HC Deb 01 May 1929 vol 227 cc1622-47
Mr. GILLETT

I beg to move, in page 3, line 31, after the word "interest," to insert the words (not exceeding five per cent. per annum, or one per cent. in excess of the average bank rate during the preceding year, whichever is the lower). The Bill which we have before us is one of the most unusual Measures which has ever been presented to the House of Commons dealing with the transfer of a public undertaking owned by one of the greatest municipalities in the kingdom into the hands of a private combine. It is not as if we were favoured in this Bill with the terms on which such a transfer is going to take place. I know the Bill is optional in certain respects and the London County Council may do this or that, but when you come to the details we have no information as to the exact terms upon which this undertaking may be amalgamated with the combine for a certain number of years. The Amendment I have moved is an attempt to try and remove part of that difficulty and to get something definitely laid down in the Measure which is now before the House.

I would remind the House that the Clause we are dealing with is more or less a statement of the terms used in the Bill giving their meanings with the idea of making the Bill more intelligible. In the first place we have an explanation of the expression "ranking capital" of the various concerns who are going to enter into the combine. This capital may include not only the present capital but also the reserves which have been capitalised and of course may include new issues. I am bound to draw the attention of the House to this side of the capital issue because the amount of interest which is payable upon that capital has a distinct relation to the question of what is the capital. There is one aspect of the question which no doubt will come up later, and that is as to how far the London County Council itself could be made liable especially in regard to new issues. That is a very important point in regard to the security of the new capital, and the rate of interest that could be paid upon it.

The answer which may be given to the Amendment I have moved is that this Measure provides that in the agreement the rate of interest has to be approved by the Ministry of Transport. That involves great confidence in every Minister who is going to occupy the position of the present Minister. Personally I think this is too important a matter to be left either to the present Minister of Transport or to any Minister who may succeed him, because I do not think the Minister should have the responsibility of deciding this very important question. My Amendment proposes that the interest shall not exceed 6 per cent. or 1 per cent. in excess of the average bank rate during the preceding year, whichever is the lower.

I should like to draw the attention of the House to the return which is being received on some of the capital which might be included. The Underground Common Fund last year paid 5 per cent. or 5½ per cent., but in the previous year it was lower than that. The London General Omnibus Company paid 6 per cent. in 1924, 1925 and 1926; in 1927, 7 per cent.; and in 1928, 8 per cent. The dividend paid by the Underground Electric Railway in 1926 was 1½ per cent., and in 1927 5 per cent., and there was an interim dividend in 1928. The House will see from these figures that the suggestion made in my Amendment is very close upon the average figure of the dividend recently received, and I think that fact ought to be borne in mind.

We do not know how much of the reserves of these companies is going to be capitalised, or how much is going to be issued in the form of bonus shares. The rate of interest that is now being proposed may involve the shareholders actually receiving a far larger rate than they are receiving to-day. The London General Omnibus Company has a capital of £2,700,000 and a reserve fund of £2,900,000, but we know nothing about what is going to happen in this case. If the shareholders in the London General Omnibus Company were given full interest on what they hold now and whatever dividend they will receive now which in 1928 was 8 per cent., the interest would be equivalent to 16 per cent. Even under my scheme they would be in a much more satisfactory position than they are at present. All this seems to show how unsatisfactory the Measure is which is now before us. The House is now being asked to give its assent to terms which we have not the slightest opportunity of knowing. I am not sure that the London County Council have before them the actual conditions on which they are going to make this transfer. When you consider the possibilities as we have seen them in the case of electrical companies which were dealt with in a recent Measure, it will be seen that it is quite possible that a number of the reserves may be capitalised and in that ease there was a fixed rate of interest. Of course that was less objectionable than the proposals under the Electricity Supply Act of 1925, where a limit upon the returns was definitely stated in the Bill.

There is also another point upon which the rate paid upon the capital is of great importance. It is provided in this Bill that if the fares are altered and the City Corporation or any local authority in the area affected want to object to such alteration in the fares, they can make a protest to the Minister of Transport and the Minister of Transport can then consider whether the increase in fares is justified or not. The Bill says: Provided that in arriving at his decision the Minister shall be bound by the principles mentioned in the Section of this Act of which the marginal note is the principles to govern management of associated undertakings. When we turn to Clause 7, paragraph (c), we find that one of the things which has to be borne in mind is that the Minister is bound to recognise a reasonable return upon the capital. In other words, the condition is that supposing we fix 5 per cent. as a return in the agreement, then the Minister, in considering whether the new fares are suitable or not, has to ask himself, "Will the return pay an interest of 5 per cent. on the capital," and if the fares are not high enough to pay this return the Minister has no power whatever to refuse to agree to the interest. The City Corporation or any other body may make an agreement, but the Minister cannot say: "I think these are excessively high fares; and I think it would be fairer if the owners of the capital took a smaller interest." Nothing of the kind. The Minister can only say: "Will these fares ensure a 5 per cent. interest on the capital?" I think it is exceedingly important that some limit should be placed on this figure, and I think 5 per cent. should be the limit which the shareholders can receive. The proposal that the fares may be raised to ensure that 5 per cent. will be paid to the shareholders is more valuable than is the case with any of the stocks which these companies hold at the present time. A company may be getting 7 or 8 per cent. upon Omnibus Company stock, but under this Bill you are practically bound to pay the interest officially fixed in the agreement. If that interest has been fixed I do not see that there is any power to alter it except by an alteration in the agreement with which the shareholders would have to agree. The whole wealth of Greater London is put behind these agreements. My Amendment seems to be absolutely fair and just, and I beg the House, before this Bill passes from our control, to see that this important item is secure so that the interest of the citizens of London may be secured.

Mr. THURTLE

I beg to second the Amendment.

