POST OFFICE (WESTERN HIGH LANDS AND ISLANDS OF SCOT LAND MAIL CONTRACT).

HC Deb 07 February 1939 vol 343 cc856-912

8.31 p.m.

The Minister of Transport (Mr. Burgin)

I beg to move: That the Contract, dated the 13th day of December, 1938, between His Majesty's Government and David MacBrayne, Limited, for the maintenance of transport services in the Western Highlands and Islands of Scotland, and for the conveyance of mails in connection with the said services, be approved. It falls to my lot to move the confirmation of this Motion, which stands on the Order Paper in the name of my right hon. and gallant Friend the Financial Secretary to the Treasury. I do so by virtue of Section 17 of the Ministry of Transport Act, 1919, which gives power to me to pay a subsidy in connection with transport services. I would ask the indulgence of the House if I trouble them with a great deal of detail in presenting a contract which contains a number of unusual features, all dealing with a somewhat exceptional position. By Standing Order 71, page 35, it is provided that: In all contracts extending over a period of years, and creating a public charge, actual or prospective, entered into by the Government for the conveyance of mails by sea, or for the purpose of telegraphic communications beyond sea, there should he inserted the condition that the contract shall not be binding until it has been approved of by a Resolution of the House. The Contract that I am submitting is for 10 years; it creates a public charge, it is entered into for the conveyance of mails by sea, and in consequence it is one that is not binding until it has been approved by Resolution of this House. That is why I as Minister of Transport am moving its confirmation and why the Contract comes before the House to-day. The Highlands and Islands of Scotland are modestly described in one of MacBrayne's publications as the world's finest scenery, and at the end of a winter's day my mouth waters at the prospect of visiting by some of these steamer services places on the west coast of Scotland and in the islands whose very names conjure up delightful reminiscences of holiday experiences. I find it rather hard to bring my mind to bear on the legal phraseology of the Contract, for I would prefer to think in anticipation of the delight of having a passenger ticket on one of MacBrayne's boats. It may be interesting to Scottish Members to know that I am personally familiar with the greater number of these passenger services, that I have visited most of these parts at different periods of the year, and that I know something at first hand of the importance of the services covered by the contract. I prefer, if the course commends itself to the House, to go through the draft contract article by article, and to offer explanation, where explanation is required, of the provisions of the contract itself. I propose, not unnaturally, as there is a subsidy involved, to devote a certain amount of time to an explanation in detail of the monetary circumstances, showing how the increase of Government subsidy is arrived at, but before dealing with the articles in detail I should like to explain the setting in which this contract is placed, and to show why in February, 1939, we are dealing with the contract here.

The importance of the Highlands and Islands of Scotland need not be stressed. Transport facilities require no commendation from me. As always, away back in the distant past, it has been recognised that a proper and effective service between the mainland and the Islands is an essential part of the economy of the country. MacBraynes is a household word. In 1928 a desire was expressed that the service should be improved and a Select Committee of this House looked into the whole matter and made a report which was ordered to be printed on 24th July, 1928, and which, of course, is an official document. In the year 1928 MacBraynes offered to withdraw, and did in fact withdraw, from tendering for the carriage of mails and goods. The London Midland and Scottish Railway and Coast Lines offered to set up a new service. A new company was formed in which there was a railway investment of substantially half of the capital, and a contract, dated 13th November, 1928, ordered by the House of Commons to be printed on that day, resulted. That contract gave effect to the scheme set out in the Select Committee's report to which I have referred, and the contract dated 1928 remained in force for 10 years.

It came to an end on 31st October fast. As negotiations for a new contract had not at that time been concluded, there was a short extension of the old contract for a period of a couple of months until the end of the year, and the contract to which I am now asking the approval of the House was executed on 13th December, 1938, and is to run from 1st January, 1939, for to years and thereafter to continue subject to six months' notice on either side, subject, of course, to the prior approval of this House. If the House approves the contract it will then be retrospective and will date back to 1st January. The House will therefore see that the whole question of these steamer and other services was inquired into in 1928, and that the scheme which found favour with the House was embodied in a contract which lasted for 10 years and provided for a Government subsidy of £50,000. The new contract continues the provisions of the old where they were found acceptable, makes changes where changes have been required by altered conditions, provides for a better fleet, newer vessels, more capital, and involves as a corollary the granting of a greater Government contribution. The new Government contribution is to be £60,000, in circumstances which I will explain.

The details of this commercial arrangement made between the Government on the one hand and Messrs. MacBrayne on the other I now propose to describe in some detail. I have told the House that the contract is between the Minister of Transport and the Postmaster-General on the one hand and the shipping company on the other. The Postmaster-General is concerned because there is a large carriage of mails, and my hon. Friend the Assistant Postmaster-General will be available should any question arise as to the Post Office's part of the contract. I propose, therefore, with these words of introduction, to approach the contract, to deal with it article by article and to give the House the benefit of comments and observations as we go through the contract carefully. I have no doubt that the House will find that the terms upon which these arrangements have been made are terms which commend themselves to a deliberative assembly and that this is essentially a commercial bargain which the House will desire to approve.

May I add one other fact. The terms of this contract had been negotiated and settled before the publication of the Highlands and Islands Report at the end of November, 1938. Account could not be taken of the terms of that report in the negotiations for the present contract, but I shall make it perfectly clear that the present contract is without prejudice to a consideration of the references to the Western Islands and Highland services in the examination of the report as a whole. There is nothing in the contract which I am asking the House to approve which in any way fetters or restricts the powers of the Government to deal with the matter on a larger basis, and to give consideration to this report should it be so required.

Mr. Kirkwood

Does that mean that people other than MacBraynes say Mac-Callum Orme who have vessels, will be able to go to the Western Isles, their vessels being subsidised, so that we may get better vessels than we have at the moment?

Mr. Burgin

As a matter of fact, MacCallum Orme have been subsidised for a long time. The contract which I am now asking the House to implement is a contract between the Government and Messrs. MacBrayne, and is without prejudice to a consideration by the Government of the whole of the Highlands and Islands report, and the House need not therefore think that the matters referred to in that report, which came out after these negotiations, are in any way compromised by the approval of this contract. I am coming to the House and asking for a 10-year extension of a 10-year contract, with the alterations which have been necessitated by changes in the circumstances.

After these opening observations I hope I may ask the House to look at the actual contract published as a White Paper, which has been in the hands of hon. Members since December last and which we may now proceed to examine. The first two pages are the Treasury Minute, the official commendation by the Lords of the Treasury of the terms of the contract, which involves a charge on public funds and gives the reasons which have induced their Lordships of the Treasury to give their approval of this document. I emphasise at once that I am dealing here with a shipping company, a company in which the London Midland and Scottish Railway Company has an investment. But it is a shipping company managed by a board of directors; it is a separate limited liability company, with separate capital, and I shall have to pass in a moment and refer to specific provisions in the Articles of Association which show how the company is, in fact, managed. I make the point in passing that it is a shipping company dealing substantially with shipping services. I think I have dealt in a sufficient detail as I need for the moment with the circumstances which have led to the new contract, and I now desire to go through the provisions of the contract itself.

The contract is divided into several parts. The first is general, the second is services, the third is conveyance of mails, the fourth finance, and the fifth penalties. The Schedule sets out in detail the services which the directors have to perform. Articles 1 refers to the Standing Orders of this House; the contract is not binding until it has been approved by a Resolution of this House. It provides that the contract is to run from 1st January, 1939, subject, of course, to its terms, for 10 years and thereafter unless determined by either side by six months' notice. By Article 2 the Minister has the right to nominate a director to serve on the board of directors of the company. There is a provision that the directors shall be British subjects, that the contractors may not assign the contract, and that no Member of the House of Commons shall benefit from the contract, and there is an arbitration article. I should like for a moment to refer to the power of the Government to nominate a director.

The House may be interested to know how the directorate of this company is constituted and what is the intention of the contracting parties in making that provision. The directors of the company are appointed in pursuance of Article 71 of the articles of association, which provide that the number of directors shall not be less than three or more than seven, in addition to the Government director, and in addition to local directors. There is a provision under which local directors have rather less power than the full directors. The main board consists, broadly speaking, of five persons—two nominated by the shipping company, two nominated by the railway company, and a Government director. I need not give the names of the specific nominees of the different interests. The local board consists of three appointed by the shipping company, and three appointed by the railway company.

The object of there being a Government director is, of course, to make quite certain that the Government have the fullest right of access to and knowledge of everything that happens within the company. There is nothing that can be denied to a director. Under English company law, the rights of a director are very considerable indeed, and the Government director, who has been Lieut.-Colonel Norman MacLeod, has the full rights of any other director. The Government are satisfied that a proportion of one in five on the main board gives them all the power of supervision, information, right to examine and control that they desire. It is not, of course, a majority control. There never was any question of the Government director having a majority control, and the Government, who have negotiated this contract, are entirely satisfied with the right to nominate one member of the main board as a director looking after the interests of the public, as public money is concerned. I do not know that any point arises on the arbitration article. It is a common form of arbitration provision, a repetition of one in the earlier Contract, providing that if there is a difference under this Contract the matter shall be referred to a suitable arbitrator to be appointed under the Arbitration (Scotland) Act, 1894, and that the decision of the arbitrator shall be final.

If hon. Members will turn to page 4, they will see that we embark upon Part II, one of the operative parts of this Contract. Article 6 says that the contractors shall maintain the services set out in the Schedule—which are substantially those which the contractors have operated in recent years under the old Contract—and provision is made for the alteration of these services by agreement. We then get to Article 7. There is a number of paragraphs to Article 7 with which I will deal in detail. Paragraph (1) is a new requirement. The contractors shall, when they begin to operate an additional transport service, give notice to the Minister, and the Minister may require that service to be included in the "General Services." The House will appreciate at once the object of that provision. It is to prevent the contractors from keeping some new and remunerative service entirely outside this Contract, and it says that if the contractors embark on a new service which turns out to be remunerative, the Minister shall have power to say that that service shall come within the purview of the main Contract. I do not think anybody can foretell with exactitude what the development of the Highlands and Islands is likely to be, and it may well be that services not at present included in the Schedule may turn out to be the best of the bunch. As this is a Contract on a sharing system, this very properly provides that the Minister may himself say that one of the provisional services shall come under the heading of "General Services" and be counted in the general accounts for accountancy purposes hereafter.

Paragraphs (2), (3), (4) and (5), are similar in general effect to the old Contract. They enable the Minister to require the contractors to undertake additional services, and to make alterations in existing services, and it gives them the right to receive an additional payment should there be a financial loss. The financial loss is to be estimated in cases of difference by an expert committee consisting of the President of the Railway Rates Tribunal, and the member thereof experienced in commercial matters, together with a person experienced in shipping affairs appointed by the Minister after consultation with the contractors and the Chamber of Shipping. That expert committee is the same as the committee to which increases or reductions in freights, charges and fares are to be referred under a later article of the Contract. Under the old Contract a financial loss was determined by a single arbitrator. It is thought that these terms are an improvement, and a body composed of the President of the Railway Rates Tribunal, together with two experts, is judged to be a more manageable and more up-to-date tribunal.

Mr. Kirkwood

Does this mean that in the event of there being some means of transport other than sea transport—that is to say, air transport—it must be left to this company to develop that method of transport? There is nothing in this Contract that would hinder this line being developed, if necessary, outside this company?

Mr. Burgin

The hon. Member is quite right. There is nothing in this article which limits air transport to this particular company, and either I or my right hon. Friend the Secretary of State for Scotland will, at a later stage in the Debate, deal with the question of air ser- vices if the hon. Member so desires; but perhaps for the moment he will accept my assurance that what he was saying is quite outside the purview of this article. What this article says is that if, in addition to what is in the Schedule, which is the only contractual obligation under which Messrs. MacBrayne are working, some other or different service is required, the Minister may order them to do it, and if as a result they suffer a loss, that loss shall be calculated in a particular way. It is a separate matter from that which the hon. Member has in mind.

