§ (1.) Where the council of any county, borough, or district have advanced or agreed to advance any sum to a light railway company, the Treasury may also agree to make an advance to the company by lending them any 260 sum not exceeding one-quarter of the total amount required for the purpose of the light railway and not exceeding the amount for the time being advanced by the council.
§ Provided that the Treasury shall not advance money to a light railway under this section unless at least one-half of the total amount required for the purpose of the light railway is provided by means of share capital, and at least one-half of that share capital has been subscribed and paid-up by persons other than local authorities.
§ (2.) Any loan under this section shall bear interest at such rate not less than three pounds two shillings and sixpence per centum per annum as the Treasury may from time to time authorise as being in their opinion sufficient to enable such loans to be made without loss to the Exchequer, and shall be advanced on such conditions as the Treasury determine.
§ (3.) Where the Treasury advance money to a light railway company under this section, and the advance by the council to the company is made in whole or part by means of a loan, the loan by the Treasury under this section shall rank pari passu with the loan by the council.
§ MR. LOUGH moved the omission of the clause. He argued that the financial proposals of the clause were all wrong. The principle of the clause was that the Treasury should make loans to a certain amount, provided that the local authorities contributed equal amounts. He had already drawn attention to the unsatisfactory character of these financial proposals both at the stage of Second Reading and in Committee. The action of the Treasury in making advances would stimulate local authorities to make loans in cases where there was no proper security, and the result would be that loss would be suffered by the localities, and ultimately by the Treasury. The House ought to be warned by what had occurred in Ireland. There, in the case of light railways, the first thing that was necessary before the Treasury contributed anything was that the local authority should involve itself in difficulties by guaranteeing 5 per cent. interest on the capital sunk in constructing a railway. This year we had to pay £66,000 under these Irish guarantees because the means taken to stimulate the local authorities to act had led to extravagance. The railway companies were not induced to make every effort to secure economy. Under this clause no advance was to be made by the Treasury to a light railway company unless at least one-half of the total amount required was provided by means of share 261 capital, and at least one-half of that share capital had been subscribed by persons other than local authorities. That provision, in his opinion, would not lead to economy. There would be a division of authority that would make everybody careless, and the result would be loss. There was a plan under which the Treasury would not be exposed to a third of the risk to which it would be exposed under this Bill, and under which the local authority would not be exposed to risk at all. He meant the plan of giving a very moderate guarantee. The plan of guarantee had failed in Ireland only on account of the high amount of the guarantee. His idea was that the Treasury should guarantee 2 per cent. interest for 20 years on the capital required for a railway.
§ * MR. SPEAKERpointed out that at this (the Report) stage of the Bill it was not competent to the hon. Member to argue that the amount of interest ought to be reduced, as that would be an attempt to increase the charge upon the public.
§ MR. LOUGHmaintained that the clause as at present framed would lead to considerable extravagance, and expose the Treasury to considerable loss. It was true that Sub-section 2 of the clause provided that any loan made under it should bear interest at not less than £3 2s. 6d. per cent. per annum; but how was this interest to be collected? There was no guarantee that it would be paid, and the localities, the private investors, and the Treasury might all lose their money. Then he objected to the stipulation that the interest should not be less than £3 2s. 6d. Why should it not be less? If the Treasury made an advance it ought to be satisfied if the money was repaid.
§ THE ATTORNEY GENERALsaid that as the hon. Member had by his own confession spoken twice on the same subject, it would not be necessary for him to do more than refer briefly to his argument now. Though the hon. Member had moved the rejection of the clause and had spoken of other schemes, no Amendments had been put on the Paper to indicate the nature of those schemes, nor had he suggested any alternative course which should be adopted in the present state of the Bill. It was, 262 however, not possible for the Government to assent to the rejection of the clause, and he denied that the method of raising money provided thereby would be productive of expense and extravagance. He appealed to the experience of hon. Members who knew anything about guaranteed lines to say whether it was not the fact that guarantee was the most expensive way of providing for the power of raising money. There was no direct control over the expenditure, nor was there any incentive forthcoming to cause economy to be practised.
