CLAUSE 39.—(Issue of transport stock.) (Hansard, 13 February 1933)

§ The ATTORNEY-GENERAL
I beg to move, in page 57, line 33, to leave out from the word "respectively" to the first word "to," in line 35, and to insert instead thereof the words: being holders in the aggregate of not less than five per cent. of the total amount of stock of that class then outstanding. This is the first Amendment on the Order Paper which deals with the important financial question raised by some of my hon. Friends during the Committee stage. The finance of the Bill is an important part of its structure, and it was suggested that we ran a considerable risk in allowing holders of "C" stock of not less than £500,000 to apply to the High Court for the appointment of a receiver if there were a failure on each of two consecutive years to pay interest at the standard rate. The standard rate, for the earlier years at any rate, was 5 per cent., and it was said that owing to the depression through which, unhappily, we are passing, it was quite possible— indeed, I think some hon. Members went so far as to say it was quite likely—that the "C" stock would not earn its 5 per cent., and that therefore, at the end of two years, application would be made to the courts by a small group of dissatisfied stockholders for the appointment of a receiver, and that before the child was scarcely weaned it would be strangled. On that point we had an interesting and informal discussion, and it was suggested, I think by an hon. Member for one of the divisions of St. Pancras, that the standard rate should be reduced to 3 per cent. for the first two or three years, should then be 4 per cent. and then 5 per cent., and I think it was to rise to 7 per cent., as the maximum which could be paid, instead of 6 per cent. It was also suggested that action by a larger body of stockholders should be required to enable an application to be made to the courts for the appointment of a receiver.
This last point we are endeavouring to meet. We are providing, both in the case of "B" stock and in the case of "C," not merely that there must be an aggregate nominal value of £500,000 worth of stock represented, but there must be a number of holders who represent in the aggregate not less than 5 per cent. of the total amount of that stock at that time outstanding. In the case of "C" stock that would mean that stock 710 holders to the extent of £1,000,000 must be brought together before an application can be made to the courts for the appointment of a receiver. There still remains the formidable question as to the nature of the default upon which such an application can be made and acceded to by the court. It is proposed that instead of a default in payment of interest for two consecutive years justifying an application it must be default in respect of three consecutive years, and the first of the consecutive years is to be not earlier than the third year after the appointed day. Putting that necessarily complicated phraseology into simple words, it means that the undertaking will have a clear run of five years before there is any possibility of an application to the court for the appointment of a receiver. If it should so unfortunately happen that this undertaking, managed by the Transport Board, is not able to earn the standard rate of interest on its "C" stock, which one may compare to the ordinary stock, at the end of five years, I should think it would then be perfectly proper for the persons interested to apply to the courts, and possibly for the Government of the day to reconsider the whole undertaking and its position. Though I know so little about these matters that I cannot engage in any prophecy, I hope and trust that that possibility will never be realised; but I hope and believe, also, that the proposal we are now making will satisfy the doubts which were raised by an hon. Member for St. Pancras and, I think, by an hon. Member for Paddington. It will, as I say, give the Transport Board a breathing space of substantial length to enable them to exist until times which may be happier than the last year or two have been, so that the undertaking may earn a standard rate of interest.
We are also proposing to the House for its acceptance another safeguard which will be found in a subsequent Amendment in page 58, line 9. The Amendment provides, in short, for the ascertainment of the wishes of the stockholders as a whole, so as to see whether the 5 per cent. who are making the application really represent both the interests and the wishes of their fellow-stockholders. I think that that is a provision of substantial value to protect the undertaking from exploitation, or 711 rather to prevent its exploitation for their own private interests by some dissatisfied group of financiers, who might wish to manipulate the market for some reason of their own. Although £1,000,000 worth of stockholders, or 5 per cent. of the whole may, so to speak, start the ball rolling, it may be arrested if the rest of the stockholders, or a majority of the rest of the stockholders, are satisfied that it is undesirable, having regard to all the circumstances, to ask the court to intervene.
I hope that we have succeeded in devising a fair balance between the interests of the stockholders and the interests of the public who are represented in this Transport Board undertaking. I made another suggestion on the spur of the moment during the Committee stage, that the standard rate of interest should be reduced, at any rate so far as, in the case of default, to justify application for the appointment of a receiver. That proposal was regarded as indicating a reasonable frame of mind on the part of the Government, but it was not a proposal which, upon examination, appeared to be so satisfactory as those which we now lay before the House. We have consulted the persons concerned, and we have not found it necessary to reopen the whole of the agreement so as to call together large classes of the stockholders concerned. These are proposals which are satisfactory, so far as we know, to all parties, and I hope that the House will feel now that the future of this undertaking is properly safeguarded, and that, at the same time, stockholders have all reasonable protection for the money that they invest in the undertaking.