Under Article 8 the contractors are to make all proper returns and information. Although there is a Government director on the board, it is always as well to have a contractual obligation as well, because it gives a proper ground, should there ever be any difficulty, and one can apply to the proper tribunal. Article 9 is important. It deals with the question of a new fleet. The contractors shall, as soon as possible, supply a new vessel for the Islay service, and before 31st December, 1940, shall provide also a new vessel for the Stornoway service. The whole question of the fleet is one of great importance, as hon. Members will appreciate, and if time had permitted, I would have liked to give something of the romance of the way in which the MacBrayne fleet has from time to time been altered. Broadly speaking, one judges the fleet of a company by three factors, namely, the number of ships, the average age and the total tonnage. Under the old contract Messrs. MacBrayne had 18 ships, the average age was 36 years and the total tonnage 4,523. Under the new contract they have at present a fleet of 19 ships, the average age is 25.6 years and the total tonnage 9,103. I mention these figures so that they may be put on record and so that the House may realise something of the way in which the fleet has to be built up if it is to be available for performing the increased services which are demanded of it. The new Islay boat is being built at Messrs. William Denny Brothers, Dumbarton, and it is expected that she will be ready about the end of May. She will have accommodation for 700 persons including crew, and the accommodation, both first-class and third-class, will be very much improved. The building of the new vessel for Stornoway will be started within the contract time, but the plans have not as yet been finally completed. She will be taster than the present vessel and will have sleeping accommodation, both first-class and third-class, and the accommodation generally will be much improved. The expenditure on these two vessels will probably be as much as £150,000.

Mr. Malcolm MacMillan

Can the right hon. Gentleman give us a rough indication of what the speed of the new Stornoway boat will be?

Mr. Burgin

As that is a matter of detail and as the plans are not yet finally determined, perhaps the hon. Member will allow me to make some inquiries. I should imagine it will be 14 knots or over, but I am imagining when I say that. The hon. Member will appreciate the fact that speed and planning must be combined and that speed and cost are very relevant factors. The driving of a vessel through the water at a knot or two above a given figure may multiply the cost, instead of merely adding to it. That is a general reflection which I seem to have carried over from my Board of Trade days, but I hope the hon. Member will not seek to pin me down to a definite statement of the actual number of knots of this new vessel. I hope, as the members of the travelling public do, that the new vessel will be an improvement on the old one. I have given the House the information in my possession and I will make inquiries about the specific point raised by the hon. Member.

I pass to Article 10. This is generally similar to the corresponding article of the old contract. Under it the vessels must be approved by the Minister, they may not linger or delay on the voyage, or deviate, except as the result of stress of weather—and as I myself have been marooned for more than 24 hours, I can speak feelingly of that. There are penalties in all cases in which a vessel fails to put to sea at the proper time, the consent of the Minister is required for the sale of a vessel and provision is made whereby the Minister may secure the withdrawal of vessels which are considered unfit. These are common form conditions in a mail contract and there is nothing special about them. They repeat the corresponding conditions in the earlier contract. Paragraph (2), however, is a new provision which I hope the House will appreciate. It says that the contractors shall not, during the continuance of the contract, buy a vessel abroad or buy from foreign owners, and I think that is in accordance with the spirit and feeling of Members in all parts of the House. Paragraph (5) provides that the masters, officers and at least three-quarters of the crew shall be British subjects. In point of fact, at this moment all the crews are British subjects, and this is merely a safety provision in case it may be necessary to have a cook or somebody of that type, of non-British nationality. I hope the House will not think that I am skipping anything if I say that there is nothing in the remainder of Article 10 to which attention need be called.

Article 11 applies to road services. Perhaps the House would be interested to know that this shipping company has a staff of 515, of whom 275 are afloat and 240 are ashore, and of the 240, 65 have to deal with motor vehicles. Article 11 deals with the obtaining of licences for the running of motor vehicles and makes similar provisions with regard to motor vehicles to those which I have just read dealing with shipping services.

Mr. Mathers

Will the Minister say whether there is any limit, or whether it is understood with the company that there is to be any limit upon the services in operation on the roads?

Mr. Burgin

The limit, as I have tried to explain, is the schedule setting out the services which the contractors are to carry out. They have to carry out those services, and whatever is proper and necessary for that purpose comes within Article 11. There is otherwise no limit. They have to obtain the Traffic Commissioners' licence in the same way as any other operator. They are under contract to carry out and maintain the services set out in the schedule some of which are road services.

Mr. Mathers

There is no limit?

Mr. Burgin

There is no limit other than that of proper compliance with the terms which they have undertaken to carry out. Articles 12 and 13 apply the Fair Wages Clause to the services run by the contractors and require them to keep proper records of wages and hours. Under the old contract the Fair Wages Clause applied only to the land services. The new article is in a more modern form and applies to both land and sea services. The article requires the contractors to exhibit a copy of the Fair Wages Clause for the information of their workpeople in connection with the road services. That does not apply to the sea services. It is not the practice to exhibit a copy of the Fair Wages Clause on ships, but it is the practice on shore. The conditions of service at sea are governed by agreements, and local superintendents of mercantile marine will be appointed by the Mercantile Marine Department to supervise the carrying out of the agreements. There has not been, as far as I know, any suggestion that the Fair Wages Clause is not fully and properly implemented by the company.

Mr. Gallacher

There have been a lot of complaints.

Mr. Burgin

Perhaps the hon. Member will allow me to make my statement. I say with deliberation, having made elaborate inquiries into the matter, that I know of no complaints ever being made that the company is not fully and properly implementing the Fair Wages Clause.

Mr. Kirkwood

That includes the engineers on board ship as well?

Mr. Burgin

Certainly. What I am saying is a negative statement, that no complaint has been made that the Fair Wages Clause has not been observed by Messrs. MacBrayne. Through the courtesy of some Members of the House I have been told recently that there is a request by the Railway Clerks' Association that that association should be recognised as the trade union having the interests of the clerks at stake. I am told that the Railway Clerks' Association say that the management of Messrs. MacBrayne have declined to recognise that association as the negotiating body for that class of their employés. I understand that out of the entire staff of Messrs. MacBrayne there are 104 who may be described as clerks, and it is alleged by some Members of the House that 76 of these are members of the Railway Clerks' Association and that they are desirous that their terms of employment should be negotiated and handled by that trade union on their behalf.

Mr. F. Anderson

Do the 104 include the administrative staffs?

Mr. Burgin

I have only recently been informed of this suggestion of the Railway Clerks' Association and I should rather imagine that it did. There is a guild to which Messrs. MacBrayne's clerks belong, which is a great feature of their employment, to which great importance is attached by the management.

Mr. Watkins

But not by the staff.

Mr. Burgin

I hope the hon. Member is not serious in that. I am trying to tell the House of a position which is new to me and which has recently been explained to me. It has been said, "You are offering £60,000 of Government money to this company; you surely desire that they they should be eminently proper employers and that the conditions should be above reproach." As a Member of the Government I entirely subscribe to the doctrine of voluntary collective discussion and negotiation. That is Government policy and a principle which I definitely favour. The Railway Clerks Association are apparently suggesting that clerks in the employ of Messrs. MacBrayne are performing work comparable to that which is performed by employés of railway companies. The railway capital in Messrs. MacBrayne is an investment which does not provide a right of management; the management remains with the shipping interests.

Mr. Walkden

It provides a substantial representation on the board of directors.

Mr. Burgin

I am speaking with knowledge and authority when I say that the management of that company is provided and controlled by the shipping interests, and that the railway capital is an investment.

Mr. Walkden

Surely the management is controlled by the directors?

Mr. Burgin

Two out of five is not a majority. I am not trying to make any false point. I am making the plain statement that the railway capital in Messrs. MacBrayne is an investment and that they are a shipping company run, directed and controlled by shipping interests. I have been impressed by the figures of 76 out of 104, and I want to assure the House that I have the undertaking of the President of the London Midland and Scottish Railway to raise at the next board meeting of Messrs. MacBrayne the question of the propriety of a discussion with the Railway Clerks Association on this matter. I desire to communicate to the House that undertaking which I am authorised to give.

I pass to Article 14 which says that the shipping services are to be run in connection with the railway services. That is quite natural. The railway is a part of the transport communications. The shipping is an essential link with the railway, just as much as the railway is with the shipping, and it is essential that there should be some form of close collaboration. Hon. Members who may be induced to take part in the Debate know that there is a vessel that leaves the Kyle of Lochalsh to connect with the railway at Mallaig. That is one of the reasons it does not stop on the way.

I will now deal with Part III of the contract which is concerned with the conveyance of mails. Article 15 says that the contractors shall without additional remuneration carry all the mails tendered to them. This means that if the Post Office wish to send mails by certain of the company's services which do not at present carry mails the company are bound to take them free of charge. The subsidy is an all-in subsidy, and the obligation to carry mails is unlimited in its extent, and is not specific by way of service.

I come to the part of the contract which, no doubt, will interest hon. Members particularly, that is, the financial part. The contractors are to receive £60,000 a year. Under the old contract it was £50,000 and, in addition, the contractors received from the Post Office sums amounting to £1,690. Under the new contract that merges in the larger figure and the £60,000 is inclusive. The financial framework is substantially the same as under the old scheme. Of the £60,000 subsidy, something under one-half is payment for the conveyance of mails. I make that point because in any contract with a steamship company where a subsidy is mentioned that portion of the Government payment which relates to mails is in reality a payment for services rendered and is not subsidy properly so called. The figure of payment for mails is about £26,000 out of a total of £60,000. Under the old contract that portion of the capital of Messrs MacBrayne which was allowed to rank for dividend received 6 per cent. Under the new contract the rate of interest is 5 per cent.

Mr. Gallacher

How much increase in capital is there?

Mr. Burgin

The increase in the amount of capital is represented by an increase in the fleet and assets which are very valuable for the purpose of the services. Under the old contract the amount of capital which was allowed to rank was £250,000. Under the new contract the ranking capital may not exceed £425,000 without the approval of the Minister. That figure of £425,000 is approximately the amount to which the assets of the company may be allowed to grow during the period of the new contract. Under the old contract Messrs. MacBrayne did more than they were required by the contract in the way of providing new boats and modernising old ones, and the amount of capital which they in fact ventured in the enterprise was considerably greater than the amount which was authorised to rank. The Government have recognised that fact, and having put the contractors under an obligation to provide new facilities they thought it right that the amount of the ranking capital should be entitled to rise to a maximum of £425,000.

Mr. Kirkwood

Then their income will be exactly doubled. They had an income of 5 per cent. on £200,000 and now it is to be 5 per cent. on £400,000.

Mr. Burgin

No, it was 6 per cent. on £250,000 and it is now 5 per cent. on a maximum of £425,000, and more than that £425,000 is, in fact, represented by vessels, omnibuses and other assets which have been acquired by the new enterprise. The House is perhaps familiar with the old system of remuneration. Any sum, called "the surplus profit," after the interest has been paid on the ranking capital is assigned as to one half to Messrs. MacBrayne, and the other half is paid to a contingent liability fund, and at the end of the contract the amount standing to the credit of that fund becomes the property of the Minister.

I do not want to weary the House with details, but it is necessary that I should go through this with some particularity. In the early years of the new contract there is every probability of Messrs. MacBrayne having to have recourse to the Contingent Liability Fund for the purpose of paying the interest on the ranking capital. In the early years of the old contract Messrs. MacBrayne were very successful and earned considerable money, but expenses increased, and in the latter years of the contract there were very reduced earnings. On an average the interest earned over the whole period of the contract would be of the order of 6¾ per cent. on the limited amount of capital which was allowed to receive interest. In 1936, 1937 and 1938 the expenses increased enormously, but the net receipts dwindled to almost one-half. The Government, by the new terms, are endeavouring, by bringing down the rate of interest and by increasing the amount of capital, to make a more equitable provision for both sides. In order to assist the early years of the new contract the Minister agrees to pay back into the Contingent Liability Fund by way of loan a sum of £10,000. The House will appreciate that when the old contract came to an end, whatever there was in the Contingent Liability Fund became the property of the Minister. The withdrawal of that buffer clause out of which the interest could be paid would naturally leave the concern without adequate finance. In order, when we start the new 10 years' period, to give the whole adventure a prospect of developing under its own power the Minister agrees to pay back into the Contingent Liability Fund by way of loan a sum of £10,000, and proper book-keeping and accounting is to be done during the lifetime of the contract to ensure that credit is always given to the Minister for that £10,000.

Mr. Walkden

Is it £10,000 for 10 years free of interest?

Mr. Burgin

Will the hon. Member allow me to make an inquiry? It is a point to which I have not directed my attention. I have not heard anything about its being free of interest. The point will receive attention. Before I resume my speech I will endeavour to give the hon. Member the answer. I can now tell the hon. Member at once, from information which has reached me by divers methods, that it is not free of interest, but I will endeavour to obtain a little more specific information for him. When new vessels are built of course the old vessels are sold. You do not by ordering two new vessels bring up your fleet from a strength of 19 vessels to 21. As a rule there is some scrapping or selling when there is building, and one of the reasons why there are losses occasionally is that there is loss on the re-sale of an old vessel. I shall deal with that depreciation in a moment, but when on the sale of vessels there is a good deal of loss which has to be spread over a number of years and can be recouped only by a percentage in each year's accounts there may have to be some subsidising of the contingency fund. The new contract is substantially a continuation of the old one, and so it was considered reasonable to allow the money in the old contingency liability fund to be carried over. At the end of 1938 the amount in that fund was £47,000, which becomes the property of the Minister, subject to the agreement to lend this £10,000 to which I have referred.

