HC Deb 23 April 1940 vol 360 cc120-78

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Munro.]

7.39 p.m.

Mr. Ridley (Clay Cross)

On Wednesday of last week I addressed a Question to the Minister of Transport in the following terms: What applications he has received from the railway companies to increase their rates and fares; and whether he proposes to remit them for decision to the Railway Rates Tribunal?"—[Official Report, 17th April, 1940; col. 955, Vol. 359.] The hon. Gentleman said he had received an application from the controlled undertakings supported by certain figures and accompanied by a request for a 10 per cent. increase in their charges. He had considered the application and had reached the conclusion that the increase was justified and he had, on his own volition and responsibility, issued an order approving the increase. I wish to draw further attention to the matter in the hope of making my position clear in this sense. The Minister is the object of my criticism, and not the railway companies. I do not, for the moment—although I may do so later—deny, or question, the need for certain increases. All I say is that sufficient evidence has not been produced to justify the increases asked for, as it would have been if the matter had gone to the Railway Rates Tribunal. I have no special reason or desire to heap opprobrium on the companies because they have asked for a 10 per cent. increase in charges. Such an increase, after all, is less than the general increase in the cost of living since last September, and there has been a smaller increase upon railway charges of 1914, than the increase in the cost of most other substantial commodities as compared with that period. On Saturday, I travelled from London to Norwich and back, and paid the same fare as I should have paid 30 years ago. It is not my purpose, primarily, to question the justification for this increase. I must, however, seriously question the methods employed by the Minister in approving them.

The Minister referred on Wednesday to something that, he said, had been approved in the White Paper Debate on 13th February. There was only one Motion before the House on that occasion. Our Motion was one of disapproval. There was no Motion positively approving the terms of the White Paper, and certainly no Motion positively approving the terms of the Minister's speech. I am not trying to make what might be called a trifling debating point. But, as I hope to show, a point of some substance, for the White Paper contained no reference of any kind to the Railway Rates Tribunal. Obliquely it did, if you like, in paragraph 10; but only very obliquely. If the defeat of our Motion is held to be an implicit approval of the Minister's decision to abolish the Railway Rates Tribunal, it must at the same time be held to approve of the terms of the White Paper itself, so far as it obliquely referred to the Tribunal. Paragraph 10 of the White Paper reads: Fares and charges will be adjusted to meet variations in working costs and certain other conditions arising from the war, and machinery will be provided to this end. Nobody knows where that machinery is. Nor can anybody read the statement without believing it to mean that the machinery would be some form of independent examination, before which pleadings could be made as to any application, and consideration given to ways and means. But there has been no such machinery employed by the Minister in considering this application. There is the Minister's own speech in the Debate. He said: If it appears that an adjustment of charges is justified, the Minister will, unless he considers it in the circumstances unnecessary or undesirable— The Minister nods his approval of his own reservation; I will say a word about that in a moment— seek the advice of the permanent members of the Railway Rates Tribunal acting in an advisory capacity. I do not mean this in any sense personal to the Minister, but those words represent a very deceptive reservation. Everybody thought that that undertaking meant that when the Minister received an application of this character and of this magnitude, he would, before reaching a decision, take the advice of the Railway Rates Tribunal acting in an advisory capacity. He goes further. He says: Any representations by a representative body of users as to the level of charges will be considered by the Minister and, if necessary, referred to the consultative committee for advice."—[Official Report, 13th February, 1940; col. 641, Vol. 357.] The Minister has done nothing of the kind. Something different may be in his mind. I do not wish to be unfair to him; but he has neither used the kind of machinery indicated in the White Paper —the kind, I suggest, which was in the mind of every hon. Member when he read paragraph 10—nor has he taken the steps which every hon. Member thought that in these circumstances he would have taken, of at least obtaining the advice of the members of the Railway Rates Tribunal in a consultative capacity. I will meet the Minister, as far as to say that, if he had taken the view of the Tribunal in a consultative capacity and they had agreed with him, I would have modified my view for the sake of peace and harmony. But he has completely ignored them. In taking the step which he has taken, he has done something else. He has driven those of us who were prepared to give, and did give, a qualified support to the White Paper into the most severe criticism of the White Paper itself. I will tell him in a moment why I use that adjective.

First, let me say that, in my view, the suspension—the Minister used the word "suspension"—was a grave injury to sound public policy. For nearly 20 years this Tribunal has heard applications of this kind from companies and traders in public. Almost everybody could appear, sometimes, but not necessarily, with learned counsel. The proceedings were entirely judicial, and at the conclusion, the report not only said what were the findings but gave a detailed resume of the arguments and of the reasons for the decisions reached by the Tribunal. Nobody could possibly question the nature of the decisions. Occasionally, as in the case of the London Passenger Transport Board, Class C, decisions were questioned for reasons which were entirely outside the jurisdiction of the Tribunal but otherwise, as far as I know, nobody has ever questioned the fairness and the judicial character of the decisions reached. Now, the safeguard of public hearings of evidence is gone. Hearings take place in private rooms and decisions are given by a very interested party, the Minister of Transport. He has become judge and jury in his own case.

