CLAUSE 7.—(Consideration for transfer of undertakings other than local authorities' undertakings.) (Hansard, 5 December 1932)

§ The DEPUTY-CHAIRMAN
There are some manuscript Amendments in page 10, line 32, standing in the name of the hon. Member for South Croydon (Mr. H. Williams).

§ Mr. H. WILLIAMS
I do not propose to move them.

§ The DEPUTY-CHAIRMAN
Sir Kenyon Vaughan-Morgan.

Sir K. VAUGH AN-MORGAN
I do not propose to move the manuscript Amendment which I have handed in, but will leave it until the Report stage.

§ Mr. PYBUS
I beg to move, in page 11, line 2, at the end, to insert the words: 1303 Provided that, where any of the companies specified in Part I of the said Schedule have at any time after the thirty-first day of December, nineteen hundred and thirty, and before the appointed day redeemed any debenture stocks of the company, the appropriate reduction calculated on the basis of the said rates of substitution shall be made in the Transport Stock to be issued to the company under this section. 6.35 p.m.
Since the amount of stock to be issued to the Underground companies was settled some of the companies have redeemed part of their debenture stocks. The purpose of the Amendment of ale Government is to secure that the amount of stock issued to the companies shall be reduced by the amount of debenture stock redeemed.

§ Mr. PYBUS
I beg to move, in page 11, line 3, to leave out Sub-section (2).
It might be convenient to the Committee if, at this stage, I made a brief statement regarding the Metropolitan Agreement on this the first of a series of Amendments. Members of the Committee have had an opportunity of becoming familiar with its provisions, which were set out in full in the White Paper I issued last July, and in the carry-over Motion of the London Passenger Transport Bill my right hon. Friend the Secretary of State for the Colonies and I dealt with it. The Metropolitan Railway have never represented themselves as opposed to a comprehensive scheme of unified control of London passenger transport, provided that the terms which concerned their railway recognised its position, and, further, flat the financial terms should be fair and equitable. They remained, however, unsatisfied as the Bill left the Joint Committee, and there seemed no other course but that the acquisition of the railway should be settled on the terms decided by the Arbitration Tribunal set up for the purpose. I was never in doubt that it was essential that the Metropolitan system should be taken over as a whole by the board, and I set about to try to find a solution which would remove certain outstanding objections. The agreement which was arrived at is now before the Committee for approval.
There are two points which I will mention in order to remove any misunderstanding which may be in the minds of 1304 any Members of the Committee. First, it is not an acquisition by compulsion. Compulsory acquisition is repugnant to many Members of the House. This is now removed. Secondly, there is no guarantee given to the Metropolitan Railway shareholders by the board itself. It was obviously impossible for me to agree to undertake to give any guarantee to the ordinary shareholders in the Metropolitan Railway of a minimum rate of interest to be guaranteed by the board. But if the main line railways were prepared to give such guarantee, I could not see any objection to this course. The terms set out in the Agreement were approved by Sir William McLintock after careful and prolonged consideration. They were approved by the Treasury, and the Government submit them as being fair and equitable to the board and to the public. Personally, I am relieved that the expense and time of arbitration proceedings have been avoided, particularly as the board will, in my opinion, need all its energy in the early days to serve the public. I hope that with the text of the agreement before them, and the previous explanations of its terms, the Committee has now a fair view of the arrangement which I unhesitatingly recommend for its endorsement. Finally, I cannot too strongly emphasise what I have already said on more than one occasion, that the guarantee involves no burden whatever on the finances of the board.

§ Sir K. VAUGHAN-MORGAN
I wish to ask the Minister a question in regard to the statement he has just made. If I heard him correctly, he said that the arrangement made with the Metropolitan Railway was free from compulsion and was entirely voluntary on their part. Were the Metropolitan Railway free to stand out from the transport undertaking, or was it simply a question as to whether, in the face of compulsion, they agreed to terms, or, as an alternative, had to submit to arbitration, and in either event had to part with their undertaking?

§ Mr. PYBUS
The best answer which I can give is that the Metropolitan Railway have agreed with us that they will give up their ordinary stock for "C" stock, with a guarantee from the main line railways. They agreed to that course, and 1305 I do not think that it would serve a useful purpose to argue whether they did it under compulsion or not. It was a perfectly free agreement between the parties.

§ Sir K. VAUGHAN-MORGAN
I was only putting a question on the basis of the statement made by the Minister himself, and he has not answered it now.