I said a moment or two ago that in the latter years of the old contract there had been a considerable falling-off in income. In 1936 the net receipts were £32,000, in 1937 £25,000, and in 1938 they were of the order of £18,000. I say "of the order of £18,000" because the 1938 figures are not finally audited and I can give only the company's estimate. On the other hand, the increase in the cost of running vessels and road services in the last few years has been substantial. I will give the figures of the increase in 1937 over 1936 and of the increase in 1938 over 1937, in other words I will ask hon. Members to go up two steps with me. In 1937 crews' wages went up £2,000 over 1936, dock labour £2,000 over 1936, coal £3,000, repairs £2,000, and depreciation £2,000. Thus the expenses in 1937 were some £11,000 over the comparable items in the year before. During 1938 wages went up £2,000 over 1937, marine insurance £3,000, dock labour £3,000, coal and oil £2,000, repairs £1,000, depreciation £2,000, and the general expenses £2,000. In other words, in 1937 expenses rose £11,000 over 1936 and in 1938 expenses rose £15,000 over 1937.

Mr. Walkden

Do we understand that that occurred on decreasing traffic?

Mr. Burgin

It was a rise in working expenses on, broadly, the same gross receipts.

Mr. Walkden

Was the personnel increased?

Mr. Burgin

Perhaps the hon. Member will allow me to inquire about that. I should not have thought there was any substantial increase in personnel. What I have been giving are comparable figures, like being compared with like. If there has been any increase in personnel, of course my figures would be thrown out.

Mr. Duncan Graham

Is the Minister correct in saying there was an increase of £3,000 for coal in 1937 over 1936, and an additional increase of £3,000 in 1938 over 1937?

Mr. Burgin

The figure I quoted was for coal and oil together. I am assured that there was an increase of £3,000 in 1937 over 1936 and another £3,000 in 1938 over 1937. I was trying to ascertain the subdivision between coal and oil. I have the two bracketed together as fuel.

Mr. Graham

Is the coal supplied by Scottish coalowners? From what district is it sent?

Mr. Burgin

The hon. Member is setting me some teasers. I will see if I can ascertain from which pit the boiler was stoked. It is British coal, but I will try to find from which part of the United Kingdom it came. I will do my best. In 1939 my own confident prediction is that the expenses on these items will show an increase over 1938. The increase in the subsidy was agreed to after a very careful consideration of the whole of the figures. The hon. Member for Inverness (Sir M. Macdonald) will appreciate that the increased subsidy of £10,000, if we make allowance for the fact that £1,690 for the Post Office is included amounts to a net increase of £8,310 a year. In order to remunerate £250,000 of capital and to meet increased working expenses, a large sum of money is required. The ranking capital under the new contract is higher but the rate of interest is 1 per cent. less. Having regard to these facts, it is probable that, even with a subsidy of £60,000, there will be an obligation on the contractors to draw from the Contingent Liability Fund at all events in the first year of the new contract period.

I pass from that and come to the remaining Clauses of the Contract. Article 17 defines the "Subsidised Balance," which is, of course, the net revenue plus the subsidy, and the definition is the same as in the old contract but a little more precise. Article 18 deals with the way in which depreciation is calculated but, unless any one desires to go into it in detail, I think the Clause speaks for itself. There is a carefully calculated schedule of depreciation. Article 19 says that on this subsidised balance there is a first charge of interest at 5 per cent. on the ranking capital and the next charge is to fill up any deficiency of previous years. The balance is "surplus profits" and the "surplus profits," as stated in Clause 20, are distributed as to one half to the contractors and one half to the Contingent Liability Fund, the balance in the Contingent Liability Fund remaining with the Minister at the end of the contract. So that, broadly speaking, after these first charges the net equity is 50–50–50 to the contractor and 50 to the Minister. Earnings are, so to speak, put at the disposal of the contractors by being put into this Contingent Liability Fund.

Article 20 deals with the disposal of the surplus profits. Article 21 deals with the way in which the Contingent Liability Fund is dealt with, and then we come to Article 22, which deals with such things as the reconstruction of piers. I appreciate the interest that hon. Members have in that. During the old contract the contractors spent some £40,000 in the reconstruction of essential piers. Tobermory, Fort William and others have been rebuilt and Port Ellen will soon be completed. The main object of this Article is to enable the contractors, with my consent, to reconstruct piers which they have acquired. It sometimes happens that the only way to effect repairs is for the company to acquire the pier and carry out the work of reconstruction themselves. They have done this in many cases under the old contract, and it is thought desirable to make a similar provision in the present one.

Article 23 deals with fares and freights. I must detain the House for a moment on this very essential Article. It introduces a radical change in the control of freights and fares. Under the old contract the company made an immediate reduction in freight charges and fares of 10 per cent. Provision was made for the examination at two-yearly intervals of the Contingent Liability Fund and, if it amounted to £12,500 or more, reductions had to be made in freights and fares. Reductions were made after reviews in 1932 and 1934, but for various reasons it was not possible to make further reductions. The reductions were dependent upon agreement. The ranking capital was £250,000, but the actual capital involved was much more and, by agreement, the company were allowed to charge to revenue a number of extra costs. The new contract provides that there shall be no increase in fares and freights for a period of two years, and that notwithstanding the fact that I have shown to the House that expenses are on a rising scale. I claim that this Article is a protection to the consumer, that rates are not to be increased for two years.

On 1st October, 1937, railway fares were increased by 5 per cent, and, when that increase came about, this company was rather anxious to see whether similar considerations did not apply to Messrs. MacBrayne as had applied to the railway companies. That increase was not allowed and a condition of the new contract is that a couple of years must elapse before there can be any increase or reduction. The test is always, "Are the freight charges sufficient to bring in 5 per cent, on the ranking capital?", and the standard which any tribunal judging these fares is to have before it is, "What is the amount necessary at the end of the year to provide a minimum return on the agreed capital?" There is a tribunal, the same that I referred to earlier on—the President of the Railway Rates Tribunal, someone experienced in commercial matters and an expert on shipping and, if the Minister after any year thinks there are circumstances that justify a reduction, the matter can be dealt with by the same committee, the criterion always being, "What is the figure at which freight charges and fares ought to be stabilised in order to produce 5 per cent, on the agreed capital?" Clause 25 enables the Minister to determine the contract if there is a breach, and Article 26 enables him to charter a vessel himself should the company decline to carry out their obligations.

I apologise to the House for having taken rather a long time to explain a somewhat complicated matter, but I have endeavoured to give information to the best of my ability. I have not yet subdivided the coal and oil supplies, but I hope to obtain that in the course of a few minutes. With these opening observations I commend the contract to the House as a good commercial bargain freely negotiated between the Government and the shipping company. A shipping company is essential to the maintenance of these services, and I know of no other company which could carry out an effective service between the mainland and the Islands and Highlands, and it is necessary to have a sensible contract approved by both sides if it is to give satisfaction.

This contract is one of which I can conscientiously approve and can commend to the House. I ask the House to adopt it. I have now been supplied by the magnificent information service of which we are all aware with the exact sub-division of coal and oil. In 1936 it was £17,600 for coal and £6,100 for oil. In 1937 it was £15,500 for coal and £11,200 for oil. The name of the colliery company will follow immediately.

9.37 p.m.

Mr. T. Johnston

The fundamental difference between the two sides of the House on this issue can be very briefly stated. We believe that the road to the Islands ought to be as much a public service as the roads are on any part of the mainland, and that the inhabitants of the Outer Islands ought not to be compelled to yield a profit to a private company or to a semi-private company any more than the inhabitants of the mainland should be compelled at this time of day to yield a profit to a private company operating the roads in the neighbourhood. A coastal, a sea, service to the inhabitants of those Outer Islands ought to be as much a communal service, rendered free and gratis to the local inhabitants, as are the road services on the mainland to the inhabitants of the mainland.

The right hon. Gentleman has been at great pains to-night, and for a considerable period, to examine the financial aspects of his bargain. He calls it a very favourable bargain for the State. We are not so much concerned with the precise details of that financial bargain that he has made with the company, but with the conditions of life of the people in the Outer Islands. Largely owing to transport those conditions are rapidly becoming impossible. A ton of groceries from, say, Glasgow, sold to the inhabitants of the Outer Islands involves a freight charge of 60s., or in some cases 58s. 6d. In other words their groceries cost them about £3 a ton more than has to be paid by consumers who can get their groceries on the mainland. A population about equal to that of Newfoundland inhabits the Western Highlands and Islands of Scotland and is being steadily reduced to appalling poverty, with no prospect whatever of ever being able to create an economic life of its own on which it can stand without subsidy, of one kind or another. In our view that is largely because of the heavy transport charge which they have to pay on their housing material, food supplies, and every commodity they consume in their daily lives. For our part we would welcome any kind of proposal for a sea transport service owned and run by the community.

I remember well a Friday about 10 years ago, when the Government of the day produced a contract with the old MacBrayne Company. That was the time when the subsidy was x00A3;36,000. From every part of the House where Scottish representatives sat furious protests arose against the continuance of the old MacBrayne contract system, and the Government were compelled to yield. At four o'clock on Friday afternoon they had to withdraw their proposal to implement that contract. They set up a Select Committee of inquiry. The party opposite was the majority. I see some hon. Members here who were on that Committee. At the end, that Committee put forward unanimous recommendations one of which was that there should be at least two Government representatives upon the board of the company. I go further than that. I believe that the present Minister is aware that the proposal for two representatives of the Government was not a wild Socialist proposal. It was put forward actually by Sir Josiah Stamp, as he then was, and Sir Alfred Read. I have nothing to say against those two public-spirited citizens for the action they took.

The old MacBrayne company had resigned from their contract and the thing was in chaos when the committee met. The company had resigned those particular services after a period of three months and we were faced with a complete collapse in the Highlands and Islands of Scotland. We asked the London Midland and Scottish Railway, the London and North Eastern Railway and Coast Lines, Limited, to see what they could do to help us. For reasons to which I need not refer to-night, the London and North Eastern Railway could not come in, but the London Midland and Scottish and Coast Lines did come in. They offered to provide half of the capital each— they made the offer— and suggested that there should be two Government representatives on the board. The committee hurriedly brought forward this proposal as a unanimous recommendation, all parties agreeing.

Then the Government resigned from the arrangement as to two representatives and proposed only one. The numbers on the board were reduced. The original proposal was three London Midland and Scottish, three Coast Lines and two Government. The new proposal put forward by His Majesty's Government was two London Midland and Scottish, two Coast Lines and two Government. Subsequently to that, a local board was set up with three London Midland and Scottish, three Coast Lines and no Government representative. So that, by whatever test you like, the semi-public-utility corporation idea, which was the public-spirited proposal of Sir Josiah Stamp and Sir Alfred Read, was departed from, and here to-night, after 10 years of having only one representative on that board and no Government representative on the local board, the Government come forward for recognition of that contract with its departure from the proposal agreed to unanimously by the Select Committee upstairs.

This is not a mere academic discussion, but something which affects vitally the lives of a quarter of a million people. When we had to face the situation before we discovered that the cost of conveying stock pre-war from Lochboisdale to Oban was 2s. 6d., and in 1928 it was 13s. How could a crofter make ends meet with freightage increases like that? All the public expenditure by our Scottish Office, every attempt made to create smallholdings, was rendered nugatory and vain by the excessive freight charges that were imposed upon the inhabitants of these Islands. A cow sent from Lochboisdale to Oban pre-war cost 8s., and in 1928 20s. To send an empty herring barrel pre-war cost 1½ d. and in 1928 is. I am not sure these conditions are substantially improved now. Sir Alexander McEwan—I have been unable to check his figures—late Provost of Inverness, recently circulated a pamphlet, which I suppose most hon. Members of the House will have received, entitled "Act Now" It is a resumé of the Highlands and Islands Economic Committee Report, and he says here that it costs more to send goods to the Islands than it does to send them to Belfast, and that it is still the case that it costs more to send feeding stuffs to Mull and to Skye than it takes to send them to Stornoway.