§ MR. CALDWELLdid not think that the omission of the clause would affect the value of the Bill. The risk of the Government only reached to the extent of one-fourth of the loan; in reality, one-half of the capital was made up by share capital, and the other fourth was lent by the County Council.
§ DR. CLARKsupported the omission of the clause. As a trustee of an insurance company, he said that he had been instrumental in lending over a million to local bodies on the security of the rates. They used to get £3 10s. per cent. and £3 7s. 6d. per cent.; but the value of money had fallen so much that it was nearly impossible to get 3 per cent. Insurance companies would lend money to county or borough councils at less than 3 per cent.; probably at £2 18s. 6d. The clause would limit and restrict the Treasury and the Public Works Loan Department—first, by the limitation of one-fourth; secondly, by the position to be taken by the County Council; and, thirdly, by the high rate of interest. Its effect would be baneful.
§ MR. BRYCEsaid his hon. Friends suggested that the clause would be useless, and if that was the case he should not regret it, because he did not look with any satisfaction or sympathy on the plan of bringing the Treasury into these enterprises. It might be said that the clause would not do much harm; he was not so sure of that. It would raise expectations that would not be realised. In his opinion, however, the clause was entirely unnecessary, and the Bill would be far better without it. The House might strike out the two financial clauses, and still leave the Bill a useful working Measure. It was absurd to suppose that a million of public money 263 was going to cover the country with light railways. That sum would have no substantial effect in hastening their advent. The truth was this Treasury grant was put in, not with any impression that it was necessary or desirable, but as part of a settled policy which seemed to prevail in the present Government of trying to do something for their agricultural supporters, and, unfortunately, their agricultural supporters were so simple and innocent, and so easily beguiled, that they expected an advantage from this contemptible grant which assuredly they would not receive. He believed the tendency of this system of Treasury grants would be to discourage rather than to encourage private enterprise. It would be better for the State to reserve its money gifts for the time when, having tried what could be done by the obvious methods of cheapening the initial cost of construction and also of working it could be shown that those methods were not sufficient. If it were found, after the passing of the Act without the financial clauses, that no light railways were being made, then it would be soon enough for the Government to come with their money bags and open them to their agricultural friends. To win popularity the Government had adopted a policy which was not calculated to attain the object in view, and which would open up a dangerous era in our financial policy.
§ * MR. T. T. BUCKNILL (Surrey, Epsom)said the last two speeches were inconsistent with each other. Firstly, the hon. Member for Caithness had told the House that he, as a trustee, was lending millions at 2½ per cent. If that were so, the promoters of light railways would borrow of him instead of paying the Treasury £3 2s. 6d. per cent. But the right hon. Gentleman who spoke last said the clause would open the door to extravagance, and that promoters would come knocking at the Treasury door to borrow millions at £3 2s. 6d. per cent., which he called a glittering lure, and therefore the clause was baneful. The two arguments were absolutely inconsistent.
§ MR. E. STRACHEY (Somerset, S.)dissociated himself from the attitude taken up by the right hon. Gentleman. The right hon. Gentleman could, perhaps, speak for Scotland, but he had no 264 right to speak in behalf of English agriculturists in this matter. And even as regards the poorer country, he should be surprised if Scotch agriculturists were not most anxious that they should be treated exactly in the same way as Ireland had been treated. The Irish farmers were assisted to bring their agricultural and dairy produce, not only to the markets of their own country, but to the markets of England. The agriculturists of the West of England had suffered severely from this competition, and it was only fair when Irish farmers were assisted by Treasury grants, that English agriculturists should have the like assistance. There might be many arguments against all State aid whatsoever, but he was not ready to argue that point at all, as long as the last Government, or this Government, or any future Government favoured Ireland by giving it assistance from the State for the construction of light railways. He supported the clause because for the first time in the legislation of this country it did something to put English agriculturists on the same footing as those of Ireland in this matter.
§ Question put, "That the words of Clause 4 down to the words 'one quarter,' in line 6, stand part of the Bill."
§ The House divided:—Ayes, 107; Noes, 23.—(Division List, No. 199.)
§ * MR. SPEAKERruled out of order a number of Amendments on the ground that they proposed to give power to increase the public charge.
§ Clause 5,—