§ Sir H. CAUTLEY
As I understand the agreement made with the Metropolitan Railway, the terms are that the Metropolitan Railway stockholders are to receive a guarantee of 3i per cent. for 15 years and a guarantee of 3 per cent. for a further 10 years? As the Minister has told us, it is not to be paid out of the funds of the undertaking but by the four main railways with which the Bill has nothing whatever to do, except that there is a provision in it for a pooling arrangement of the suburban traffic of those stations within the London traffic area which is the subject matter of the Bill. I wish the Minister to tell us what influenced those four main railways to give this bribe to the Metropolitan Railway Company to come into this agreement It is obvious, although the Minister seems to shirk it, that this is an agreement made at the point of a pistol presented at the head of the Metropolitan Railway—"Either you come in or you go to arbitration; you are to be deprived of your property." They made an arrangement which they think is better, or, at any rate, less uncertain than going to arbitration.
It is equally obvious that the Metropolitan Railway, from beginning to end, never wished to come into this undertaking. They did not believe that the dividends and interest would be earned. It seems to me that they have carried out the logic of that view by saying, "We will only come in if, at any rate, we secure these guarantees for the next 25 years." I ask the Minister to tell me whether I am not correct in my surmise, that the only way in which it can possibly be that the main railways should come into this agreement, is that they intend, and see their way, to raise the suburban fares in a very large area affecting a very large number of people. If that is so, I want to know why the Minister of Transport has agreed to this agreement, which can 1306 only have the effect of substantially increasing the fares charged to the suburban traffic.

§ Captain STRICKLAND
The more one hears about the matters contained in this Bill the more suspicion seems to be engendered in one's mind that the Committee is not being taken into the fullest confidence with regard to the various measures that have led to the presentation of the Bill. We have the Minister of Transport speaking in terms of pride of the fact that, the Metropolitan Railway undertaking has come in entirely on a free and voluntary basis rather than under compulsion, but at the same time he knows and the Committee know quite well that there are more undertakings coining into this scheme under compulsion than those coming in by voluntary agreement. If he recognises this principle in regard to the Metropolitan undertaking I cannot see how he can refuse to allow the same privileges to those undertakings that are being compelled to come in. However, that does not come under this Clause. I should like to ask how far the Amendment to Schedule 2, page 120, line 29, column 2, leave out £2,953,950 and insert instead thereof £4,753,950 has a bearing on the particular point covered by Sub-section (3) of this Clause. I cannot help feeling that the Committee is not being taken into the fullest confidence and that there is far more behind this matter than the Committee or the country have been informed.

§ Sir H. CAUTLEY
Is not the Minister of Transport going to answer the question that I put? The Committee has a right to know, and I protest strongly against the action of the Minister in sitting there and not giving the Committee the information that we want. I repeat, with all the force I can, that I want to know how it is to the interests of the main line railways to give this guarantee to the Metropolitan Railway for 25 years.

§ Mr. PYBUS
The hon. and learned Member asks me how it is in the interests of the four main line railways to do a certain thing. The proper place to address that question is to the four main line railways.

HON MEMBERS
No !

§ Sir H. CAUTLEY
You submit the scheme.

§ Mr. PYBUS
Subject to the ratification of this House, yes. The hon. and learned Member's argument tends to throw upon the agreement with the Metropolitan Railway a suspicion that something has been done which ought not to be done, something which is going to raise fares in the London area and something which the shareholders of the main line railways if they had their will would not have done. There can be no doubt that it is in the interests of the main line railways that the Metropolitan Railway as a whole should come into the group. It is in the interests of the board and of the economic operation of London transport that the Metropolitan Railway should be part of the undertaking. While it was not possible for me to give the Metropolitan Railway any guarantee of interest it was possible for the main line railways to do so, and in their wisdom they agreed to do it. With that answer, I think the hon. and learned Member must be content.

§ Sir W. RAY
We have reached a position at last which justifies many of us in opposing the Bill. We have pressed all along that the financial arrangements are unsatisfactory and that if they had gone again to the Select Committee the Bill would not have been approved. We have argued repeatedly that there is a danger to the travelling public of London that they will be compelled to suffer through increased fares or decreased facilities, or both, if this Bill is proceeded with. We are told this evening that the Committee is not to be informed on one matter which is of the deepest interest not only to this House but to the travelling public of the London area. If the Ministry and the Government have given their benediction to this Bill we can presume that they have given that benediction to the agreements upon which the Bill is based, and we have a right to ask, in the interests of the London travelling public, what are the agreements, so that we may know how it is possible for the main line railways to give the guarantee which is now talked about. It is unfair to those who are taking up the attitude that some of us are taking on this Bill that we cannot get the information which is at the root of 1308 the question. Therefore I feel, although the opposition to the Bill has been conducted in a perfectly responsible way by those conducting it, unless the information desired is given to the Committee and to London, any form of opposition might be justified.