At this time of day these things cannot be justified. If true, they are a strangu- lation of the economic life of our people in these Islands, and for a beginning we on this side would most earnestly appeal to the Government to fall in with the expressed wishes of Sir Josiah Stamp and Sir Alfred Read and let us have two Government representatives on the board of this company, and, as the second representative, some gentleman who will be able to devote time and knowledge towards assisting the proposals outlined in this Highlands and Islands Economic Committee Report. It is no good saying, "We are going to have a representative who will be a good financial man and who will see that the books are all right, and attend the quarterly meetings of the larger board." That is no use. Let us have no Newfoundland created on our coasts. While yet there is time—and the sands are running out—let us give the people in these Outer Islands a chance to live.

I will not go into the points that I know will be raised much more effectively by hon. Friends behind me about trade union conditions and trade union recognition, and although I welcomed for my own part the statement made by the Minister that Lord Stamp was going to raise this issue personally at the next meeting of the MacBrayne Board, I wish the right hon. Gentleman had also got Sir Alfred Read to act in support of him. If Sir Alfred Read and Lord Stamp together would raise this matter, it would be settled in five minutes, and I think it is again indicative of the attitude of the Government, of the solitary Government representative that we have on that board, that it is at this last moment of the eleventh hour that even this proposal has been put before the House. I do not see why the Government representative long ago should not have sought to apply what is known to be Government policy, the policy of all Governments now, that trade union recognition should be afforded to all the employes of all public works and services.

Again, there are other matters, relating to prices, cost of living, and so on, that I know my hon. Friends behind me will want to raise, and at this late hour one wants to avoid repetition. But I beg of the Minister not to spend all his time thinking of the fine bargain he has got here, of how he can cheesepare something down and do with a little less, or how he can avoid spending £1,000 here and £1,000 there—not on this matter. If you let our Outer Islands go, you will lose a hardy, seafaring population, a population which you may require to draw upon very effectively in the future as you have had to do in the past, a population which, as we all know, cannot get employment, cannot maintain themselves economically now, and yet a population which has to carry burdens upon its shoulders that no other section of the people of this country is being called upon to bear.

Let the right hon. Gentleman and the Secretary of State for Scotland even now look at the problem of the Outer Islands as the Highlands and Islands Committee have looked at it. That committee have been given a blessing in general, and the people have welcomed the outlook of the members of this committee. They thank them for their public spirit and for this non-partisan report. Will the Government not even now look at this problem, not from the point of view of how much they can save here, but how far they can help, how quickly they can help. I would particularly stress that, because of the experience we had when we were on the committee and of the public-spirited report that we got from the two capitalist representatives who took over the whole derelict MacBrayne concern. They are still with us, and I believe that if the right hon. Gentleman and the Government would go to these two men fairly and squarely to-morrow and say, "Let us have a new outlook, a new deal here," and if they and the Government and the MacBrayne Company (1928) Limited would give the public of the Western Highlands and Islands a new deal, I am sure they would receive the cordial thanks of Scots representatives in every part of this House.

9.54 p.m.

Mr. Macquisten

It is 10 years since we had that memorable Friday, when I think the last speaker and I brought about a result which, as far as it went, was a great improvement on the past. Still, we have nothing in the Highlands like what we had 50 years ago. We were infinitely better served 50 years ago than we are now. Of course, in those days there were no hours of labour. People just worked till the job was done, no matter how long it took. Their pay was poor, and there had been no Coal Mines Acts, and coal was cheap. We managed to have these extraordinarily cheap fares, about which the right hon. Member for West Stirling (Mr. Johnston) has talked. But after the War the fare from Oban to Tiree was raised from 8s. to 31s. for so-called cabin deck, though there was no cabin and nothing but the open ship exposed to wind, rain and spindrift. The steerage fare was raised from 6s. to 15s. We have not got anything like the reduction that we should have, and it is a pity that the subsidy was not adequate.

We need a much broader view than has hitherto been taken. We might well follow the Norwegian practice of running steamers at low rates, by heavily subsidising private enterprise under very careful supervision. They have much cheaper rates than we have to many places in Norway, where there would have been no steamer service whatever but for the Government subsidy. They have also some very enlightened methods that we do not practise. For instance, when a Norwegian is going to some fairly distant place, if he takes his wife with him, she can travel at half fare, and his children at a quarter fare. The result is that there are many more passengers than there otherwise would be. I have often wondered why similar methods of increasing the number of passengers are not adopted in this country.

The real difficulty, of course, is the smallness of the population of the Islands. These Islands used to be densely populated in the old days, before we had all the disabilities that were imposed by the English Government. I am sometimes reminded of the story of an old Irishwoman who took her furniture out by a passenger steamer to South Africa, and when she was presented with the bill for transporting it said. "I do not wonder that the Lord walked upon the water, because he could not possibly afford the fares." I do not say in the circumstances that this is an unfair contract. An addition is being made to the subsidy which, as the Minister of Transport has shown, has barely met the increased cost. We ought, as the right hon. Gentleman the Member for West Stirling (Mr. Johnston) has said, these services are the roads to the Isles, and should be helped by the Minister of Transport. If something is done for these people, it will be a real economy. We do not want the Islands to be evacuated of all these gallant people, who stick to their islands with the most intense local patriotism, and would continue to live there if they could get the barest subsistence. It would be far more economical to give them free travelling altogether. In this country, if the roads had been properly regulated, we should all have had free travelling. If we had taken up the land alongside the railways, we should all have been able to have free travelling. Provision ought to be made for practically nominal freights for people in these outlying parts. There should be some balanced system of assistance, as there is in Germany and America, whereby the distant farmer gets allowances in rates which bring him on to an equality with those who are near the markets. The little Island of Tiree exports to the amount of about £72 per head of the population—a very fine figure—and has to bear very high charges for freight.

There is another matter which ought to be dealt with by the Minister of Transport. It is sad to hear that the Mac-Brayne Company have had to spend £40,000 for piers which ought to have been provided by the Minister of Transport. The piers are part of the roads, and should not be charged to private individuals. Moreover, it is sometimes very awkward that they should be in private hands. There was an instance of this in my constituency, where I was told that a pier had been shut because the man who bought it raised the charge from 1d. per person to is., and the people could not pay this. I asked who was the monster who had perpetrated this shameful act, and I was told that he was a London accountant named Napier. I said, "Nae Pier! What else could have been expected of a man with a name like that?" I could see that they thought I was of very little use as a Member if I could not open the pier. I told them that in Ireland they would have dealt with him locally, but that they were a law-abiding people here. Then, being a very devout man myself, I said, "Leave it in the Lord's hands; he will soon deal with the situation." And he did, because within three weeks the nefarious man was dead and up for Judgment. It shows that The prayer of a righteous man availeth much. In that Glen they believe that I have the power of life and death, and I am almost inclined to believe it myself. Finally, Lady George Campbell bought the pier from Napier's executors and restored the old charge of 1d. at once. In due course the Lord rewarded her, for the county council went in for an immense scheme of road improvement, and tens of thousands of tons of material were landed at the pier, so I do not think she lost on the transaction. At any rate, it was a very beneficent thing she did. All these piers ought to be acquired and kept up by the Minister of Transport. That would be an immense help to the masses of the people. The pier is the end of the road, the foundation for the immortal song which our great Scotsman sings.

The 10 per cent, reduction was not nearly enough; it should have been 50 per cent. The reduction of practically nearly 50 per cent, that I got for lobsters and shell-fish made a great difference to the lobster fishermen and the poor people who gathered what in this country are called winkles, and what in Scotland we call whelks. Many of them do that still, and there is nothing better than a good Scotch winkle. This House has a long way to go to undo all the wrongs that have been done to the Highlands in the last 200 years especially, since Culloden. The Chancellor of the Exchequer has destroyed our distilling industry. It was our main industry, producing hundreds of thousands of pounds in the Highlands and other places in the north of Scotland and millions of pounds in revenue to the English Exchequer. That has been largely ruined by foolish taxation, and surely, with the revenue thus obtained, something can be done in the way of transport for those parts of the country who produced it. That revenue from the whisky duty in the Highlands before the War paid the whole cost of the British Navy. It has been largely taken from us by taxation, because the product has now been made almost as dear as milk under the Milk Board.

Something will have to be done. This is a small step, but I hope that it is only a beginning, and that the Minister of Transport, the Secretary of State for Scotland and the House will realise that it is not going to relieve the situation. I may point out that some of the boats are not as swift as was provided in the original contract, which stipulated for a greater speed by two knots. That would make a great deal of difference to many of these small places. Moreover, some of these places, which have a relatively enormous production of cattle and sheep, only get one boat a week in the winter time. I speak specially of Lismore, a fertile island producing great numbers of sheep and cattle. Even the weekly steamer only allows 2½ hours in Oban which is useless for the sales.

There should be more liberal provision made for places like that. There needs to be more liberal provision all round. You need to improve the houses, and when you have improved the houses you want more inhabitants also. It was a great advance when the people got the telephones in. But not nearly enough has been done. It will take a generation and immense sums of money to undo the enormous wrongs of the last 200 years since the Act of Union and the Battle of Culloden. [Laughter.] It is no use laughing about that. It is a very recent wrong in the minds of our people. The wrongs are beyond all mention. We used to have very great populations there. The exodus has been caused by the wrongs committed, and a lot more will have to be done to restore us to our old prestige and our old happiness and people.

10.7 p.m.

Mr. Malcolm MacMillan

I should have liked to have been able to follow the hon. Member for Argyll (Mr. Macquisten), but I do not share his quality of being able to make a subject like the steamer services to the Western Isles a subject for humour at the same time as he makes it a subject of criticism. I am not going to let myself be led astray from my duty to my constituents by the happy assurances that the Minister gave us regarding the important things in the contract, and the more important things which may be added to the contract but of which we have no guarantee. When I looked at the Order Paper to-day I saw that it was a perfect example of the Government's habit of muddling abroad and tinkering at home. The gift to the Czechs is to compensate them for the Government's muddling abroad and this contract is an outstanding example of their, tinkering at home, with, of course, a characteristic subsidy to discredited private enterprise.

Like the Czecho-Slovak loan, this is retrospective. This House was not consulted in advance with regard to the proposals. I do not say that it is our constitutional right as Members to be con- sulted, but a little more consultation could have been held with the House and with the local authorities before these proposals were submitted to the House to be approved retrospectively. There; was no reason why the old contract should have been allowed to expire and a stop-gap contract inserted, about which, again, we have not been consulted. After the old contract had been in operation for 10 years, and had failed to a large extent, we were told that it had expired, and that a stop-gap contract had become necessary. Surely 10 years, during which repeated representations have been made to the Ministers in charge about the working of the contract, was ample time in which to make all the amendments and improvements that were urgently necessary, without having to ask for a further two months in order to produce almost exactly a replica of the old contract. The Minister hardly explained that to us. He said himself: I cannot answer in regard to the original contract, but a supplementary contract for two months has been entered into on the old terms to enable negotiations for a proper new contract to be concluded."—[OFFICIAL REPORT, 30th November, 1938; col. 421, Vol. 342.] After that has been drafted and submitted to the House, we find ourselves in almost the position we were in before. It is practically a photograph of the 1928 contract, except that it has been touched up to make the profit a little more handsome. The Minister said that that procedure seemed an "essential, commercial, businesslike proposal." It is a long time to take to do business, and to do it badly— because I consider that this business has been done badly. The Minister himself has gone fairly fully, part by part and Clause by Clause, into the contract. It is not necessary for me, in criticising some of the Clauses, to go into them as fully as he did, and I am not going to do so. I shall only mention a number of representations that I have made myself to the Minister, to the Postmaster-General, to the Secretary of State for Scotland and to the other Ministers concerned. They promised to take into consideration the representations of the people of the Western Isles, who are, after all, the people most affected. As far as I can see, after having read the contract several times, they have not taken those representations into consideration, as they should have done.

The Members for the other Highland constituencies, no doubt, will make their own representations to-night. I have no doubt that the hon. Member for Inverness (Sir M. MacDonald) will deal with the position of the Islands in his constituency, I have no doubt that the right hon. Member for Ross and Cromarty (Mr. Malcolm MacDonald) will assist me to-night in making representations for the Isle of Lewis and other islands in his constituency, and I have no doubt that the hon. and gallant Member for Orkney and Shetland (Major Neven-Spence) will be making representations for the Orkneys and Shetlands—and they are in a worse position in some regards than the Western Isles. I am not making any criticism of the masters or crews or the staffs of the company. The company and all concerned have been most fortunate in the men who have manned these ships, and in the people, ashore and afloat, who have been responsible for running them. Not enough tribute has been paid to these people who make the steamer service possible.