It seems to me that the Amendment is rather a test of the good faith of those who are promoting this legislation. If they are really concerned with traffic co-ordination from the point of view of giving better facilities and better services to the citizens of London, and not from the point of view of extracting a high return on their capital, I think they cannot offer any reasonable objection to this limitation of dividend. As the Mover of the Amendment has pointed out, the holders of the ordinary stock in these companies are, in effect, through this monopoly, going to have a gilt-edged security, and a 5 per cent. return on a gilt-edged security is not at all unreasonable. If in any given year the earnings tend to drop to the point at which it may appear doubtful whether the profits earned will be sufficient to pay 5 per cent., it will be quite possible for this monopoly so to increase its fares as to ensure that the earnings are ample to pay interest at 5 per cent., and, indeed, if necessary, to build up reserves in the shape of an equalisation of dividend fund which will ensure for all time a return of 5 per cent.

It seems to me that, considering the great area for which the combine has to cater, only one conceivable element of risk is involved. There is no risk, I take it, that, so long as the population of London remains at round about its present figure, the demand for traffic facilities will decrease. As a matter of fact, the statistics have shown that the public are travelling more and more and in greater numbers throughout London, so that, if we may assume that the population is going to remain even stationary, without increasing, there is ample security behind the present arrangements for the earning of this dividend of 5 per cent. The one possible element of doubt is as to whether the population of London may not decrease, so that there will not be a sufficient number of people using these traffic facilities to enable the necessary profits to be earned to pay 5 per cent. That is the only kind of risk that enters into the transaction at all, and I think we know enough about London and its possible development and probable permanence as a great centre to feel that there is not the least likelihood of any-marked decrease in its population. What can the promoters of this legislation want more than an absolutely safe and secure 5 per cent.—a 5 per cent. as safe and secure as if it were invested in the very best Government stock? If they are not satisfied with that, if they are really out for more, and want to extract from a complaisant and obliging Minister of Transport 6, 7 or 8 per cent.—

The MINISTER of TRANSPORT (Colonel Ashley)

The decision of the Minister of Transport is subject to the control of both Houses of Parliament.

Mr. THURTLE

The difficulty is that a complaisant and obliging Minister of Transport may have complaisant and obliging supporters behind him.

Colonel ASHLEY

Does the hon. Gentleman object to the democratic principle on which this House is elected?

Mr. THURTLE

I certainly do not object to that, but I realise that the vicissitudes of political fortunes sometimes place in a majority in this House a party who are very regardless of the rights and needs of the common people, and I think that that is the situation at the present time. I was saying that, if the promoters are so rapacious as to want 6, 7, 8 or 9 per cent. on the ordinary stock of this undertaking, we are justified in saying that it is sheer nonsense and humbug for them to pretend that their reason for promoting this scheme is that they want to prevent waste, to promote efficiency, and to improve the services to the people of London, and that the real reason for this scheme is to extract extortionate and unreasonable profits from the people of London. Therefore, as I said at the beginning, this Amendment is a test of their good faith and sincerity, and nothing would surprise and please me more than to find that the promoters of this legislation, as a proof of their good faith, were prepared to accept this Amendment, as I hope they will be.

Sir HENRY JACKSON

I hope the House will reject this Amendment. This matter was most carefully considered by the Traffic Advisory Committee when they were compiling their Blue Report, and this is their very clear opinion: It is not possible to define precisely what is a reasonable return upon capital, as this will vary from time to time with the price of money in the market. The return must, however, be such as will enable additional ordinary capital to be raised at above par. I may say that that was signed by the three representatives of organised Labour. This Amendment practically proposes that 5 per cent. should be the limit of interest on the ordinary stock of this concern, but a fixed rate of interest is ineffective, as it entirely ignores the current price of money. The great problem of all transport authorities, whether they be municipal or private, is the continual raising of capital for development and extension, and the price at which that capital can be raised must clearly turn upon the current market value of money. It is quite clear that, if the return is such as to fall below the estimated amount, we get depreciation and a discount, and the result is that, when you try to raise capital on the next occasion at the same low rate of interest, you fail.

What, after all, is the real test of this problem? The real test is not that of theories on one side of the House or the other; it is the test of what can be done to-day. It is probably common knowledge to most Members of the House that from 1924 to 1929 the Underground group of companies have been raising money for the extension of their facilities—chiefly, of course, the Morden Tube extension; and I can assure the House that, even with the powerful backing of the Trade Facilities Act behind them, they have never once been able to raise money at less than 5 per cent.; indeed, on all occasions, the rate at which they have been able to raise it has been over 5 per cent. I say, therefore, without hesitation, that, if the House were to insert this Amendment in the Bill, it would mean that the Underground group, if they went into the City of London, would not be able to obtain money for the financing of the tubes which are so necessary. As I ventured to say on the Second Reading, in reply to an interjection, if any hon. Member cares to look at the last issue of the "Economist" for 1928 he will there find a list of first-class securities of the same type as this security, and he will find that in all cases during the year 1928 their capital was raised at not less than 5 per cent., the rate being anything between 5 and 7½ per cent.

Mr. THURTLE

Does not the hon. Member think that the security offered by the great City of London, the centre of the Empire, is infinitely better than that which would be offered by the other municipalities to which he is referring?

Sir H. JACKSON

I can only reply again that, when the underground group went to the City of London with the backing of the Government behind them under the Trade Facilities Act, they could not raise money at 5 per cent.

Mr. KELLY

This is a monopoly.

Sir H. JACKSON

I am stating what is a financial fact, irrespective of monopolies or anything else, and it cannot be gainsaid. Hon. Members opposite are proposing, in case they return to office, great schemes of transport development, and I say without hesitation, that they will have to face the same financial difficulties as the Traffic Combine or the London County Council. I would ask anyone who may follow me how he would propose to raise money in the City of London at less than 5 per cent. I sincerely hope that the House will not place such an embargo on this great scheme. It will simply mean putting the scheme into chains for years, and defeating all its objects in regard to the improvement of travelling facilities which London needs so much.

