am also glad that it is proposed that the Motion should be followed up by another of a more general character. It certainly ought not to stand alone, but it is a matter which ought to be dealt with in a general way. If the hon. Member will do me the honour of consulting me before he moves his Resolution, it is probable we may come to some agreement as to the alteration which ought to be made in the Standing Orders.
§ THE PRESIDENT OF THE LOCAL GOVERNMENT BOARD (Mr.RITCHIE) (Tower Hamlets, St. George's)
On behalf of the Government I am very glad indeed to find that there is a general agreement in all parts of the House in respect of this Instruction, and also upon the general question. The Government are entirely of opinion that it is not only desirable this Instruction should be carried, but also that there should be an alteration of the Standing Orders, so as to make the principle apply to every Water Company. It is for the interests of the community that whenever an issue of fresh capital is required for enterprizes of this kind, that capital should be restricted to the amount which is to be raised and to the actual value of the shares. Of course, if the shares are of more value than the sum at which they are issued so many fewer shares would be required. If, hereafter, a general principle should be adopted which would enable Local Authorities to purchase undertakings of this kind, it should be only incumbent on them to pay the real value of the undertakings. It is, therefore, clearly in the interest of the public, when fresh, capital is required for the purpose of carrying out the obligations 15 cast on Water Companies, that that fresh capital shall be strictly limited to the amount which it is necessary to raise, and, that being so, that the share should be sold at their real value, and no profit put into the pockets of anybody. Therefore, the Government entirely support not only this Instruction to the Committee on the Sutton Bill, but also the suggestion, which has been endorsed by my hon. Friend the Chairman of Committees (Mr. Courtney), that there should be some alteration of the general law which should prevent the evil which the hon. Member's Resolution calls attention to.
§ Motion agreed to.