SOUTH METROPOLITAN GAS BILL.

HC Deb 01 March 1895 vol 31 cc145-54

On the Motion for Second Reading,

MR. JAMES ROWLANDS (Finsbury, E.),

who had on the Paper a notice to move the rejection of the Bill, said, he fully realised the importance of moving the rejection of a Bill of this kind on the Second Reading. He knew he would be told that he ought to allow this Bill to go through Committee in order that it might be threshed out. When, however, they objected to the principle underlying a Bill, they were bound to oppose it and see whether the House endorsed that principle or not, His main point was whether the House was to give a private company the power to do what was known on the Stock Exchange as "watering" its capital. They now knew that the gas supply of London was an absolute monopoly. Mr. Livesey, in a lecture he delivered some months ago, said there was no such thing as competition. The Bill was supposed to be a very simple one. It asked the House to convert £2,000,000 of capital into £4,000,000 of capital, and to reduce the statutory dividend of the Company from 10 to 5 per cent. What was the history of this Bill? There had been at one time a possible reason for the promoters bringing this Bill into the House, but that reason had disappeared. The reason at the bottom of this Bill had not been the multiplication of the capital or the division of the interest; the Bill had undoubtedly sprung from the ingenuity of Mr. Livesey. That gentleman had desired to develop his opinions in regard to the relations of capital and labour which he had carried out in his profit-sharing scheme, and had therefore desired that facilities should be given for placing one or two workmen upon the Directorate of the Company. The clause embodying this idea, however, had been dropped out of the Bill—he admitted through no fault of Mr. Livesey—but because the shareholders, backed up by the majority of the Directors, were against him. With its disappearance the reason for bringing the Bill before the House had also disappeared, The promoters of the Bill would, of course, make the most they possibly could of the advantages of the scheme now proposed. He ventured to say he understood fairly well both the auction and the sliding scale clauses. By Clause 15, the statutory standard was 3s. 6d. per thousand feet, and he thought that all these statutory standards were ridiculously high, whether in the case of the London Gas Companies or such Companies as the Liverpool Gas Company. The Gas Company had its powers already, and should not, he contended, ask the House to re-affirm its statutory dividend. It was argued that the consumer was perfectly protected because of the working of the auction clause. This was a very wise provision, but he ventured to say that not more than £800,000 of the capital had been submitted under that clause. He might be told that there was some more capital which had to be submitted under the auction clause, and he admitted it. But what was the gross sum? £600,000, and not £600,000 to be put on the market to realise all that it possibly could, but only such a sum as would realise, with all the benefits of the auction clause, £600,000. He was not going into the question of the conversion of Stock; that was largely a question for the stockholders themselves. The real reason for the promotion of the Bill was to facilitate the sale of Stock by its conversion into one single Stock. That was not a question on which the Company ought to come to Parliament. Let them look at the matter from a public stand point. They were asked to convert the Stock and give it a face value of double the nominal value. Supposing that the conditions of lighting changed, and this stock went back to somewhere approaching its original value, the persons who had bought off the present holders would consider that they had bought the capital value on the face of the Stock; and if at any time the authorities should want to buy the undertaking, they would consider that some system of confiscation was taking place if they did not get the full face value. He thought it was a very serious thing indeed for the House to interfere in a transaction of this kind. The promoters had issued a statement of their reasons for introducing the Bill, and among them he found—first, that they pointed out that consolidation of the stock made the market value go up. He admitted that, and would ask the House whether that was not giving a bonus to the whole of those who at present held the stock. But the next reason given was contradictory of the first, because the promoters pointed out that in Paragraph 3 of the Bill power was given to enable consumers and those in the employment of the company to buy any unissued stock at the then market price of the company's stock. They expressed a desire that, those small holders might be created, yet first of all they forced up the stock to its highest value. Before he sat down he wished to appeal to the President of the Board of Trade to seriously consider, from a public point of view, what he intended to say on the question. The right hon. Gentleman might feel justified in supporting the Bill. At any rate he hoped the right hon. Gentleman would very closely consider whether it was really to the interests if the community at large that the proposed change should take place. He had not raised the question of the dividends of the company, but he should probably do so at a later stage if the Bill passed. He had mainly devoted his attention to the principle underlying the Bill, and he hoped the House would reject it in the public interest.