Mr. HARRIS

The hon. Member for Central Wandsworth (Sir H. Jackson) entirely ignores the fact that this is a very exceptional Bill. I do not suppose that any analogy could be found in the whole of our legislation for merging in private companies, which are built up in very complicated and involved ways, the assets and undertakings run by a public authority. The hon. Member assumes to himself the rôle of a prophet, and says that, if this limitation is to be imposed, the whole scheme is foredoomed to failure. He seems to forget that the London County Council has been in this business for many years, and has had to raise money in connection with it, and I have not the slightest doubt that, if we went into the market with our credit, which we understand is bad —it is always being said by hon. Members opposite that we have a bad asset—we should not have the slightest difficulty in raising money at 5 per cent. The hon. Member forgets that it is for his side to prove their case. They have to convince the people of London and this House that London is going to gain by this proposal. If he is not prepared to show that the new undertaking, which will have the assets of the London County Council Tramways thrown in, will not be in as good a position as the London County Council, the whole of his case falls to the ground, and the sooner we break up this Bill the better for London and the better for the County Councils undertakings.

Of course, however, we have another concern. We realise that this company, in which we are going to merge the London County Council undertaking, is out to make the concern a financial success. I do not question that. Nothing with which Lord Ashfield is associated is likely to be other than a financial success. It may be at the expense of the travelling public; it may be at the expense of limitation of services; but no one questions the financial ability of the people who run the Underground undertakings. We have to be sure that success will not be achieved at the expense of the travelling public, because cheap transport is the very life-blood of a town of the size of London. That being so, we ought to be quite sure that the interest offered is not more than the interest paid by the London County Council. I do not myself, nor, I suppose, does, the Mover of the Amendment; attach an excessive amount of importance to the actual figure of 5 per cent., but I do say we are justified in asking that, if this scheme is to go through, no higher rate should be given to the investors in this new stock than that which is actually paid at the present time by the London County Council when it requires to raise loans in order to carry on [...]its undertakings.

8.0 p.m.

Mr. KELLY

I really cannot understand the reason of the hon. Member for Central Wandsworth (Sir H. Jackson) for opposing this Amendment. He justifies his attitude by the position in which the Underground group found themselves when they were raising money for the Morden tube extension. It was much more difficult then to raise money at a reasonable figure. Also at that time Lord Ashfield had not secured the monopoly which he had set out for. I heard him say across his own table, before he set out for extending the Morden tube, that he was determined that if they were going to engage upon this method of transport for London, they should be rid of competition. He was then under the disadvantage that he had not a monopoly. He will have a monopoly on this occasion. I think the profession to give us a better system of traffic might well be met by giving it to us and, at the same time, being prepared to accept that reasonable return of 5 per cent., or 1 per cent. in excess of the average bank rate, whichever is lower. Surely that is an adequate and reasonable return and those who are asking for more are certainly asking for too much.

Sir WALTER GREAVES-LORD

I rise to congratulate the hon. Member for Bethnal Green (Mr. Harris) upon the independence he has shown to the leader of his party. His leader has claimed that, by the co-ordination of London traffic, it will be possible to get three great tube schemes through to help in the fulfilment of his electioneering pledge with regard to the unemployed. The hon. Member, carrying out the policy which he and those of his party who are in the London County Council and in the House have consistently carried out, of trying to prevent this Measure from getting through, is now trying at any rate to impede the progress of this scheme for co-ordinating London traffic by trying to lay down conditions which would make it impossible for it to be financed in the ordinary way. I congratulate him upon his independence. I also think he would be better advised to tell his leader to cease claiming credit for a scheme which his own party continually oppose.

Mr. GARDNER

I have listened with interest to the two speeches which have been delivered from the opposite benches. If anything has been said that is condemnatory of the success of this Measure, it has been said most effectively by the hon. Member for Central Wands- worth (Sir H. Jackson). He said distinctly that the company cannot raise money at 5 per cent.

Sir H. JACKSON

Without a Government guarantee.

Mr. GARDNER

That means that the stability of the underground group is not sufficiently high to give them money at this rate. The hon. Member for Norwood (Sir W. Greaves-Lord) said our leader referred to the development of the tubes, which is going to fulfil some of our ambitions arising out of the General Election. I was present at a function presided over by Lord Ashfield when the Morden tube was extended. I indulged in the luxury of a free luncheon. I then learned that Lord Ashfield was not prepared to go any further unless the Government was prepared to guarantee the money. The then Parliamentary Secretary of the Ministry of Transport assured him that there was not much hope of the Government giving the money. Lord Ashfield had to look in another direction. He said, "What can we hitch our wagon to for the purpose of getting on with the job? We have tried over and over again to get the trams, but we have failed. We will tell the people of London they are going to own their trams and we will run them." It simply means that a private company cannot raise capital at 5 per cent. They want to run tubes which will be profitable. They say, "If you will give us your trams, we can get money at a cheaper rate." We are entitled to ask for a limitation of profits. I assume every Member received a circular to-day drawing attention to certain wonderful schemes whereby you might assist certain things if you were to invest money, and the limitation was to be 5 per cent. Why should Lord Ashfield not be in a position to get 5 per cent.? I can suggest one reason. If this scheme goes through, we are in this position, that if there is a deficit upon the combine undertaking it will be possible to levy a rate upon the London ratepayer.

Sir H. JACKSON

That is not true.

Mr. GARDNER

Tell me why it is not true.

Sir H. JACKSON

I state it as a fact. It is not a matter of argument. It is a fact.