The question of nationalisation was raised by my right hon. Friend a few moments ago. It is a question on which we should be insistent. We realise that it would be voted out of the House tonight if it were before us; and on the Motion that we are now considering, because of the form it takes, we can only say yes or no. It is rather an unfair way to put before us a Measure of this importance. There are very good reasons why we should press the Minister to consider modification of the terms of the contract, or some further legislation or amendments which it is in his power, as he said himself, to introduce. We are in the position of subsidising this company, though not to the full extent of £60,000. It may be a question of paying the Post Office £36,000 and the rest going completely in subsidy, or it may not. The point is that the Government have recognised that it is the duty of the State, and have accepted it as the duty of the State, to provide a mail service for the Western Isles through the Post Office, which is a nationalised institution. Nobody can deny that the subsidy is a national subsidy. The Minister of Transport himself professes to be very deeply interested in the welfare of the Western Isles, and it is under the control of the State from the point of view of the Ministry of Transport, the Board of Trade, the Post Office and—financially—of the Treasury.

If we are to pay £60,000 a year for a service which does not completely serve its purpose or adequately serve the people it is intended to serve, an adequate case might be made out for the State to take over the service itself. Nobody could say that it would be a loss to the State if profit was being made, and there is no reason why the State should make a profit out of it at all. I am making certain serious criticisms of this Measure and the people responsible for it only because I feel the serious nature, and the great importance to the Islands and Highlands, and to the economic life especially of the Islands, of this great question of transport. It is chiefly a question of transport by sea. My hon. Friend the Member for Dumbarton (Mr. Kirkwood) interrupted the Minister and properly stressed air transport as well. This is a question which the Minister seems prepared to consider favourably. A number of people, including myself, who generally use the steamer service have, when it has failed, had to use the air service, and I hope that that service will make the progress which my hon. Friend also said he hoped it would make. Not only are passengers among the Islands and to and from the mainland affected, but the transport service affects the very economic life of the Western Isles of Scotland. Every fisherman is affected, and fishing is the staple industry of the Western Isles of Scotland. If they are to make an economic livelihood at all; even if we have to admit that to some extent it is the duty to subsidise transport, we must cheapen transport as much as we can.

Since the State recognises that it is necessary to subsidise these services, surely the State should do the job thoroughly and properly when it is at it. When we are giving 100 per cent, for so-called first-class roads in the Western Isles, surely the steamer service is to be recognised to be as important to the economic life of the Islands as the roads. All roads in the Islands converge on the harbours and ships come to and from the harbours taking people and goods to and from the Islands. When one comes to the ships one is at the mercy of MacBrayne and of the people who do not choose to control MacBrayne. My right hon. Friend has already quoted figures and I do not intend to do so. I have collected many figures which are at the disposal of the Minister if he requires them at any time. It is not the first time by any means that I have presented them.

The charges for the conveyance of some of the essential commodities are enormous and disgraceful. They eat up a large part of whatever small profit the fishermen make out of their very arduous calling. The costs of food coming into the Islands and the cost of agricultural needs are swollen by the "cut" which MacBrayne takes out of them. The local merchants are compelled to raise the prices to people who can very ill afford it, because of the large transport charges upon groceries and other commodities. A very good case has been made out by the people in the Islands for a reduction, not only in passenger fares but in freight charges, because those are the things that directly affect their livelihood.

The Minister will tell us that this cannot be done, unfortunately, because of the 5 per cent, on which the whole of the contract has been made. Everything is subject to the 5 per cent, demand. Unless the 5 per cent, is guaranteed, the charges go up. If we guarantee the 5 per cent., in two years some of the freights and passenger fares may be reduced—after two years. The business should not, however, be related to 5 per cent, but to the needs and welfare of the people. I take it to be the purpose of the Government subsidy to make it possible for people to continue to live in these Islands and to make a livelihood. It ought to be the policy of the Government not only that the people should stay there but that they should make a reasonable livelihood. Transport service is, as the Minister admitted, an essential part of the economy of the Western Islands, and the charges should be reasonable.

The Minister of Transport might consider the establishment of a flat rate for certain classes of goods; and certain commodities, at any rate on foods, and to meet the needs of the fishermen and the agricultural people, the crofters, at least within the subsidised area. The Post Office will also be interested in this proposal. There should be a flat rate for any distance within the subsidised area, in the same way that there is a flat rate for postal packets. A person sending fish from the more distant or smaller isles to the mainland should not be penalised. There should not be any discrimination within the subsidised area, but all the people within that area should enjoy the benefit of the flat rate on the specified commodities, which should be operated on the same principle as the postal arrangements. The question of extending that principle will, I hope, be supported by other hon. Members.

It may be said that some of these proposals cannot be afforded under the terms of the subsidy, and I partly agree. I would prefer to see a higher subsidy serving its purpose fully than a smaller subsidy serving the purpose less well. It is not unreasonable to suggest that a higher subsidy would bring greater benefit than the smaller subsidy. I would prefer that we had a larger subsidy with better conditions if we cannot have nationalisation. I look forward to the time when these essential services will be run not for the benefit of vested interests but run by the State for the general benefit of the people.

I am glad to learn that two new boats are to be built and that at last third-class sleeping accommodation is to be provided on the boats. That will be a blessing to many people who have to travel in them. Some of these boats are a good deal more than 10 years old at the present time, and 10 years hence they will, of course, be 10 years older than they are now. They will be very much more out of date by the time the contract is finished, even the "Loch Ness" which is the most modern is three years older than the Government, and while I am prepared to admit that its condition is butter than the dilapidated condition of the Govern-men, nevertheless, it is not the most modern of boats by any means, and the others are considerably older. I have travelled in these boats practically every month, and I know what it is to go into a boat which is sometimes not altogether seaworthy, and, what is equally important from the point of view of travel, is not altogether passenger worthy. Have we to wait for 10 years before the "Loch Earn," for example, is replaced by another boat? I am not suggesting that the boat does not serve the purpose as well as we could expect her to do, but we have a right to expect a better boat. We do expect the Minister to give consideration to the importance of good transport facilities in these parts. He mentioned being himself delayed in the Isles 22 hours. I have had to struggle for three days, from Monday morning to Wednesday night, between Oban and Castlebay, and it is not a pleasant experience. It is a depressing experience. In addition it all adds to the costs of a family who have to travel a longer time and pay for additional meals and other things. I think the company should bear the costs of people who are delayed in this way on these journeys. I am glad to have the assurance that the third class accommodation is going to be improved, and I hope the Minister means that it really will be improved. It is within the power of the Government to decide the specifications of new boats. I hope the Minister will do his best; and I accept the promise which he has given.

There is one matter to which I must refer, and that is the Stornoway steamer. The "Loch Ness" is put down as capable of 13 knots: it does 11 knots. We have been promised that the new boat will do 14 knots. I can assure the Minister that this will not at all satisfy the people in the Lewis district. They will not be satisfied with a boat which is going to do the journey in just a little less time than the present boat. They have asked for a 20 knot boat with steam, hoped for a 17 knot boat, and will be dismayed at getting a 14 knot boat. Fourteen knots is not a modern speed for such boats. I hope the Minister will insist on a boat of higher speed and that he will carefully consider the specifications. Seventeen knots is not too high a speed to ask for, and I hope the Minister will not think they are unreasonable in asking for this. The hon. and learned Member for Argyllshire (Mr. Macquisten) has referred to the service as it was 40 years ago. There was only one disadvantage and that is that the boats used to come from Oban and not from Oban, Kyle and Mallaig as they do now. This arrangement of the three ports is the better by far. I hope the Minister will give consideration to the claims of the people from Harris to Barra for a daily service. The least I hope and ask for is extension from May till the end of October of the summer services. They ask for the restoration of the service which they had 40 years ago.

Regarding piers the Minister mentioned that the pier at Tarbert was recently reconstructed, the pier at Lochboisdale in good condition and the Scalpay pier re- cently improved. He did not mention the pier at Lochmoddy, the piers at Barra, Castlebay and Northbay which are utterly unworthy of being called piers, the pier of Tiree, which cannot be used by the average steamer going there if the sea is even choppy, and the pier at Leverburgh, which is falling to pieces, so that one cannot take a car on to it with any hope of getting the car off again. The piers are in a very bad state. The Minister knows all these things, because he knows the Islands very well, and I hope he will insist on the local authorities taking advantage of the recent Enabling Bill to remedy these matters. I hope the Secretary of State will also consider the giving of financial assistance at the same time.

There is another matter which is of great importance to the fisherwomen and fishermen who have to go to the Islands in the fishing season. Hundreds of them are often crowded on to the ordinary boats. We must get the MacBrayne company to put on an extra boat to take these people across to the Islands instead of crowding them on to the ordinary single service, where they have to sleep on the decks, with perhaps a mattress under them and a thin sheet over them as their only protection against the winds of the Atlantic. I am sure that if the Minister would approach the company and use his influence with a view to getting some shelter at Kyle especially provided and some sort of canteen from which the people could get refreshment, these things could be done. I am sure that these little comforts could be obtained if the Minister would use his influence with Lord Stamp— certainly not the most reactionary of men.

In the interests of the Islands, I hope the Minister's specifications will be, as he has promised, of the very best. I hope he will also insist on some of the older tubs being taken off and better steamers provided. We have great hopes of the tourist industry, in which I know the Minister is himself directly interested. I take his assurances to-night, perhaps a little more generously than he intended, to cover not only the points he has mentioned, but his interest also in further improvements in the steamers which are used on these lines. In the interests of the tourist industry, the local industries, which are absolutely essential to the economic life of the Islands, and the interests of the people who travel to and from the Islands, I ask the Minister to consider the suggestions I have made. It is only once in 10 years that we are able to discuss these matters, and although I apologise for having detained the House for a long time, I do not apologise for any of my suggestions, which I consider to be more moderate than those which the people in the Islands are making.

10.34 P.m.

Sir Murdoch MacDonald

When the Minister introduced the contract and asked the House to approve it, he examined it meticulously article by article, and with his usual extreme lucidity, he made every article plain. However, I must admit that I was astonished that he omitted to refer to a matter to which reference was made immediately afterwards by the right hon. Gentleman the Member for West Stirling (Mr. Johnston). Possibly he left it to his colleague, the Secretary of State for Scotland, to deal with it, but it did not seem to me that he examined the fundamental fact about this contract. Why is this contract being made? It is being made because life in the Western Isles and on the Western seaboard of Scotland would be impossible unless reasonable facilities for transport were available at reasonable rates. When the original contract was made it was found that not only had the Post Office to provide a subsidy of £21,500, but that the Scottish Office had to provide a further subsidy of £28,500, and that second subsidy was really for the purpose of enabling cheap transport to be made available for the service of the Western Isles.

Since that contract was made circumstances have changed considerably. There has been in the Western Isles a state of depression, if not of absolute poverty and a lowering of the standard of living. A vast number of people are out of employment—a far greater number than there was when the previous contract was made. I would have thought that those circumstances would have been taken into account in making this new contract. It is true, as the Minister pointed out, that a sub-committee of the Scottish Economic Committee called the Highlands and Islands Committee was set up with the sanction and approval of the previous Secretary of State for Scotland. They examined this question, and it so happens that their report was almost contemporaneous with the signing of the final contract. It was well known to the general public all the time that committee was sitting—for two years at least—that the rates in the Western Isles were at an impossibly high level. I will not weary the House with further examples because the right hon. Gentleman the Member for West Stirling (Mr. T. Johnston) gave sufficient to enable the House to judge whether those rates were reasonable or not.

It is evident that if these islands and the Western seaboard are to remain populated, a reduction of transport rates is one of the major things to be attended to in order to enable the people to obtain an economic living. They have not that at the moment but if transport charges were reduced to a reasonable level, they would be put in the same position as people on the mainland who are closer to the markets. I am sure it is the anxiety of everybody to see that the people are distributed as equitably as possible throughout the country. They should not be concentrated in great masses in the large centres as at present giving the people who supply those centres with agricultural produce an advantage over those who are separated from the large centres by long distances and particularly those, like the people of the Western Isles, who are separated by a great distance over the sea as well as over the land from these markets.

I then address myself to this problem. What are these reasonable rates to be? We have a reply to that question in the report of the Economic Committee. They say that if 25 per cent., on the average, were taken off the rates that might be considered reasonable. That might mean a 50 per cent, reduction in some rates and perhaps no reduction at all in others, such as luxuries, but on actual necessities there would be the possibility of reduction larger than the average of 25 per cent. I then asked myself what that would mean to the Government financially. Under this contract the subsidy is to be £60,000, which includes the contribution of the Post Office and the Secretary of State. The previous contributions were £8,300 less. The increase in that respect will undoubtedly be swallowed up in increased wages. As a consequence there will be no chance of any of the money that is now being allocated going in reduction of rates. The Minister rightly did not mention the possibility of a reduction.