§ Mr. C. WILLIAMS
How on earth can the main line railways guarantee the interest to the Metropolitan Railway? We know that the main line railways are very powerful bodies and that they have enormous financial backing but at the present time they are not doing so well that they can afford to guarantee this London traffic. My hon. Friend opposite speaks on behalf of the people of London, but a vast number of people outside have interests in the railway companies and a large number of railway workers are also concerned, and they are in a very difficult position at the present time. Are they, for instance, to guarantee the losses on the London tramways? It is a monstrous thing to come to this House and say that the main line railways are giving this guarantee without any explanation on what it is based, what is the financial justification for it and how the railway companies are in a position to give the guarantee. Why should the main line railways guarantee London passenger traffic? They have sufficient difficulties outside London without giving such a guarantee. I have always thoroughly disliked the way in which certain opposition to the Bill has been withdrawn because it is thought that in some way the main line railways may benefit. I have never been able to make out how that will be. I am not speaking as a railway director or as one with any financial interest in the railways, but I maintain that it is not right that this burden should be placed on the shoulders of the main line railways, because it is vital in the interests of the country that at the present time their full financial resources should be available for the development of the country. I do not see why London should place this burden upon them.

§ The ATTORNEY-GENERAL
Is not the Committee in danger of mistaking the question which alone is for the Committee to consider? The London main line railways as main lines are not compre- 1309 headed in the Bill. The Bill does not touch anything except what for the moment we might call the London passenger transport problem. Let us assume that the Bill covers a certain area in which that problem exists. Outside that area the main lines are absolutely unaffected by the Bill, but the suburban traffic is a problem with which the main lines have always been concerned, at any rate in recent years. Strictly speaking, the suburban traffic is a part of the business of the main line railways. The main lines are really more interested in the through traffic which we generally call main line traffic, but they cannot divest themselves of the suburban traffic. For a number of years arrangements have been made for dealing with the suburban traffic. The present scheme is to include the suburban traffic of the main lines in the settlement which is sought to be made of the chief problem of London passenger transport.
The inclusion of the Metropolitan Railway in this scheme is eminently desirable, as I think everyone will admit. If you are to have a scheme and if you are to try to unify all the services engaged in carrying passengers in the London area you must have the Metropolitan Railway in it, otherwise there would be a hole in the scheme. I am not suggesting that everyone is agreed upon unification, but given the principle of unification, the scheme in this Bill is on the right lines. Given unification, the Committee will agree that the Metropolitan Railway must be brought in, because it is too big a factor in the problem to be left out. The question is, what can be done to induce the Metropolitan Railway to come into the scheme on lines satisfactory to the Metropolitan Railway. It is quite clear—I do not think anyone desires to burk the question—that if the Metropolitan Railway had not been prepared to come in under a friendly arrangement there would have been an assessment by means of arbitration as to the value of their undertaking, which is essential to the whole scheme. Nobody who knows anything about the Bill would ever suppose otherwise.
The question put to the Government is what inducement has led the main line railway companies to give this guarantee to the Metropolitan Railway Company? Is not that a question entirely for the main lines? I think I could answer the 1310 question, and I think every Member of the Committee could answer the question. [Laughter.] My hon. Friends behind me laugh, but they are not doing great credit to their own logic, which is greater than they appear to admit in regard to this problem. They know perfectly well that the main lines are greatly interested in having this traffic problem, including that of the suburban traffic, settled. Stability and coherence is given to the scheme by having the Metropolitan Railway in it, and the main lines, through their directors, without any compulsion, have been perfectly prepared to give this guarantee in consideration of the greater stability and strength that the scheme gets by having the Metropolitan Railway in the scheme on lines which the Metropolitan Railway have agreed to accept. There is no mystery about it. There is nothing being kept back from the Committee, as the hon. and gallant Member for Coventry (Captain Strickland) seemed to suggest. I was sorry to hear him make that suggestion. There is nothing that the Government are trying to keep back. There is nothing that anyone need be puzzled to understand, if they will address their minds to the matter. We were not in a position to direct the main lines to come forward and give the guarantee; they were not included in the Bill. The fact is that the main lines, finding the Bill what it was, were prepared to give the guarantee, which has settled as they think on satisfactory lines this ever-present and difficult problem, with which they have been faced, of the suburban traffic, which interferes with the ordinary operations which are more proper for the business of the main lines. I hope the Committee will be prepared to accept the arrangement that has been made with the Metropolitan Railway Company, which no doubt has been made easier by the guarantee which I am glad to say the main lines are prepared to give to them.