MR. F. G. BANBUBY (Camberwell, Peckham)

said, he would not follow the hon. Member for Finsbury into a discussion of a clause that was not in the Bill, but he would endeavour as shortly as possible to put the true reasons and the true objects of the Bill before the House. The hon. Member stated at the opening of his speech that only the interests of a particular class, and not the interests of the whole community, would be benefited by the Bill. He did not think the hon. Member really understood the effect of the Bill. At the present time there were three classes of stock in this company, and it was proposed to consolidate them into one stock, and to reduce the statutory dividend from 10 per cent, to a statutory dividend of 5 per cent., at the same time doubling the stock, the effect of which would be that the dividend would remain exactly the same, the actual capital would remain the same, and the company would gain no advantage whatever as far as regarded both capital and dividend. The hon. Member was under a delusion in supposing that the capital of the company would be increased by the Bill. The capital, of course, would be doubled. Suppose, therefore, the ordinary stock stood at 300, if the Bill passed it would stand at 150. It was quite possible that the new stock would command a higher premium in the market, and that would be an advantage to the community, as he would show. There was £600,000 or £700,000 of fresh stock to be issued by auction. It was very evident that if they wished to raise £15,000 and the stock stood at 150, they would have to issue only £10,000 'in order to get that £15,000, but if the stock only stood at 100 they would have to issue £15,000 nominal capital to obtain £15,000 money. That being so, in the event of the County Council wanting to buy the company, they would have to buy up a less nominal amount of stock than if they had to raise £15,000 of stock, which could only be obtained at par. In that way the capital of the company would not be increased, and when the new stock was issued they would be able to obtain a larger amount of money with a smaller amount of capital than at present. In the event of the County Council, or any local body, therefore, buying up the company, the amount of nominal capital they would have to deal with would be smaller than if the Bill did not become law. The hon. Member had spo[...] about watering the stock. He did [...] think the hon. Member, knew what watering meant. It was issuing new capital for which no money was raised, and it would rank for dividend with the original stock; whereas, in the present instance, while the amount of stock was doubled, the statutory dividend was also halved. Therefore, there would be no larger amount of money required to be earned by the company to pay the statutory dividend. The hon. Member had stated that certain portions of the existing capital had not been raised by tender. That might be so, but the present Bill would not affect this in any way. The stock would remain the same as now. The effect, of the Bill on the consumer would not be at all a disadvantage, because it would enable the company to borrow money at lower rates. Its effect on the shareholder would be that he would have a better market for his security, while the Bill would really be an advantage to a purchasing body. Under those circumstances he failed to see why the House should object to read the Bill a second time.

MR. G. HOWELL (Bethnal Green)

said the hon. Member for Peckham had shown that the Bill was absolutely unnecessary, for he had endeavoured to prove that it was not going at all to change the existing condition of things. The hon. Member was quite right, from this standpoint, in not discussing the history of the Bill. When the clause which had been referred to was struck out, it seemed to him that all reason for the Bill, even if any had existed before, had gone. Again, if there was to be no change in regard to either the capital or dividend of the company, why on earth should the House have been troubled with this jugglery of finance? The first clause of the Bill was— To convert the capital of the Company entitled to the said standard 10 per cent, dividend into double the nominal amount to be entitled to a standard rate of dividend of 5 per cent., being half the present standard dividend. Exactly, they were going to double their stock, and a person holding £400 stock wul[...]d in future, if the Bill passed, receive 5 per cent, on each £200 instead of 10 per cent. on the £400 as now. It was true that this would not affect the shareholder, nominally he would remain in the same position; but there was something behind this. Ten per cent. in the present state of the market looked a very large sum. There were few businesses or companies that could now pay the 10 per cent.; yet this company was paying 13 per cent. But the promoters of this Bill, though halving the stock, would make the dividend appear as only 5 per cent., a reasonable amount. If the County Council or any other body came forward with proposals to purchase the Company, the Committee upstairs dealing with the matter would, no doubt, thought the promoters of the Bill, regard 10 per cent, much too high as a basis of purchase, especially in view of the possible competition of the electric light in the future. But if the Gas Company came before the Committee with a 5 per cent, basis, though their share capital had been doubled, it would look such a modest sum that the Committee might feel inclined to pass it. A Committe should not be called upon to deal with the principle of this Bill. The House owed a debt of gratitude to its private Bill Committees for preserving it from being tainted with corruption. And it ought to protect those Committees, and ought not to leave them to deal with delicate questions of this kind. The House itself ought in future to watch very carefully any Bills brought in affecting gas, water, or other monopolies. In the case of Gas Companies all competition had been done away with by mutual arrangements in order that their power of earning dividends should not be interfered with. The House would do well to reject the Bill. There was no real reason for it. The promoters had practically abandoned the only reason for its introduction, and so far as working men were concerned, they were now in a position to say "Thank you for nothing." The principle that a working man should be entitled to buy the stock of the Company in which he was employed was good, but in this case it could not be applied; and it was cheap patriotism to ask the House to sanction a Bill, the original object of which was by no means carried out in its provisions.