Mr. GARDNER

You either take the profits or you take the losses. If profits are available, you get the advantage, but if there is a loss, who is going to meet it? There is nothing in the Bill to say the Combine will meet it. It will be shared generally. Therefore the county council, as a partner in the scheme, may bear the loss. In other words, a private company is going to have a right to levy a rate upon the ratepayers of London. Therefore, in going into the market to get money for this, they are in a position to say, "One of our partners is an unlimited source for getting money. It is a source which cannot be repudiated." If there is a need for new tubes, let us have new tubes on a public basis. What is the objection to limiting the dividend to 5 per cent.? Is that an unreasonable return? It is a return which the Gentlemen on the benches opposite offer to the public for Government stock. Is a monopoly in London not as good as Government stock? If a borough council wants to raise money, owing to the extraordinary conditions to-day, it has to go to the county council, and the county council has to go into the market. But even then it can get the money.

You are going to hand over to this Combine all the resources of the county council tramway undertaking and their legal obligations as ratepayers. The least that those who support the Bill can do is to agree to the limitation of interest to 5 per cent. Are we to understand that Lord Ashfield and his colleagues are to pledge the credit of London under a common fund basis which is not defined? There is no agreement before Parliament. They do not know how it is going to be arranged. There is a formula like that in the De-rating Bill which none in the party opposite, with perhaps two exceptions, understood. Under this formula, what is going to happen? Are we going to permit the construction of three tubes, with all the authority of the county council tramways and the rates behind it, on the terms that if they are successful, the profits are to go to the Combine and any losses go to the ratepayers? The Amendment is a very simple and reasonable one and it is only fair in the interests of the general public.

Mr. MARCH

I support the Amendment, especially after hearing the hon. Member for Central Wandsworth (Sir H. Jackson). He informed us that the matter was thoroughly considered by the Traffic Advisory Committee and, to give it a better fillip, he says this was signed by three representatives of the trade union. But he did not say under what pressure or under what conditions they signed it. I hardly credit that representative of trade unions would be prepared to hand the whole co-ordination of traffic over to a combine. I think their desire was that it should be under control, and they had an idea that it was going to be so, but the authorities that be at the London County Council have deemed otherwise, and they prefer to lease their undertaking to the combine. It seems to me that 5 per cent. would be a very reasonable amount for any of their money that has to be invested. In reading Clause 2, I find that all the expenses, and so forth, are to be paid out before they put anything into the Common Fund and, if there is anything to go into the Common Fund, I take it the dividend or interest will be paid over to the combine and, if that is not going to satisfy them, they have a right to appeal to the Minister of Transport with a view to increasing the fares. That is where I differ from the hon. Member who has just spoken as to the county council coming on to the ratepayers. They will come on the travellings passengers. They will be the people who will be asked to make some addition to find what dividend or interest is to be paid to the moneylenders.

I am very much concerned, as are many people in the district I represent. They are having a good deal of difficulty, and they have to travel at a great deal of inconvenience, both on omnibuses and trams, to and from their work. Their wages are very small, and they do not want an increase of a penny, or even a halfpenny, on their fares. That may not seem much to some people, but to those who travel backward and forward it means probably 6d. or more per week. We are anxious that there should be some better understanding as to the amount of traffic that there should be on the roads and the convenience which is given to the travelling public, not only on the roads, but on the tubes as well. We should like to see an arrangement made providing for a limitation in this matter. There should also be a limit on the fares charged per mile in respect of the people travelling backwards and forwards. I want to see the people of London gain by this co-ordination, and not a certain few of them. I want to see better services given to them than they enjoy at present, and I want to see an opportunity provided for tubes being built and extended so as to relieve, the present state of congestion in the rush hours both in the morning and at night. If these things are going to be provided, we ought to be given an opportunity of reviewing them as they come along. After this Bill becomes an Act of Parliament, practically the whole matter will be out of our hands. We ought to have some limiting Amendments introduced so that we may know where we are.

Mr. W. THORNE

I rise to support the Amendment. The House ought clearly to understand that there is a difference of principle on this question. We on this side believe in collective ownership, and hon. Members on the other side believe in what is known as private enterprise. I take it for granted that the company in question think that it is very much better to promote a Bill at the dying end of this Parliament than it would be to delay it and bring it forward after the next General Election. I am convinced that if this Bill had been delayed until after the General Election there would be no possible chance of getting it through. It goes without saying that we shall come back with double the numbers we have now, and we shall then be in a position to form a Government, and there will be no possible chance of such a Bill as this going through at all.

The hon. Gentleman the Member for Central Wandsworth (Sir H. Jackson) mentioned the fact that three trade unionists signed this Report, but I would like to draw his attention to another matter. I think that I am justified in saying that when this Report was presented to a united meeting of the London Members of the Parliamentary Labour party and those who represent outside constituencies, although naturally we did not feel inclined to censure our colleagues who sat on that Committee, we talked to them rather sternly about signing the Report. They were not, in our opinion, signing the Report in accordance with the wishes of the present Members of the Parliamentary Labour party. As hon. Members know, I represent a very large constituency. I am not quite sure whether I am entitled to speak as a Member of Parliament only or also as a Member of the West Ham Corporation. I am the Member of Parliament for a Division in the West Ham Borough and I have also been a member of the West Ham Corporation since November, 1890, nearly 40 years ago. When these Bills were brought before the Legal and General Committee of which I happen to be a member, they were thoroughly considered, and the Legal and General Committeee reported to the borough council advising them to oppose the Bill.

Mr. DEPUTY-SPEAKER (Sir Dennis Herbert)

I must remind the hon. Member that he is speaking as a Member of this House, and therefore must keep to the Amendment now before the House and not discuss the question of the General Election or the principles of the Bill.