He mentioned that the rates would be stabilised for the next two years at the present figure. As this Highland Committee has reported that the transport rates should be reduced something like 25 per cent., I asked myself what this represents. It will represent a figure of something like £40,000.

Therfore, with this £60,000 we want a further £40,000, and I feel certain that if the Minister asked the House for £100,000 for this purpose and explained that transport rates were to be such in the Western Islands that there would be no continuation of the de-population that has been going on for the last two or three generations, every Member would gladly acquiesce. I was glad to hear the Minister say that all he was stating in his lucid exposition would not interfere with the consideration that was to be given to the Committee's report. I hope that earnest and quick consideration will be given to that report, because time is of the essence of the problem in this matter while people are drifting rapidly away from the Western Isles. I, therefore, hope that the Secretary of State will have something to say on this report, and will indicate that something is to be done in the way of further increasing the grant. I am certain that if he indicated that at a reasonable date in the future the amount would be increased to £100,000 so that transport rates could be lowered, everybody in the House would acquiesce.

10.43 p.m.

Mr. Kirkwood

I was delighted to hear the manner of approach to this question by the Minister of Transport because, like myself, he has roamed the Western Islands and is therefore in a position to face this question in a different way from most of the Transport Ministers in my time in the last sixteen years who have known nothing about the question. Therefore, I have great hopes that he will face this problem sympathetically, because anyone who has visited the Western Islands is bound to be alarmed at the terrible conditions under which the people there and in the Highlands of Scotland exist. I want to deal with the question of MacBrayne's ships. There has been a great revolution and a change for the better since the time when a Member for the Western Islands gave an invitation to the hon. Member for Camlachie (Mr. Stephen), the hon. Member for Bridgeton (Mr. Maxton) and me to see the terrible state of affairs under which the fisher girls had to exist, and the sort of transport they had when they had a vessel seventy years old. The only time the hon. Member for Bridgeton and myself had seen like conditions of transport was when we sailed from Marseilles to Algiers. In both cases the passengers were huddled together on deck, and the only difference was that there were warm zephyrs blowing in the Mediterranean night while in crossing the Minch the conditions were as wild and terrible as only those know who have made the journey.

Terrible conditions still exist, and although MacBrayne's service now is very much improved the House must remember that those improvements were forced upon the company by our agitation here. This is not a philanthropic institution. It is a delusion to walk away with the idea that MacBrayne and Company are nice, kind, philanthropic Christian gentlemen, although one of the chiefs is known as "Holy Willie" and passes with all the majesty of a fine Christian gentleman who is building Christian churches all over Scotland. We notice that the first essential here, laid down in no uncertain fashion, is 5 per cent. interest. On any money which we on these benches can put into cooperative societies we are getting only 2 per cent., and if my colleagues knew of any undertaking in which we could get the same guarantee of 5 per cent. we should not consider that we were being kind, generous and philanthropic in putting our money into it. We are not going to be "kidded" in that fashion.

Apart from that, the Highlands and Islands of my native land are becoming deserted. It is a tragic scene, and it is one of the disgraces of the British Empire. The Secretary of State for Scotland promised that he would himself see to it that the pier at Armadale was made all right. In the month of July last year he promised that the pier at Broadford would be made all right, and only 25 per cent. of that pier needs to be repaired in order to make it quite easy for ships to put in there.

The Secretary of State for Scotland (Mr. Colville)

At Question Time to-day I answered a question about that pier, and was glad to say that the Treasury have promised assistance in the restoration of the pier subject to certain procedure.

Mr. Kirkwood

I am very glad to have got that concession. The matter is evidently making some headway. As I said to the Secretary of State on that occasion, there is no man in Scotland who will pay more tribute to him than I will, irrespective of party, if he does what he has the power to do; and should the Cabinet stand out against him, then if he will ask this House to ensure that the needs of the people in the Western Isles and the Highlands are seen to I am satisfied that the House will stand by him. If anyone looks into this matter he will feel broken-hearted, I am sure, to think that a hardy, intelligent race of men, whom the Romans themselves could never defeat, are being driven from their native land. Already to-day it has been said that this British Empire may have to call on these men again, as it did in the last War, and has done in every war in the last 130 years. No part of the British Empire has contributed more towards making the British Empire possible than the men from the Highlands and Islands of Scotland. If it happens again, the men will not be there. The Highlands and Islands are being depopulated at a rate beyond the wildest dreams, and one of the reasons is bad transport. Transport to-day is the very life blood of a country, and they have no means of transport. MacBrayne's ships pass within a mile of Armadale Pier. I have been appealed to time and time again in the past 15 years for them to call there, but they do not do it because it does not pay them. This is a matter that should be beyond payment. I would advocate anything to get us out of the trouble, even a subsidy for shipping. We are busy discussing that now with the Cabinet. We subsidise beet and wheat. Why should we not subsidise the Highlands and Islands to raise men and women? One of the finest reservoirs of human beings in the British Empire is being tapped dry and here is an opportunity for the Secretary of State for Scotland, in conjunction with the Transport Minister, who has roamed the Highlands and Islands. It is not enough to approach it in a sympathetic fashion. We want more than sympathy. We want action, and I am sure if the Secretary of State is prepared for action the House will support him.

10.53 p.m.

Mr. Watkins

I should not intervene in a Scottish Debate were it not that my union, the Railway Clerks Association, feel that something ought to be said in the House of Commons regarding their position. There is a Fair Wages Clause in this contract. The complaint of our members who are employed by Messrs. MacBrayne and Co. is that that clause is being violated. It has not been observed in the past and, unless there is some change, it will not be observed in the future. The wages and salaries paid to our members are £30 or £40 a year less than those that the railway company pay for precisely the same work in the same districts. The hours that pursers are called upon to endure are excessive, there is little or no pay for overtime and Sunday duty and, generally speaking, the service conditions and rates of pay cannot be regarded as being in harmony with the Fair Wages Clause.

We have intimated these facts to the Ministry of Transport. We let them know about them before Christmas. so I was rather surprised when the Minister said that he had only just heard about those complaints. Our members complain that the yare not receiving the benefits of the Fair Wages Clause and are denied the right of trade union protection and negotiation. Our members are surprised about this, because Messrs MacBrayne, Limited, deal with the National Union of Seamen for the men on their ships, the Transport and General Workers' Union for their servants on the land, and with the Navigators' and Engineering Officers' Union for the men who are in that union; yet they refuse recognition to the appropriate trade union for their clerks, pursers and supervisors. In this case, as in many other cases, it seems as though the employers regard trade unionism as something appropriate for manual labourers but not appropriate for what are usually called black-coated workers. We say that black-coated workers have just as much right to the protection of a Fair-Wages Clause as have seamen, lorry drivers or any other group of workers.

I further submit to the Minister that the Railway Clerks' Association is the appropriate trade union for these members to join and to represent them in negotiations with their employers. The Railway Clerks' Association caters for railway clerical, supervisory and administrative workers and also for those classes of workers in allied undertakings. Messrs. MacBrayne, Limited, are un- doubtedly an allied undertaking. They work in close combination with the railways. There are through bookings from London to the Western Isles, partly by rail and partly on MacBrayne's boats. The company have made a point of this close relationship with the railways. The chairman of the company, speaking on 30th August, 1937, used these words: For some little time now the company's services have been operated under the mutually beneficial influence of friendly arrangements with the principal railway companies, and unprofitable rates are being steadily removed. About 50 per cent. of the capital is railway capital. There are two main directors and at least two other local directors on the board. It, therefore, can be rightly said to be an allied undertaking, and a proper one for its workers to want to come into the Railway Clerks' Association.

The Minister said that the work which MacBrayne's staff are doing is different from that which the railway clerks and supervisors are doing. I assure the Minister that the most expert examination has been undertaken by our Scottish officers, who understand this matter very thoroughly, and that they assure me that the work done by the men and women on the boat side of the London Midland and Scottish Railway and of the London and North Eastern Railway, is identical with that done by Messrs. MacBrayne's staff. The London Midland and Scottish Railway's staff at Gourock and the London and North Eastern Railway's staff at Craigendoran are doing the same work as Messrs. MacBrayne's staff at Glasgow and elsewhere, and you have this curious anomaly, that Lord Stamp, president of the London Midland and Scottish Railway, who recognises the Railway Clerks' Association and is a party to our agreements and faithfully and honourably applies them in the London Midland and Scottish Railway service, refuses to recognise the Railway Clerks' Association and to adopt the rates of pay and conditions of service in this allied undertaking. One of the directors is the chief marine superintendent for Scotland of the London Midland and Scottish Railway and is familiar with the work that is done by clerks, supervisors, and pursers in his department, and he must know that the work which is done by MacBrayne's staff is similar.

I would ask the Minister also to believe that this is no quarrel between two trade unions. We have involved in our membership, as the Minister rightly said, 76 out of a staff of 104, about three-quarters of them, but the directors of Messrs. MacBrayne have circularised the staff to join in membership with the Coastlines, Limited, and Associated Companies Clerical Staffs Guild, which is not a trade union. Messrs. MacBrayne themselves subscribe to its funds, and the very essence of a trade union is that it must be an independent body. If it is not independent, it cannot negotiate with that freedom which our members on Messrs. MacBrayne's staff desire. The Railway Clerks' Association has striven to gain recognition by this board ever since September, 1937, and we desire that Messrs. MacBrayne should undertake to recognise us as the appropriate negotiating authority for our grades in their employment, in the same way as they already recognise other trade unions for the grades proper to those unions.

The Minister has very kindly looked into this matter and has had some communication with Lord Stamp. He tells us that he has secured a promise that Lord Stamp will raise this matter at the next board meeting—that is, the question of the propriety of discussion with the Railway Clerks' Association on salaries and other matters. I wish he had not used that word "propriety," as if there was any question on that point. The extraordinary thing about this is that this Matter has already been discussed by this board of directors and has already been rejected by them. Their general manager wrote to us on 30th July last as follows: The matter of recognition was laid before my board at their last meeting, and the board regret that they are unable to see their way to accept recognition of the Railway Clerks' Association.' Where is the difficulty about it? Surely the National Government believe in trade unionism and are not going to incur the hostility of the trade union movement and the General Council of the Trade Union Congress by agreeing to large sums of public money going into an undertaking that does not carry out normal trade union obligations. The Minister tells us that he has had communications with the President of the London Midland and Scottish Railway. He tells us that there are five directors, two of whom are railway and one represents the Government. Is not that the majority that the Minister requires? Cannot he undertake now to accord us recognition? It is no extravagant or improper request.

I am not by nature very sceptical, but we have had some experience with Messrs. MacBrayne. Does the Minister of Transport know, for instance, that the Chief Conciliation Officer of the Minister of Labour has been trying for days and days to get this undertaking to agree to meet us to discuss this question, and has failed? Therefore, unless the Minister himself will take very drastic action, we feel that we are going to be left high and dry. After all, this is not primarily a matter for the directors of the undertaking; it is a matter for this House and for the Minister of Transport. We say that fair wages must be observed. That phrase, surely, is not just a decoration in a document, a little bit of poetry inserted in the prose. It must mean something. And fair wages can only be determined when they are fairly and freely negotiated with the firm concerned. Lord Baldwin, a year or two ago, when he was Prime Minister of this country, used these words: A free trade unionism is a bulwark of public liberty. That is what we ask—a free trade unionism. We feel that our members will not get justice and satisfaction by joining a house union which is subscribed to by the employers; they want independent representation; and I would ask the Minister—he could if he would—to use his influence to get the board of directors of the MacBrayne Company to accord us recognition and to carry out the Fair Wages Clause according to the letter and the spirit.

11.9 p.m.

Mr. Stephen

I do not wish to delay the House at this late hour, but I would not like the Debate to pass without, on behalf of my party, joining with my Scottish colleagues in pressing upon the Minister our view that a great deal more has to be done in order to help our people in the Highlands and Islands. As the hon. Member for Dumbarton (Mr. Kirkwood) said, the hon. Member for Bridgeton (Mr. Maxton) and I went to Stornoway and saw for ourselves the difficulties of the people in that part of Scotland, and we were convinced that it would mean a great deal to them if the Government were prepared to spend more money in helping the people in that part of the country. I wish also to take this opportunity of congratulating the hon. Member for Central Hackney (Mr. Watkins) on putting forward the claims of the staff on behalf of his association. I am sure that Members in all parts of the House will not agree to tolerate the present nonrecognition of the union but will insist that this firm should come into line with every other intelligent firm in the country as regards the recognition of the trade union. I hope the Minister will take a very strong line with regard to this matter, because in these days it is of the utmost importance that the trade union rights of the people should be preserved.