MR. H. KIMBER (Wandsworth)

said, the hon. Member who moved the rejection of the Bill had argued that it established a monopoly. If they were to discuss the question whether Gas Companies had a monopoly they had better review the whole of their Legislation relating to these Companies since 1847. But the Bill established no monopoly of any kind. Since auction clauses and sliding scales had been put in Gas Bills, Gas Companies were partners with the public, and the public got the better share of the profits. What was the fact? The last speaker said the shareholders got 10 per cent.; but it must be remembered that £309 had to be paid for £100 worth of stock. The name of Mr. Livesey, the Chairman of the Company—a man who for single-mindedness of purpose and friendship to the working classes had no superior, and whose Company was the pioneer in giving cheap gas and establishing a system of profit-sharing—was a voucher for the fairness of the Bill towards the working classes. The Bill provided that the three classes of stock into which the capital of the Company was divided should be, unified. That unification of stock would no doubt make it more valuable, and he was at a loss to know why the shareholders in a Joint Stock Company were not to be allowed to get any natural improvement in the value of their property when it injured nobody else. For the purposes of unification it was proposed to read each £100 of stock as £200. But that would not fix either the market value or the intrinsic value of the stock, and therefore no harm was done to anybody. It had always been the practice of the House to allow joint stock companies, whose enterprise had built the foundation of the mercantile prosperity of this country during the past half century, to rearrange their capital provided no hardship was indicted on the public. But it was not the only object of the Bill. The hon. Member opposite said the Bill had its origin in a clause for the purpose of enabling working men to be placed on the Board, and that as that clause had since been withdrawn, he, as a friend of the working man, objected to the Bill. But what did the Bill do for the working man? It provided for the division of stock into small sums; and thus an industrious and thrifty working man, who was able to save £5, would, if he invested it in the stock of the Company, become a partner with his masters and have a right to vote at the meetings of the Company. Further, they found that the Company took upon themselves a very onerous responsibility at their own expense for the purpose of saving a great deal of trouble to the poor holders of stock in the transfer of that stock. It enabled them, without the expense of a trust deed, to take from their workmen a simple direction in writing as to the persons to whom after their death the stock was to devolve. It enabled the Company to deal, after a man's death, with his stock as well as any money derived from the profit-sharing system, and to place them in a very inexpensive manner among the relatives or other appointees of their workmen. But, even if the Bill did not contain these beneficent provisions, and only contained the clauses dealing with capital, he maintained that the House would be justified in accepting it on principle. There were several reasons why this Bill should go before Committee. Power was given in it for the issue of £600,000 additional capital already sanctioned, in an improved manner, which would benefit the company and the public by reason of the unified character of the stock. It would increase this in volume, and there would be the benefit of the appreciation which the markets always gave to a large volume of unified stock. They would get a much larger sum of money for a much smaller amount of nominal capital, and what were the provisions in the Bill relative to that? It was not to be offered to the public until some of it had been offered at the market price in the previous week to the workmen of the company and the consumers, so that they, so to speak, were to have the first pull. The hon. Member had spoken of the dividend being 13 per cent., but considering the price which would have to be paid for the shares by auction, the dividend was only about 4 per cent. He trusted that the ordinary course would be pursued, and that the Bill would be allowed to go upstairs to a Committee.

THE PRESIDENT OF THE BOARD OF TRADE (Mr. J. BRYCE, Aberdeen, S.)

said, his hon. Friend the Member for Finsbury had given long and careful attention to these gas questions, and was justified in calling the attention of the House to some of the provisions in this Bill. The points upon which the discussion had occurred, were what would be the financial effect of the various proposals; whether they would benefit the consumer or the public or how much benefit there would be to the shareholders. The House must, however, have had some difficulty in following some of the arguments, although those of the hon. Member for Camberwell wore very lucid indeed. The usual procedure was to send these matters to a Committee for consideration, and he did not think that any grounds had been shown, either by the Mover or the Seconder of the Amendment, for the rejection of the Bill, for distrusting the ability or the impartiality of any Committee that might be appointed by the House to consider this question. Every Session questions quite as difficult as these were submitted to Committees. The hon. Member, however, was warranted in bringing the matter before the House, because whenever companies came to Parliament in circumstances such as these, they came, as it were, for a re-assertion of their Parliamentary title, and thereby were considered to have strengthened their position. Complaints by the consumers still existed, but they arose far more in the case of the north of the Thames Companies than in the case of this one, and the hon. Member for East Finsbury would remember that he headed a deputation which came to the Board of Trade from the vestries in North London stating a case against the Gaslight and Coke Company, upon which occasion he held this particular Company up as a model of what Gas Companies should be. His hon. Friend and the deputation had on that occasion asked for an enquiry, and he believed that the vestries had subsequently expressed a wish that the enquiry should be by a Select Committee of the House. If such an enquiry were to take place, it would afford an opportunity for dealing with the larger questions which the hon. Member had raised, and it was therefore still less necessary to ask the House to come to a conclusion upon those large questions now. For that reason, and reminding his hon. Friend that a Division might prejudice the case raised, he would ask his hon. Friend to withdraw his Amendment and allow the Bill to be considered by a Committee of the House.

MR. J. ROWLANDS

asked leave to withdraw his Amendment.

Amendment by leave withdrawn.

Bill read 2°.