Mr. THORNE

Naturally, the West Ham Borough Council are entitled to consider the Bill, and, as I am a member of the Council, to give me instructions. As I said, they decided to oppose the Bill. I am concerned about this matter, because running powers exist between the London County Council, the West Ham Corporation, and the East Ham Corporation. It is perfectly evident that if the Combine do not receive their 5 per cent. interest—and I am not sure whether powers are given in any Clause of the Bill to levy rates on the whole of the London ratepayers—they will be in a position to raise the fares, and this will amount to a direct charge upon the travelling public. There is a possibility of fares being increased, and the result will and must be that the travelling public in the borough of West Ham will be compelled to pay such extra fares. This would mean that there would be two different fares in West Ham and in East Ham where our trams run. The County Council would be able to charge one fare and we should charge another, and the travelling public who come up every morning and ride back every night would have an extra amount levied upon them. That would mean a very considerable sum. Most of the wage earners among the travelling public have not a great deal of money to throw away. If they were to be called upon to pay another sixpence a week—and in some cases there might be three or four people affected in one family—it would have a considerable effect upon them and reduce the purchasing power of their wages. Therefore, the people in West Ham are very much concerned about this matter.

Colonel ASHLEY

May I draw the attention of the hon. Member to Clause 11 where there is adequate protection for fares?

Mr. THORNE

We get all these protections in these Bills about fares, but they do not always operate. I shall support the Amendment in the Division Lobby.

Mr. MONTAGUE

I think that it would be very useful if we could have the views of the Minister of Transport upon this Amendment. I admire the child-like faith of the Minister in democracy, but I would like to point out to him that it is quite possible after the next General Election that the party in office may not be representative of the majority of the votes of the country. When it comes to a question of technical and legal points in a Bill of this character, I am afraid that after the General Election much larger issues will be dominant and that these small things will be missed. I was not much taken by the argument about democracy, but I would like to point out to the hon. Gentleman the Member for Central Wandsworth (Sir H. Jackson) that in his speech he rather proved too much. What he really has proved is that the transport system of London is going to be bled white by the money interests of the city. If that were the question under discussion, I do not think that I could find a stronger point. The point I want to put to the hon. Member for Central Wandsworth is this. No one can surely doubt that this Bill and its fellow Bill constitute a perfect and complete monopoly in the transportation facilities of London. Surely there is no one in this House connected with financial interests who would contend that a rate of interest which repays the capital in 20 years is not a fair interest to pay for money which is raised, not upon speculative ideas or possibilities, but upon certainties that are the result of monopoly.

Surely, it is possible to-day for such a monopolistic concern to raise money at 5 per cent. quite easily. It is true that in going into the ordinary money market as the underground railways did for the Morden extension, even with the Government facilities behind them, it was a speculative venture, and they had to pay a speculative price for the money; but nothing has altered the fact that a return of 5 per cent. upon a definite security is one that is recognised as the outside limit in all financial transactions. We are proposing that that should operate and that there should be a limit of 5 per cent., not only upon the money which may be borrowed for tube extensions but also upon the ordinary capital of the combine as it stands at the present time. Mr. McKenna, in a speech to the shareholders of the Midland Bank, made a statement which is being utilised by the Liberal party as part of their election propaganda, that if the situation existed with regard to the 12 principal banks of this country that exists with regard to the Midland Bank, there must be well over £200,000,000 lying idle for want of appropriate opportunity for investment. If it be the case that there are these hundreds of millions of pounds lying idle, does anyone contend that for a gilt-edged security the possessors of those millions would not withdraw them from their account and invest them at 5 per cent.? Upon their bank account they are not getting 5 per cent.; at the outside they are geting only3½ per cent.; and yet we are told that for extensions of transit facilities, backed by a monopoly and with the power of controlling fares behind that monopoly, it is not possible to obtain money at the percentage we propose.

The hon. Member for Central Wandsworth has proved that the idea of this Bill is simply to bleed the people of London who will be compelled to use the transport facilities which will be controlled by the Combine. It was stated by the hon. Member for Wandsworth, and if was said that certain Labour representatives had signed a report, that it was impossible to fix the rate of interest because of the differences in the rate of money. Are we not entitled to ask what it is that they propose, if they are not satisfied with 5 per cent.? How much do they want? If we are told that it is impossible to fix the rate of interest owing to the variations in the rate of money, how is it possible to fix a higher rate of interest, in view of the money variation? Is it not a fact that under the London Electricity Supply Act of 1925 there is a limit to the return upon capital, and that there is a similar provision in regard to the gas and water undertakings? If it is impossible to fix the rate of interest to-day, in consequence of the fluctuations of the money market, how was it possible to fix the return in those particular Acts of Parliament?

The average return upon the ordinary stock of the constituent companies in the Combine, last year, was 5.69 per cent. That includes the return on the omnibuses and the tubes: a speculative investment. We are proposing simply to knock off the 69 per cent., supposing that total rate to be the normal return upon a speculative investment. Surely, that is not too much to ask to pay for security as against speculation. This type of Measure represents something that is not unlikely to be, in many ways, a feature of certain transitional periods in the future. I do not mean the particular Bill that we are now discussing, which is objectionable from start to finish from the point of view of the people of London; but a good many people will agree that there is the probability of an avenue in industry for public utility societies, the idea of public utility as a means of developing certain types of industrial enterprise. The idea of public utility is usually limited not to 5 per cent. but to 4 per cent. It is possible to obtain capital even at less than that amount. The London County Council can obtain capital at less than 5 per cent. They are paying considerably under 4 per cent. now upon the enterprises that they run.

Mr. TASKER

The hon. Member is wrong in that statement. We cannot raise money at 5 per cent. to-day. He is referring to pre-War arrangements.

Mr. MONTAGUE

It is all very well for the hon. and gallant Member to confuse pre-War and post-War. What has that to do with percentages?

Mr. TASKER

The hon. Member does not seem to realise that before the War 24 per cent. Consols stood at over £100, whereas to-day they stand at a very low-figure.