11.11 p.m.

Mr. Colville

My right hon. Friend the Minister of Transport explained the contract in considerable detail and with his customary lucidity, and I do not think the House would wish me to go over it again. But there are some points raised in the Debate which require a reply. First, let me refer to the speech of the hon. Member for Hackney, Central (Mr. Watkins). As regards the observation of the Fair Wages Clause, he will agree that if it be broken there are ample powers within the contract to have the matter effectively dealt with—by Clause 25, by subsequent action which the Minister could take under Clause 26, and under Clause 5, the arbitration Clause. But the recognition of a particular trade union is not for the Minister to enforce; it is a matter of the policy of the management. My right hon. Friend, however, in his careful statement on this matter in his opening speech, indicated that he was impressed with the number—76 out of 104 —of the clerks who were members of the Railway Clerks' Association, and that he was authorised by Lord Stamp to say that he would raise the question at the next meeting of the directors of the company. I will not add to the statement except to refer to the interest my right hon. Friend has in the matter. Lord Stamp himself was not at an earlier meeting when the matter was discussed.

Mr. Watkins

Am I to understand that the Minister of Transport himself is, as it were, to keep hold of this matter and receive from the head of the London Midland and Scottish Railway Company a report of what transpires, so that he is fully informed of any development?

Mr. Colville

My right hon. Friend is a party to the contract and he will naturally be interested in what transpires, and will be fully informed.

Mr. Mathers

Are the Minister's desires, or any wish of the Minister's, to be communicated to the Government director on the board?

Mr. Colville

The Government director will, no doubt, be aware of the statement of my right hon. Friend to-night

The right hon. Gentleman the Member for West Stirling (Mr. Johnston) raised the question of public versus private enterprise, but I do not think he would expect me to debate that to-night. Our concern to-night is to get the House to agree with this contract as a wise one to adopt in present circumstances. The right hon. Gentleman based most of his doubts as to the wisdom of the present contract on the Highlands and Islands report, which indicates the need for certain large-scale action. I believe the right hon. Gentleman thinks that apart from this consideration the present contract is adequate in view of the terms set before him. He gave the report his whole-hearted blessing, but he seemed to be in some doubt earlier to-day as to the central provision of the report, which is the appointment of a Commissioner to the Highlands, and he referred to him as a commissar. Perhaps he and I in a close examination of the report might find many points for discussion before its provisions can be implimented.

Mr. Johnston

I am not sure from the recommendation of the Islands and Highlands Committee that there should be an immediate reduction of fares and freights.

Mr. Colville

The right hon. Gentleman, as one who has had experience of administrative work, will agree with me tht when you get the report of a committee you cannot take individual items. You have to look at the picture as a whole and consider how much of the report you can act upon. The House might fairly ask me to answer three questions on that point. These are the questions. Why does this contract not give effect to any decisions of the Government on the recommendation of the Highlands and Islands report? Does the contract preclude the giving effect to any decisions of the Government on the report? Could not the old contract have been extended, say, for a year pending the decision on the report? The report is under careful consideration and examination, and I am in consultation with certain local authorities and other bodies on its provisions. The new MacBrayne contract had to be made for a period commencing in January of this year, so as to secure the maintenance of services in the Highlands and Islands after the expiry of the previous contract, The report was only received at the end of November, and it was clearly impossible to reach a decision either on the report as a whole or even on parts of it—parts to which the right hon. Gentleman referred—before the settlement of the terms of the new contract.

The new contract is, therefore, on the general lines of the old contract, but, as my right hon. Friend was careful to state, without prejudice to the consideration of the references to services and freight charges in the Highlands and Islands Report. If the result of the Government's consideration of the Highlands and Islands Report should be in favour of the adoption of any of its recommendations as to seaborne services, there is nothing in the contract to preclude effect being given to such a decision. Any modification in the services can be dealt with in Articles 6 and 7, subject to the possibility of additional payment to the company being necessary. Again any reduction in charges which might be approved could receive effect by means of an amending contract which might require an additional payment to be made to the company. I have calculated the amount of Exchequer money which might be required to implement the suggestion in the report of an all round reduction of 25 per cent. in freights at approximately £50,000. This is rather more than the amount stated by the hon. Member for Inverness (Sir M. MacDonald) who said that it would be £40,000. I mention that figure in order to show the House the sort of region into which the Government would be required to go if assistance was to be given.

The mere continuation of the old contract after 31st December would not in our opinion have been satisfactory. That is a point which I should answer, because the question was put to me, Why do we not carry on temporarily under the old contract? Temporary prolongation would not be satisfactory. The financial provisions of the contract had become ineffective in the circumstances which have existed in recent years and it was agreed by both sides that the remedy should not be postponed.

A temporary prolongation merely as a stop-gap arrangement would have produced a state of stagnation, and in such circumstances we could not have hoped to get the Company to proceed with the improvements in the service, with the new ship for the Islands service and the new ship for the Stornoway service. The old contract was extended for two months, one of the reasons being to bring the contract into line with the year of the Company's accounts on which the arrangements are based.

The main point made by those who have spoken is that the Highlands and Islands should receive a greater measure of special treatment in order to assist them to face their difficulties. There is one aspect of the conditions in the Islands which I ought to mention. Several hon. Members have spoken of their rapid depopulation. They are misinformed. The population situation is changing. A very large decline in population in the Highlands and Islands took place in the century from 1831 to 1931, amounting to about 95,000. From 1911 to 1931 about 48,000 people left. It is noteworthy, however, that in recent years the decline in population appears to have been largely stopped, owing to the reduction of emigration. The recent report of the Highlands and Islands Committee referred to that fact. It showed that in 1931 the population was 293,212, and that in 1936 it was estimated by the Registrar-General to be 291,848. Therefore, fewer than 1,400, or less than 1 per cent., had left, or approximately one-tenth of the decline in the preceding years.

Mr. Kirkwood

Is not the right hon. Gentleman showing that the statement I made is absolutely correct? There is nobody there to come away.

Mr. Colville

The Registrar General's estimate is that 291,848 are still there. Therefore, the depopulation is not so rapid as some hon. Members suppose. There is, however, an alteration in the age groups, the age groups there consisting of a greater proportion of elderly people and not so many young people.

That, however, is not a feature of the Highlands alone, because other rural districts of the country are suffering from the same conditions. I should like to correct an impression in the minds of many people, and in the minds of hon. Members, judging from the speeches tonight, that the Islands are being rapidly depopulated. In the last 10 years, while the old contract was operating, the rate of depopulation was decreasing. None the less, we have the serious problem of the age groups.

Mr. Kirkwood

Is not the right hon. Gentleman aware that during the Napoleonic wars, which lasted 21 years, Skye alone sent to the British Army 10,000 men. To-day it could not send 2,000.

Mr. Colville

The hon. Member is wrong. The Highland Division of the Territorial Army, which includes the Islands, is at present over strength. From the point of view of recruiting for the Territorial Army, there is no region that does better than the Highlands and Islands. I ask the House to accept the Motion and to recollect that between 1928 and 1938 considerable improvements have been made in the services offered to the Highlands and Islands by this company and that the present contract ensures that this improvement will be maintained. New vessels have been and are being built, and if we pass this contract, we shall be continuing the policy of assisting the Highlands and Islands of Scotland in their transport services. There would be no degree of transport at all in these areas but for the special provision made by the Government. The Government recognise that they have to make special provisions and by approving of this contract we shall ensure that this provision shall be maintained.

11.26 p.m.

Mr. MacNeill Weir

I beg to move, in line 4, to leave out "approved," and to add instead thereof: disapproved with a view to Article 2 (which empowers the Minister to nominate a person to serve on the Board of Directors of the contractors) being altered so as to empower him to nominate two persons. I understand, Mr. Speaker. that the form of words in the Amendment on the Order Paper in the name of the right hon. Member for Stirling (Mr. Johnston) is out of order, but that you are prepared to accept an Amendment in the form in which I have moved it. In view of the fact that the principle of the Amendment has been fully discussed I will not take up any time of the House but will formally move it.

11.27 p.m.

Mr. Mothers

I beg to second the Amendment.

I propose to follow my hon. Friend and be equally brief. The principle of the Amendment has been argued already and has been accepted by the Government up to the present. We believe that if there were two Government directors on the board we should have some influence over shipping interests which appear to dominate on the board. We think the Government should have an opportunity of carrying out their policy in respect of trade union representation on this board, and that two directors would enable them more properly to carry out what we consider to be the right policy.

Mr. Speaker

The Amendment which appears on the Order Paper in the name of the right hon. Member for Stirling (Mr. Johnston) is technically out of order, but the words which the hon. Member has moved are in order.

11.29 p.m.

Mr. Burgin

This Amendment asks the House to reject the contract. There is no other course. The agreement has to be accepted or rejected. Under the Standing Orders a contract of this character, over a period of years, involving a public charge and dealing with mails, is only binding if it is supported by a Resolution of the House. The Amendment is therefore a wrecking Amendment, and is intended to reject the entire contract. I must ask the House to reject the Amendment. It is suggested that a second Government director would assist in some form of control over the board of the company. The Government directors would not have a majority: it is not suggested that they should have a majority.

Mr. Kirkwood

Two would be better than one.

Mr. Burgin

The Government director is intended to have access to documents and papers, in order to be able to satisfy the Government that nothing takes place within the company without their knowledge. If there was not a majority, that is the maximum that a Government director could do. In my submission, whether there is one in five or whether there are two in six, the result is precisely the same. The Government are entirely satisfied with the right of access to documents, papers and information which a Government director on the board would assure them. I cannot allow the House to imagine that the rejection of this contract, with all the advantages which it secures for the Highlands and Islands, would assist the Government in any attempt at control over Messrs. MacBrayne. Quite the contrary would be the case. Therefore, I must advise the House—I can do no other—that this Amendment would have the effect of cancelling the whole of the recommendations that have been put in regard to this contract, would involve its ceasing, and would necessarily mean that the whole of the financial arrangements relating to the building of ships and to services would come to an end.

11.32 p.m.

Mr. Speaker

The right hon. Gentleman is really raising the point of Order on which I ruled out the original Amendment standing in the name of the right hon. Gentleman the Member for West Stirling (Mr. Johnston). The reason I ruled it out of order was that it was a wrecking Amendment: it would negative the Motion, but put nothing in its place. The Amendment as it is now worded does, of course, negative the Motion, but the suggestion is that the Government should bring in an altered contract as suggested in the new Amendment. This Amendment is perfectly in order.

11.33 p.m.

Mr. Johnston

I thank you for your Ruling, Mr. Speaker. It is a long time since I heard such a tactless closing speech as that which the Minister of Transport has just made. There has been no obstruction to his proposals, and all the speeches that have been made have been helpful and constructive. The right hon. Gentleman is well aware that the precise terms of the Amendment are the terms which were indicated to us by Mr. Speaker, and to designate our Amendment a wrecking Amendment is not, in my opinion, the way in which the right hon. Gentleman can facilitate the passage of his Measures through the House.

Mr. Burgin

May I point out that I had no intention whatever of suggesting to the House that there had been any obstruction? When the terms of the Amendment in its revised form were suggested, I was not aware that it was within the power of the House to amend the contract at all. By the Rules of the House, the contract either stands in its entirety or falls in its entirety. What I was endeavouring to point out to the House—and if I used an unfortunate expression, I am the first to desire to withdraw it—was that the Amendment is not one of that character which can be accepted by the Government and which involves the passing of the contract subject to an alteration. It involves as a necessary consequence, the rejection of the contract as a whole.

Mr. Johnston

Or, as Mr. Speaker has said, delay—that is the withdrawal of this precise form of contract and the introduction of a new, and, as I endeavoured to prove when I spoke previously, an amended contract on the exact lines proposed by the representatives of Coast Lines and the London Midland and Scottish when they appeared before the Select Committee of this House. So far from that being a wrecking suggestion, it was a suggestion originally promoted by Lord Stamp and Sir Alfred Read. Let me remind the House, and particularly hon. Members opposite, what it means. The original proposal, agreed to by Conservative, Liberal and Labour Members—the unanimous recommendation of the Select Committee—was that there should be three representatives of the railway company, three representatives of Coast Lines and two representatives of the State. Subsequently, that proposal was departed from and the Government in 1928 produced an agreement in which the figures were, two representing Coast Lines, two representing the London Midland and Scottish and one representing the Government. That has been the position from 1928 until now, but in addition to the cutting down of the State representation, two further facts have emerged. One is that the State's contribution has increased by £10,000 per annum. The other is that there is a local directorate consisting of three representatives of Coast Lines, and three representatives of the railway company with no representative of the State. The position, therefore, which the Government have urged on the House to-night as a satisfactory one, is infinitely worse than the position which existed in 1928 as far as the public interest is concerned, and the proposal is infinitely worse than the proposal made by Lord Stamp and Sir Alfred Read—

Sir R. W. Smith

I understood the right hon. Gentleman's statement was that the original proposal was for a board consisting of three, three and two, thus making eight in all with two Government representatives but the Government propose a board consisting of two, two and one, which is only five in all with one Government representative. Do I understand that the right hon. Gentleman desires that the numbers should be two, two and two?