§ Mr. D. G. SOMERVILLE
The explanation of the Attorney-General, to my mind, makes the confusion worse. The Minister in charge of this Bill said that the main lines did guarantee the dividend of the Metropolitan Railway. The Attorney-General says that the main lines have nothing to do with it, except so far as the suburban traffic is concerned. I do not find it specified in the Bill that the main lines are guaranteeing this 1311 dividend, as the Minister tells us. Will he tell me where I can find it? Apparently, he is in some difficulty in finding the place.

§ The ATTORNEY-GENERAL
The hon. Member seems to come new to this question. I think I am right in saying that the White Paper which contains the full details of this scheme was circulated last July. I hope the hon. Member will acquit the Government of trying to keep back facts. It was all stated in the White Paper.

§ Mr. SOMERVILLE
I am glad to know that. It does not seem to be widely known in the House. Suppose that the returns of the Combine do not cover the dividends specified, do I understand that the main lines pay the difference? If that is so, there will be no necessity for putting up fares to make up the losses by the Combine.

§ Mr. PYBUS
If the budget of the Metropolitan Railway produces a dead loss, do they make up that loss? Is that what the hon. Member says?

§ Mr. SOMERVILLE
If there is a loss on the Combine, and the dividends guaranteed are not paid, do the main lines come in and do it, or do you make it up by increasing the fares?

§ Mr. PYBUS
The whole of the receipts are put into one pool; then each of the undertakings is allowed to charge up their charges on a certain basis, which is not upon the capital but upon the mileage and ordinary running charges. What is left is then allocated to pay interest on the various stocks.

§ Mr. C. WILLIAMS
In this White Paper, issued in July, there is, in page 4, paragraph (4), the statement: Interest on the 'Trust' stock issued as above to be guaranteed at the rate of 31 per cent, for 15 years from the appointed day and 3 per cent. for a period of 10 years thereafter. Payment of these rates to be secured by a first charge on the shares of the pooled receipts to which the Amalgamated Railway Companies are entitled under the operation of the pooling scheme set out in the Bill. Are we to understand that this guarantee lasts for 25 years—15 at 3¼ per cent.?

§ Mr. PYBUS
If the board are able to pay on this "C" stock 6 per cent. for two consecutive years after 12 years, then the guarantee comes to an end.

§ Mr. REMER
I think by this time most of the Members of the Committee will be thoroughly confused. We were told by the Minister of Transport that a guarantee was to be given, and then that was denied by the Attorney-General, who said that no guarantee was to be given by the main line railways. Who is giving the guarantee? I understood that this had nothing to do with the main line railways. I may have misunderstood what the Attorney-General said, and I presume that I did misunderstand by the fact that he is shaking his head. This guarantee will be given by the main line railways. The shareholders of the four main line railways are subject to the eventuality of this guarantee being brought into operation. I do submit that this is an added reason why this Bill should not have been debated on the Floor of the House, and should have gone again to a Select Committee which could have called for Papers with all the details of the Bill. I have examined the White Paper which explains certain of the details but by no means makes it clear to the Members of the House, as it would have had to be made clear to the members of a Select Committee. This is an important Bill involving a huge amount of capital and a revolution in the affairs of the country. It should have been scrutinised by a Select Committee in the greatest detail. I add my protest as to the way the Bill has been handled in to-day's Debate.

§ Mr. PYBUS
I beg to move, in page 11, line 8, to leave out from the word "issue," to the end of the Sub-section, and to insert instead thereof the words: to the company owning the undertaking in such, manner as is provided by this Act the amounts of transport stock which are specified in Part I of the Fourth Schedule to this Act and of the classes therein specified, and the stock so issued shall be distributed among the holders of the existing stocks of the company (other than the 4 per cent. Terminable Debenture Stock) at the 1313 rates of substitution specified in Part II of the said Schedule.

§ Mr. C. WILLIAMS
Are we to have no explanation?