Mr. MONTAGUE

I know that money is dearer to-day, and I am not disputing that. I am stating as a fact that the London County Council upon the average has to pay 3.26 per cent., or it did pay that in 1926. I know that that calculation includes the pre-War arrangement, but that does not alter the principle of the thing. We are talking about percentages. Five per cent. is the capitalisation of 20 years now, just as it was in 1913. The limit of 5 per cent. is a very sound and profitable proposal to make when it is a question of public utility, public guarantee and public monopoly.

Mr. BARNES

We are entitled before we go to a Division to ask for the views of the Minister of Transport. The Minister is now responsible for defining what is a reasonable return. The whole burden of our Amendment is that we consider 5 per cent. to be reasonable for this class of security. I would remind the House of the circumstances which have put these concerns in a favourable position which will enable them to raise capital on a 5 per cent. basis. Not many years ago, the combine and the tramway services in London were getting into financial difficulties, in consequence of undue competition. Parliament, realising that large capital investments, both in private undertakings and in municipal undertakings should not be imperilled, stepped in, and began the process of coordinating London traffic. They realised that the traffic undertakers themselves could not put their concerns into a strong financial position, and it was only when Parliament stepped in and gave to the traffic undertakers a favoured position on the London streets that their financial position immediately began to improve. Just prior to the introduction of the present Bills, Lord Ash-field, in presiding over one of the companies involved in this legislation, admitted that they could not go on to the money market and raise the necessary capital for the purpose of carrying out the desired extensions. Possibly, the hon. Member for Wandsworth when he opposes an Amendment of this description begins from that standpoint, prior to the introduction of the legislation which we are now passing.

We as a party are opposed to the principle of this Bill, but we have to face the fact that the House to-night will probably agree to the Report stage. Assuming that it does, then the whole situation is altered. That is our con- tention. The difficulty of raising money on the money market will no longer prevail, and it will never occur again because by this legislation Parliament is conferring certain definite and permanent advantages on the shareholders of the companies in this combine. We are, therefore, I think, entitled to lay down a fixed rate of interest and prevent these shareholders getting an undue advantage over the travelling public of London. Private undertakings represent at the moment the larger part of the traffic Services of London, and the proportion of private services as compared with municipal undertakings will be increased in the future, the gap will be widened, because it will be those services for which the combine are responsible which will be largely increased under the facilities, privileges and advantages which are conferred by this legislation upon the combine.

The Combine is being secured against any possible future loss. They can go on to the money market and raise money to any amount, and under this legislation they are secured against any loss. Before the War, and to-day, the railway companies carried out the equipment of our railway system under a 5 per cent. figure; and they represent the largest capital investment in the country. They have remained as a trustee security for many years at a figure of 5 per cent. Now we are creating a new type of traffic security quite equal to any post-War period in connection with railways, and I submit that it is a very serious departure to introduce legislation of this kind which leaves an unlimited figure as the return of interest on share capital. I think we are entitled to know whether the Minister of Transport considers 5 per cent. a reasonable return. In the past, when we have argued that an undue rate of interest represents a form of exploitation of the consumer, we have been met with the argument that the rate of interest must be high because of the risks involved in the investment of capital in industrial undertakings. There was a risk of losing the capital invested and therefore the rate of return must be high.

We are moving away from that point of view. Hon. Members opposite, who believe in competition, are now rapidly abolishing competition in industrial organisations. I do not think the general public realises the extent to which the investment of capital has moved away from any form of risk under a policy of concentration, co-ordination and confederation; the risk of failure is now spread over and safeguarded in so many directions that in most of these large investments failure is almost impossible. Parliament is now being asked to remove the possibility of any failure in regard to investments in the traffic system of London, and when we are proposing to double the rate of interest which prevailed under the competitive system in pre-War days we are told that 5 per cent. is insufficient. That obviously means that they will not be content with 5 per cent.; that they are out for a larger rate of interest.

Colonel ASHLEY

indicated dissent.

Mr. BARNES

The Minister of Trans port shakes his head. Will the right hon. Gentleman tell us what it does mean? Will he tell us whether he means 4 per cent.? We have invited him to give the view of the Department and he declined, and when we draw the obvious conclusion that if they are not prepared to accept 5 per cent. it means that they are out for more he shakes his head. There can be only one reason for refusing 5 per cent., and that is that they want to keep open the door so that they can pay 7 per cent. and 8 per cent. and 9 per cent. What guarantee have we that some future Parliament and future Minister of Transport will not justify an increase in the rate of interest. We ask the right hon. Gentleman to give us his reasons for refusing to accept the Amendment and whether he contemplates a higher rate of interest.

Colonel ASHLEY

The hon. Member has asked me to do something which it would be most improper for me to do. He has asked me to state whether I think 3 per cent., 4 per cent., 5 per cent., 6 per cent., or per cent., or whatever the rate per cent. might be, would be the right one. The Committee which considered this Bill upstairs came to the conclusion that the very difficult and onerous duty should be put on the Minister of Transport of deciding what capital should rank and what is a reasonable rate of interest upon that capital. Therefore, it would be obviously most improper for the Minister of Transport to prejudge his decision as to what he might do in the event of any single agreement coming before him.

Mr. GARDNER

He has to give a decision.

Colonel ASHLEY

Yes, after due consideration of all the circumstances of the case. He then makes his award, and that award is subject to the confirmation of Parliament. I submit that the proposal of the Committee is very sound and businesslike.