Mr. Johnston

I am sure the hon. Member has not been giving that attention to my remarks which they deserve. I was trying to prove that, in addition to the original figure submitted by the Committee of which the hon. Gentleman himself was a Member and with which he agreed, there has been created a local directorate on which there are three London Midland and Scottish directors, three Coast Lines directors and no State director. Instead of having two out of eight, which was one in four, the position now is that of having one in five. In 1928 we got a raw deal—

Sir R. W. Smith

As I understand the proposal which is being put forward at the present time by the right hon. Gentleman's party, they want to carry out exactly the proposal of the Committee which was for three, three and two.

Mr. Johnston

That is not the proposal at all, and if the hon. Gentleman would listen to what we are saving, it would save the time of the House. We are deliberately asking that the Government shall have power to nominate two Government representatives instead of one. We are not asking even that this shall be immediately carried into effect. We are only asking that they shall take power to nominate two representatives. I hope I have made it clear that in no sense is this a wrecking Amendment, and that any wrecking that has been done, has been done by the Government. I do not blame Lord Stamp or Sir Alfred Read. I believe that they would have honourably fulfilled their bargain. We are endeavouring to insist that as far as possible the public interest shall be safeguarded. It is not being safeguarded by watering down the suggestion of a Select Committee of this House.

11.41 p.m.

Mr. Walkden

I rise to protest against the description which the Minister has given of the position of Government directors of a concern in which Government money is largely involved. I have always understood that the representative of the State on a public or semi-public concern should serve as a director, and not as a superior auditor to which the Minister has reduced him. He is there to see that the direction of the company is in accordance with public policy, which means in accordance with the declared wishes of the Government of the day. We have been involved in labour questions to-night and have had the assurance that an eminent member of the board will raise the question of the clerks employed by this company. We shall be glad to accept that assurance knowing whence it comes, but we have had so much unsatisfactory treatment from this company. It is quite as bad as the administration of the Imperial Airways. There is something wrong in this company like there is in Imperial Airways, and we should like to see the Government director a pukker director on the board. I support the view that we should have a second man who could see that this concern is carried on in accordance with the policy of the Government.

11.43 p.m.

Sir R. W. Smith

Reference has been made to the finding of the Committee, and I want to point out that their unanimous finding was that the directorate should consist of three from the London Midland and Scottish Railway, three Coast Line representatives and two Government directors. That is not what is proposed by the Amendment, and that is why I do not support the Amendment.

11.44 p.m.

Mr. Gallecher

I want to draw attention to the description given by the Minister

of the Government director. The shipping directors are concerned with the business of making a profit out of the business. The railway directors, too, are concerned with making a profit. The Government director should not be a superior auditor; he should be a director whose special interest is to see that the welfare of the people in the Highlands and Islands is cared for. That is the big problem, not the welfare of MacBrayne's or the railways. The problem is the welfare of the people who are being driven from their homes in the Highlands and Islands. There is, therefore, plenty of work for two Government directors apart from just looking through papers and accounts. They should look after the welfare of the people with whom we are supposed to be concerned in this contract.

11.45 p.m.

Mr. J. Morgan

There is one point which I should like to have made clear before I go into the Lobby. Is it a fact that this company would not exist at all were it not for the financial assistance of the State and its participation in the concern? If that is so, surely the case for strengthening the Government directorate is established. I cannot imagine that when the hon. Member for Central Aberdeen (Sir R. W. Smith), as a member of the committee, recommended that there should be two Government directors, he imagined they would be two auditors, but meant that their status would be equal to that of the London Midland and Scottish directors, or the directors of the steamship company. In view of the fact that this company exists partly upon assistance from the State prima facie there is a case for the State taking it over and managing it.

Question put, "That the word 'approved' stand part of the Question."

The House divided: Ayes, 130; Noes, 81.

Division No. 30.]	AYES.	[11.47 p.m
Acland-Troyte, Lt.-Col. G. J.	Burgin, Rt. Hon. E. L.	Cross, R. H.
Adams, S. V. T. (Leeds, W.)	Butcher, H. W.	Cruddas, Col. B.
Agnew, Lieut.-Comdr. P. G.	Carver, Major W. H.	De Chair, S. S.
Albery, Sir Irving	Cary, R. A.	Dixon, Capt. Rt. Hon. H.
Allen, Lt.-Col. Sir W. J. (Armagh)	Castlereagh, Viscount	Dodd, J. S.
Anstruther-Gray, W. J.	Chapman, A. (Rutherglen)	Dorman-Smith, Col. Rt. Hon. Sir R. H.
Aske, Sir. R. W.	Christie, J. A.	Drewe, C.
Astor, Hon. W. W. (Fulham, E.)	Clarke, Colonel R. S. (E. Grinstead)	Dugdale, Captain T. L.
Baldwin-Webb, Col. J.	Cobb, Captain E. C. (Preston)	Duncan, J. A. L.
Beechman, N. A.	Colville, Rt. Hon. John	Dunglass, Lord
Broadbridge, Sir G. T.	Conant, Captain R. J. E.	Eckersley P. T.
Brooke, H. (Lewisham, W.)	Cook, Sir T. R. A. M. (Norfolk N.)	Elliot, Rt. Hon. W. E.
Browne, A. C. (Belfast, W.)	Cooper, Rt. Hn. T. M. (E'nburgh, W.)	Ellis, sir G.
Bull, B. R.	Crooke, Sir J. Smedley	Erskine-Hill, A. G.
Fox, Sir G. W. G.	Macmillan, H. (Stockton-on-Tees)	Scott, Lord William
Fremantle, Sir F. E.	Magnay, T.	Shakespeare, G. H.
Furness, S. N.	Maitland, Sir Adam	Shaw, Captain W. T. (Forfar)
Gledhill. G.	Margesson, Capt. Rt. Hon. H. D. R.	Smiles, Lieut.-Colonel Sir W. D.
Gluckstein, L. H.	Markham, S. F.	Smith, Sir R. W. (Aberdeen)
Grant-Ferris, R.	Mayhew, Lt. Col. J.	Snadden, W. McN.
Grimston, R. V.	Medlicott, F.	Somervell, Rt. Hon. Sir Donald
Hambro, A. V.	Mills, Major J. D. (New Forest)	Southby, Commander Sir A. R. J.
Hannah, I. C.	Mitchell, H. (Brentford and Chiswick)	Stanley, Rt. Hon. Oliver (W'm'l'd)
Harbord, A.	Morgan, R. H. (Worcester, Stourbridge)	Strickland, Captain W. F.
Heilgers, Captain F. F. A.	Morrison, G. A. (Scottish Univ's.)	Sueter, Rear-Admiral Sir M. F.
Hely-Hutchinson, M. R.	Munro, P.	Thomson, Sir J. D. W.
Hepworth, J.	Neven-Spence, Major B. H. H.	Titchfield, Marquess of
Herbert, Major J. A. (Monmouth)	Nicolson, Hon. H. G.	Tufnell, Lieut.-Commander R. L.
Higgs, W. F.	O'Neill, Rt. Hon, Sir Hugh	Turton, R. H.
Hogg, Hon. Q. McG.	Orr-Ewing, I. L.	Wallace, Capt. Rt. Hon. Euan
Holdsworth, H.	Radford. E. A.	Ward, Lieut.Col. Sir A. L. (Hull)
Holmes, J. S.	Ramsden, Sir E.	Waterhouse, Captain C.
Hope, Captain Hon. A. O. J.	Rathbone, J. R. (Bodmin)	Whiteley, Major J. P. (Buckingham)
Horsbrugh, Florence	Rayner, Major R. H.	Wickham, Lt.-Col. E. T. R.
Hudson, Capt. A. U. M. (Hack., N.)	Reid, J. S. C. (Hillhead)	Williams, C. (Torquay)
Hunloke, H. P.	Ropner, Colonel L.	Willoughby de Eresby, Lord
Kerr, J. Graham (Scottish Univs.)	Rosbotham, Sir T.	Winterton, Rt. Hon. Earl
Lamb, Sir J. Q.	Ross, Major Sir R. D. (Londonderry)	Wise, A. R.
Leech, Sir J. W.	Ross Taylor, W. (Woodbridge)	Womersley, Sir W. J.
Lipson, D. L.	Royds, Admiral Sir P. M. R.	Young, A. S. L. (Partick)
Llewellin, Colonel J. J.	Ruggles-Brise, Colonel Sir E. A.
Mabane, W. (Huddersfield)	Russell, R. J. (Eddisbury)	TELLERS FOR THE AYES.—
MacAndrew, Colonel Sir C. G.	Salmon, Sir I.	Mr. James Stewart and Colonel Kerr.
MacDonald, Sir Murdoch (Inverness)	Salt, E. W.
McKie, J.H.	Schuster, Sir G. E.
NOES.
Adams, D. (Consett)	Harvey, T. E. (Eng. Univ's.)	Pearson, A.
Adams, D. M. (Poplar, S.)	Hayday, A.	Poole, C. C.
Adamson, Jennie L. (Dartford)	Henderson, A. (Kingswinford)	Price, M. P.
Adamson, W. M.	Henderson, T. (Tradeston)	Quibell, D. J. K.
Alexander, Rt. Hon. A. V. (H'lsbr.)	Hills, A. (Pontefract)	Robinson, W. A. (St. Helens)
Bellenger, F. J.	Jenkins, Sir W. (Neath)	Sexton. T. M.
Benn, Rt. Hon. W. W.	John, W.	Silverman, S. S.
Burke, W. A.	Johnston, Rt. Hon. T.	Simpson, F. B.
Cape, T.	Jones, A. C. (Shipley)	Smith, Ben (Rotherhithe)
Charleton, H. C.	Kennedy, Rt. Hon. T.	Smith, E. (Stoke)
Cocks, F. S.	Kirkwood, D.	Smith, T. (Normanton)
Daggar, G.	Lawson, J. J.	Sorensen, R. W.
Dalton, H.	Leach, W.	Stephen, C.
Davidson, J. J. (Maryhill)	Leonard, W.	Stewart, W. J. (H'ght'n-le-Sp'ng)
Davies, R. J. (Westhoughton)	Leslie, J. R.	Tinker, J. J.
Davies, S. O. (Merthyr)	Logan, D. G.	Tomlinson, G.
Dunn, E. (Rother Valley)	Macdonald, G. (Ince)	Walkden, A. G.
Edwards, Sir C. (Bedwellty)	McEntee, V. La T.	Watkins, F. C.
Evans, D. O. (Cardigan)	Maclean, N.	Watson, W. McL.
Fletcher, Lt.-Comdr. R. T. H.	MacMillan, M. (Western Isles)	Welsh, J. C.
Foot, D. M.	MacNeill Weir, L.	Westwood, J.
Gallacher, W.	Maxton, J.	Whiteley, W. (Blaydon)
Graham, D. M. (Hamilton)	Messer, F.	Williams, T. (Don Valley)
Greenwood, Rt. Hon. A.	Milner, Major J.	Woods, G. S. (Finsbury)
Grenfell, D. R.	Morgan, J. (York, W.R., Doncaster)	Young, Sir R. (Newton)
Griffiths, G. A. (Hemsworth)	Morrison, Rt. Hon. H. (Hackney, S.)
Griffiths, J. (Llanelly)	Noel-Baker, P. J.	TELLERS FOR THE NOES.—
Hall, G. H. (Aberdare)	Paling, W.	Mr. Mathers and Mr. Anderson.
Harris, Sir P. A.	Parker, J.

Main Question put, and agreed to.

Resolved, That the contract, dated the 13th day of December, 1938, between His Majesty's Government and David MacBrayne, Limited, for the maintenance of transport services in the Western Highlands and Islands of Scotland, and for the conveyance of mails in connection with the said services, be approved.

The remaining Orders were read, and postponed.

It being after Half-past Eleven of the Clock, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Five Minutes before Twelve o'Cock.