§ Sir K. VAUGHAN-MORGAN
The House will be grateful to the learned Attorney-General for the explanation which he has given. The Amendments, which I have no doubt the House will accept, do something to improve the Bill. They appear to give the transport authority which is to be established under the Bill five years' respite from the fatal consequences of the financial difficulties with which they are liable to be called upon to deal. The learned Attorney-General used the expression "the public are 712 represented." I can understand that the shareholders are represented in regard to the Amendments, but the interest of the public in the Amendments must be rather remote. The shareholders, of course, are concerned, but some of us are mainly interested in the effect which the Amendments are likely to have upon the public.
As regards the public, what I have described as a five years' respite is likely to be an advantage. The board might not be compelled, in those circumstances, to raise fares and curtail facilities quite so soon as they would otherwise be if these Amendments had not been introduced. I feel bound to express some regret that the Amendment as originally proposed by my hon. Friend the Member for South-East St. Pancras (Sir A. Beit) to reduce the standard rate was not adopted by the Government, but if we cannot have that, we are certainly better off with this compromise than without it. In the circumstances, I desire to express my thanks personally to the right hon. and learned Gentleman for the Amendment and for his explanation of it.

§ Sir ALFRED BEIT
I would like to thank the right hon. and learned Gentleman for accepting so much of the substance of the Amendment that I moved in the Committee stage of the Bill. It has been made quite clear to me that the standard rate could not be very easily altered without reopening all the negotiations which have already taken place between the Ministry and the various interests, which are being taken over by the board. Consequently, I think that the Minister has perhaps devised the best compromise possible, and although I do not think that the danger of a too rigid finance has been entirely obviated, I would very much like to thank the right hon. and learned Gentleman for what he has done.

§ Sir P. HARRIS
I want to make one remark, and that is that the very suggestion of the possibility of a receiver coming into and running this essential public service is certainly alarming. I believe that the finances of the concern are sound. I have never doubted that a monopoly of this character, after all competition has been removed, must pay in the long run. Hon. Members will have 713 received a memorandum, from a Member of this House—the hon. Member for West Lewisham (Sir P. Dawson). I am surprised that he is not in his place. When a paper is circulated to Members during the passage of a Bill attempting to show that £1,000,000 is involved, I think that the hon. Member responsible should be in his place to challenge the finances of the undertaking. He says: Taking a conservative view, in the first year's working there will be a deficit which may exceed £1,000,000, and then he sets out the reasons. I gather that the hon. and learned Member for East Bristol (Sir S. Cripps) has not seen this peculiar document.

§ Sir S. CRIPPS
No.

§ Sir P. HARRIS
Then I am specially favoured.

§ Sir S. CRIPPS
It may be because I am not concerned, and because I do not take a conservative view.

§ Sir P. HARRIS
Well, this document may be rather a bastard, but still the hon. and learned Member has something to do with it. He cannot disown entirely that he had something to do with its inspiration. He graced the late Government with his presence—but that is only by the way. When a statement of this kind is circulated to hon. Members, the Member who is responsible should be in his place to justify it. If there is any justification for it, it is certainly alarming to find that in five years' time the finances of this undertaking may be such that a receiver should be appointed. Now that we have decided to have a form of public authority, it should not be subject to this kind of financial operation. A service of this character is vital and essential to the travelling public, and London could not exist without cheap, efficient and a live service. It should not be necessary to put in a Clause of this character. It is one of the weaknesses of this Bill that its finances are complicated, and are mixed up with forms of company finance. It would have been wiser and more advisable to have done the thing on the right lines, and to have made the board a real public authority, with proper stock raised directly from the public on the same lines as a public authority.

§ Mr. DEPUTY-SPEAKER
Is the hon. Baronet anticipating the Third Beading?

§ Sir P. HARRIS
All that I was trying to say was that I do not like this kind of finance. I am very sorry that the learned Attorney-General has told us that there is still a risk, although it may be very remote, that some day a receiver may come into the affairs of this great authority which is to be responsible for the travelling facilities of the people of London.