Mr. ATTLEE

I think the Minister of Transport has given us very strong support for the Amendment. I do not know whether he is very sanguine that he is going to continue to occupy the position he at present holds, but, if he is, it is obvious that he does not like the awkward duty of having to fix the rate of interest. Why not get rid of it? Let us get him out of the difficulty. But there is something beyond that. The Committee says that the Minister of Transport is to do this or that in the future; but that does not mean that the Minister of Transport of the day is not to have any policy at all. After all, the right hon. Gentleman is Minister of Transport, and this is a very important private Bill dealing with the biggest traffic problem of the day. The House is entitled to know exactly what the Minister's views are. Does he consider that this point ought to be left to the haphazard decision of the Minister of the day, or is he prepared to say that London transport exists primarily for the convenience of the people of London? Our demand is an extremely modest demand. It is to fix a limit and to say that beyond that financial interests shall not go. The Minister's statement that any Minister of Transport in deciding this matter will have a delicate duty to perform is not enough. He ought to suggest what are the kind of considerations that are to be before the Minister. Are they to be considerations as to the remuneration of particular capitalist interests, or considerations as to the general convenience of London? What we want is the best and cheapest service that we can get for London.

Mr. T. SHAW

I did not intend to take part in the discussion, and I now do so because I was very disappointed with the statement of the Minister. We might have had some expression of opinion as to what was considered to be reasonable. With what are we dealing? We have a breakdown of private enterprise in the traffic of London. We have the fact openly admitted that the boasted competition, which is supposed to give us the best results, has broken down. It is a confession of the absolute failure of private enterprise to deal with what ought to be one of the easiest things in the world to deal with. In effect private enterprise comes along and says to Parliament, "Get us out of our difficulty. We have absolutely failed to deal with the traffic. We cannot deal with it unless you come to our assistance, but for Heaven's sake don't take our profits." Parliament in its wisdom or otherwise will determine to help this crippled private enterprise out of its difficulties, and will determine, on Socialist lines, to deal with the London traffic problem. But it parts with the Socialist when it says that the private individual must have the profit and that the enterprise shall not be run for the benefit of the whole community. That is the difference between us.

The Minister and the House have accepted the Socialist view that centralisation, co-ordination and scientific management are infinitely better than competition. What divides us is the question as to who shall take advantage of the Socialist methods of conducting the industry. But, assuming that we have to agree to the resources of the Government being put at the disposal of a crippled private enterprise, have we not the right to say that the public body that makes it possible for private enterprise to live by taking away the very competition which has been supposed to be its life-blood, shall at any rate use its powers to protect the public against that private enterprise using the powers that are conferred on it, in order to get an undue return at the expense of the public? Parliament having made a gilt-edged security good as any national loan should have a guarantee that the profits shall not exceed a reasonable amount. Is 5 per cent. too little for a gilt-edged security. Has not the public the right to insist that Parliament, having made this gilt-edged security for private individuals, shall prevent private indi- viduals taking advantage of it? The Minister should state in advance what are his general ideas on the subject. The shareholders are guaranteed.

Sir HENRY CAUTLEY

indicated dissent.

Mr. SHAW

The hon. and learned Baronet shakes his head. Is it not a fact that this Bill prevents competition, that it literally puts the whole of the transport system of London into a monopoly, and that we are literally making the money of these shareholders as secure as the Bank of England?

Sir H. CAUTLEY

Where is the guarantee? There is no guarantee.

Mr. SHAW

There is the guarantee that if one fare will not do, the company can charge a higher fare. The hon. and learned Gentleman knows perfectly well that no Minister in his party would prevent a fare being raised in order to yield a profit.

Sir H. CAUTLEY

I was not speaking as a party man but as Chairman of the Committee which had to investigate this

matter from a judicial point of view. There is no guarantee of any kind.

Mr. SHAW

Will the hon. and learned Gentleman agree that when this Bill is passed the traffic of London will be in the hands of a monopoly?

Sir H. CAUTLEY

That was not the reason of my interruption. I merely questioned the right hon. Gentleman's statement as to a guarantee of dividends. There is no guarantee.

Mr. SHAW

That is merely playing with words. The people of London must travel, and they must travel on this service. The service can charge what fares it likes in order to make a profit. What we ought to be doing is trying to get at the facts of the matter, as to what is fair between the monopoly and the public. Will the hon. and learned Gentleman tell us his ideas as to what the limit should be?

Question put, "That those words be there inserted in the Bill."

The House divided: Ayes, 72; Noes, 132.