§ The ATTORNEY-GENERAL
This Amendment is pure drafting. We shall come to the whole agreement when we reach the Schedule. It is pure drafting to clear the way for the Schedule consequent upon the agreement with the Metropolitan Railway Company.

§ Mr. C. WILLIAMS
I accept the explanation. It is a little more complicated than it looks at first sight. Of course, a very highly-trained legal mind sees it at once,

§ Mr. D. G. SOMERVILLE
Does this refer to the agreement between the Metropolitan Railway and the main lines?

§ The ATTORNEY-GENERAL
The guarantee between the main lines and the Metropolitan Railway is found in Sub-section (12) of the new Clause on page 181 of the Order Paper. That answers my hon. Friend. It shows that part of the agreement relating to the main line railway companies.

§ The ATTORNEY-GENERAL
I beg to move, in page 11, line 24, after the word "section," to insert the words: () the provisions of the Third Schedule to this Act shall have effect in relation to and for the purpose of the distribution of the transport stock issued under the preceding sub-sections of this section. This is a purely drafting provision.

§ The ATTORNEY-GENERAL
I beg to move, in page 11, line 26, after the word "shall," to insert the words: as consideration for the transfer of the Dart of the undertaking transferred to the board. This Amendment and the next one are drafting Amendments in order to bring this particular Sub-section into conformity with Sub-section (1).

§ The ATTORNEY-GENERAL
I beg to move, in page 11, line 27, to leave out from the word "a" to end of the Sub-section and to insert instead thereof the words, "may under the next following Section of this Act be agreed or determined by arbitration."

§ Mr. D. G. SOMERVILLE
Is this a drafting Amendment?

§ The ATTORNEY-GENERAL
I thought I said both of them were drafting Amendments for the same purpose.

§ The ATTORNEY-GENERAL
I beg to move, in page 11, line 37, to leave out the words "in the case of an independent undertaking," and to insert instead the words: subject to the provisions of Sub-section () of the said section. This Amendment must be considered in connection with the fourth Amendment to Clause 8. The hon. Member will see the new paragraph on the Order Paper. They are intended to produce finality as to the election of the undertakings concerned as to whether they will take stock or cash. Clause 8 provides that they, so soon as may be, shall prepare and submit to the tribunal a scheme setting out the amount and nature of the consideration …. It is difficult to know whether an undertaking requires as consideration cash or stock. There must be some finality as to election. They are deemed to have elected to take it in cash, if they have not said they wanted it partly or wholly in stock.

§ Sir H. CAUTLEY
May I ask if it is now arranged that every constituent body coming into this undertaking shall have elected to take cash or stock?

§ The ATTORNEY-GENERAL
All, except those with whom agreements have been made. The hon. Member will see that this Amendment is at line 37. It is dealing with the independent undertakings mentioned in Clause 6. These are undertakings with which agreement has not yet been made.

§ Sir H. CAUTLEY
Will they have the option of taking cash or stock?

§ The ATTORNEY-GENERAL
Yes, they will have election in a limited time.

§ Mr. REMER
Does that apply to the firm of Messrs. Tilling?

§ The ATTORNEY-GENERAL
As I explained Messrs. Tilling wanted transport stock.

§ Mr. REMER
I have had conversations with Messrs. Tilling and they utterly deny anything of the kind. The only thing they have said is that they want the same return for their shareholders—

§ The DEPUTY-CHAIRMAN
There is an Amendment to Clause 14 dealing with that point, and we must wait until we reach that Amendment before discussing the matter.

§ Mr. D. G. SOMERVILLE
The explanation of the Attorney-General makes it somewhat difficult for a layman to follow the matter. He seems to be dealing with a subsequent Clause, and we have to jump backwards and forwards. Can he tell us what proportion of the independent concerns are going to take cash 7 Whether any investigation has been made? And whether provision has been made for a sufficient amount of cash to deal with the matter?

§ The ATTORNEY-GENERAL
I can assure the hon. Member that ample provision has been made if all the undertakings elect to have their consideration in cash. The Committee, I am sure, would not desire the smaller undertakings to be forced to take stock, and we have assumed that they are going to take cash until we are informed that they are going to take stock. We have made ample provision in the matter.

§ Mr. C. WILLIAMS
And that cash is to be provided by the four great railway companies. In other words, they carry the baby.

§ The ATTORNEY-GENERAL
I should have to go into a Second Reading speech if I replied to the hon. Member.