Division No. 287.] AYES. [8.57 p.m.
Adamson, Rt. Hon. W. (Fife, West) Graham, D. M. (Lanark, Hamilton) Pethick-Lawrence, F. W.
Alexander, A. V. (Sheffield, Hillsbro') Graham, Rt. Hon. Wm. (Edin., Cent.) Potts, John S.
Attlee, Clement Richard Greenall, T. Richardson, R. (Houghton le-Spring)
Baker, J. (Wolverhampton, Bilston) Grenfell, D. R. (Glamorgan) Riley, Ben
Barker, G. (Monmouth, Abertillery) Griffith, F. Kingsley Robinson, W. C. (Yorks, W. R., Elland)
Barnes, A. Griffiths, T. (Monmouth, Pontypool) Shaw, Rt. Hon. Thomas (Preston)
Barr, J. Hardie, George D. Shepherd, Arthur Lewis
Batey, Joseph Harris, Percy A. Shield, G. W.
Bellamy, A. Jenkins, W. (Glamorgan, Neath) Slesser, Sir Henry H.
Bennett, William (Battersea, South) Kelly, W. T. Smith, Rennie (Penistone)
Blindell, James Kennedy, T. Stephen, Campbell
Bondfield, Margaret Kenworthy, Lt.-Com. Hon. Joseph M. Sullivan, Joseph
Bowerman, Rt. Hon. Charles W. Lawrence, Susan Thorne, W. (West Ham. Plaistow)
Broad, F. A. Lawson, John James Thurtle, Ernest
Brown, Ernest (Leith) Lowth, T. Tomlinson, R. P.
Buchanan, G. Lunn, William Watson, W. M. (Dunfermline)
Clarke, A. B. Maclean, Nell (Glasgow, Govan) Wellock, Wilfred
Cluse, W. S. March, S. Whiteley, W.
Connolly, M. Maxton, James Wiggins, William Martin
Cowan, D. M. (Scottish Universities) Montague, Frederick Williams, C. P. (Denbigh, Wrexham)
Crawfurd, H. E. Murnin, H. Williams, T. (York, Don Valley)
Dalton, Ruth (Bishop Auckland) Oliver, George Harold Wilson, R. J. (Jarrow)
Day, Harry Owen, Major G.
Dunnico, H. Palln, John Henry TELLERS FOR THE AYES.—
Gillett, George M. Parkinson, John Allen (Wigan) Mr. Scurr and Mr. Gardner.
NOES.
Acland-Troyte, Lieut.-Colonel Brass, Captain W. Cecil, Rt. Hon. Sir Evelyn (Aston)
Applin, Colonel R. V. K. Brassey, Sir Leonard Christie, J. A.
Ashley, Lt.-Col. Rt. Hon. Wilfrid W. Brocklebank, C. E. R. Clayton, G. C.
Atkinson, C. Brown, Brig.-Gen. H. C. (Berks, Newb'y) Cockerill, Brig,-General Sir George
Balfour, George (Hampstead) Bull, Rt. Hon. Sir William James. Colman, N. C. D.
Beamish, Rear-Admiral T. P. H. Burman, J. B. Conway, Sir W. Martin
Benn, Sir A. S. (Plymouth, Drake) Campbell, E. T. Cope, Major Sir William
Bourne, Captain Robert Croft Carver, Major W. H. Culverwell, C. T. (Bristol, West)
Bowater, Col. Sir T. Vansittart Cassels, J. D. Cunliffe, Sir Herbert
Bowyer, Captain G. E. W. Cautley, Sir Henry S. Davidson, Major-General Sir John H.
Davies, Maj. Geo. F. (Somerset, Yeovil) Little, Dr. E. Graham Samuel, A. M. (Surrey, Farnham)
Davies, Dr. Vernon Lougher, Sir Lewis Samuel, Samuel (W'dsworth, Putney)
Edwards, J. Hugh (Accrington) Lucas-Tooth, Sir Hugh Vere Sandeman, N. Stewart
England, Colonel A. Luce, Maj.-Gen. Sir Richard Harman Sanders, Sir Robert A.
Everard, W. Lindsay Macdonald, R. (Glasgow, Cathcart) Sanderson, Sir Frank
Ford, Sir P. J. McDonnell, Colonel Hon. Angus Sandon, Lord
Forestler-Walker, Sir L. McLean, Major A. Shepperson, E. W.
Foster, Sir Harry S. Macquisten, F. A. Sinclair, Col. T. (Queen's Univ., Belfst.)
Fraser, Captain Ian Maitland, A. (Kent, Faversham) Southby, Commander A. R. J.
Fremantle, Lt.-Col. Francis E. Maitland, Sir Arthur D. Steel Spender-Clay, Colonel H.
Ganzonl, Sir John Makins, Brigadier-General E. Stanley, Lord (Fylde)
Greaves-Lord, Sir Walter Marriott, Sir J. A. R. Steel, Major Samuel Strang
Greene, W. P. Crawford Mason, Colonel Glyn K. Sugden, Sir Wilfrid
Grotrian, H. Brent Merriman, Sir F. Boyd Tasker, R. Inigo.
Gunston, Captain D. W. Mitchell, S. (Lanark, Lanark) Thompson, Luke (Sunderland)
Hall, Lieut.-Col. Sir F. (Dulwich) Mitchell, Sir W. L. [...](Streatham) Vaughan-Morgan, Sir Kenyon
Hamilton, Sir George Monsell, Eyres, Com. Rt. Hon. B. M. Waddington, R.
Harvey, G. (Lambeth, Kennington) O'Connor, T. J. (Bedford, Luton) Wallace, Captain D. E.
Haslam, Henry C. Oman, Sir Charles William C. Waro, Lt.-Col. A. L. (Kingston-on-Hull)
Headlam. Lieut.-Colonel C. M. Pennefather, Sir John Warner, Brigadier-General W. W.
Henderson, Lieut.-Col. Sir Vivian Penny, Frederick George Warrender, Sir Victor
Henn, Sir Sydney H. Percy, Lord Eustace (Hastings) Watts, Sir Thomas
Hennessy, Major Sir G. R. J. Perkins, Colonel E. K. Wayland, Sir William A.
Hills, Major John Waller Phillipson, Mabel Wells, S. R.
Hilton, Cecil Pownall, Sir Assheton Williams, Com. C. (Devon, Torquay)
Hope, Capt. A. O. J. (Warw'k, Nun.) Price, Major C. W. M. Williams, Herbert G. (Reading)
Hopkins, J. W. W. Radford, E. A. Winterton. Rt. Hon. Earl
Hume, Sir G. H. Raine, Sir Walter Withers, John James
Iliffe, Sir Edward M. Rentoul, Sir Gervals Wood, B. C. (Somerset, Bridgwater)
James, Lieut.-Colonel Hon. Cuthbert Rice, Sir Frederick Wood, Rt. Hon. Sir Kingsley
Kinloch-Cooke, Sir Clement Richardson, Sir P. W. (Sur'y, Ch'ts'y) Wragg, Herbert
Knox, Sir Alfred Rodd, Rt. Hon. Sir James Rennell Yerburgh, Major Robert D. T.
Lamb, J. O. Ropner, Major L.
Leigh, Sir John (Clapham) Ross, R. D. TELLERS FOR THE NOES.—
Lister, Cunliffe, Rt. Hon. Sir Philip Salmon, Major I. Sir Hen[...] Jackson and Sir Cyril
Cobb