It is my further submission that this is, within the provisions of the White Paper, the Minister's case, rather than the companies' case. The companies think—as Lord Stamp said a few days ago, and as other people have said quite plainly—that in their view they would be better off financially without the White Paper. Lord Stamp made that quite plain when he presided at the annual meeting of the L.M.S. Company. If the Minister chooses to treat that statement with mirth, I can only repeat that it is what Lord Stamp said. Even the Minister of Transport cannot question the capacity of the economic adviser to the Government. Many people think that if the companies had been left alone, they would, on their existing charges, have got somewhere nearer their standard revenue. That is the general impression among not altogether inexperienced people.

I am not arguing for a moment that that would have been a desirable arrangement; indeed, I shall be found arguing in a contrary sense in a moment or two. Whatever may be the immediate result, it will ultimately be a peculiar arrangement. It requires the companies to earn a pound for the Minister for every pound they earn for themselves. I would like the Minister to tell the House exactly what he meant last week when he said that the finance of the present situation would involve the Government in a liability of £400,000 a week, which means £20,000,000 a year, or half the £40,000,000 guarantee. Is the House asked to believe that in the present circumstances the undertakings are only earning £20,000,000 a year, the smallest amount in their long history? I refuse to believe it, and so will a great many other people. If it is true then how much more reason there is for having public confidence by public inquiry before the Tribunal. I recognise, as the Minister must, that this is no academic matter. Many working people, when prices rise, may have to economise by eating less food, but they cannot economise on less travel in going to work. There is no doubt of the resultant hardship to many working people.

In the reply which the Minister was good enough to give last Wednesday he quoted a considerable number of figures about increased cost. I do not propose to challenge the figures supplied to the House by the Minister, but he must have had some other figures within the picture. He must have had an estimate of gross revenue for 1940. If he had not, the increased-cost figures become entirely meaningless. He must have had some estimate. If he had not, on what basis did he reach his conclusions, and if he had, why had not the House itself last Wednesday the benefit of that information? I should like to know, for it raises, in the absence of the traditional decisions of the Railway Rates Tribunal, a very serious matter of public policy in the sense that the Minister is an interested party.

How much further is this policy going and what is the Minister's financial target? The real standard revenue is £56,000,000? In order to get it, the companies have to earn £68,500,000, and the Minister takes the difference between £43,500,000 and £56,000,000. If that is his objective ultimately, then it is a preposterous and impossible one for two reasons. The sum of £56,000,000 never was a reasonable figure as the standard revenue. As far as the four groups are concerned, it is based upon the profits of 1913, a boom year. The companies were very prosperous in 1913 because their employés were very poor. If their employés in 1913 had been decently paid, their profit figure in that period would probably have been £10,000,000 or £15,000,000 less than it was, and their standard revenue would consequently be less in 1940. But it is further inexplicable because it is related to an unhealthy capital structure which needs realistic re-writing. I remember asking the right hon. and gallant Gentleman four or five months ago whether he contemplated adopting that process, and he thought that it would be quite an impossible undertaking in the period of war. I should have thought that the emergency and the necessities of war would have made such an undertaking even more necessary now than in ordinary and normal circumstances. The companies have a gross capital liability of £1,100,000,000, an overburdened liability, badly arranged, and the heaviest in the world in relation to the mileage, and a great deal of it totally unjustifiable. That amount, which is totally unjustifiable, makes just that margin which represents the difference between fairness and unfairness in the White Paper. To maintain a standard revenue objective, which, as a global figure, becomes £68,500,000, and is itself, as far as £56,000,000 of it is concerned, based on conditions which ought never to have been accepted, and to give the Minister power under a monopolistic condition to enable or compel them to earn, not their standard revenue, but £12,500,000 more, is clearly an outrage.

I raise this matter in that sense in order, I hope, that the Minister will clearly see that the charge against him is that he has destroyed a piece of public machinery which had complete public confidence, and in its place he makes his own decisions in his own interest, and these decisions, however fair, reasonable or justified, are bound to be an object of considerable suspicion because he is known to be a deeply interested party in the matter. I have reached a conclusion that as far as the White Paper is concerned—although I did give it my qualified approval and I do not now altogether disprove of it—that a half-hearted arrangement, such as the White Paper undoubtedly is, with its divided interests in a financial sense, is bound in the end to be unsatisfactory and that it will completely break down under the pressure of conflicting interests and competing events.

The Minister referred, in reply to my Question last week, to the Debate of 13th February which took place on our Motion in favour of the public ownership of all forms of public transport. The great majority of the Members of this House sitting opposite may choose to laugh a Motion of that kind out of court, but the Government are too strong to be laughed out of court for ever. I heard a story recently of a barrister who was instructed to defend a man charged with murder and robbery with violence and on his brief were the words, "laughed out of court." It would be far better to do one of two things, either to avoid criticism, which must in these circumstances be seriously directed to him, by re-establishing for every subsequent application the Railway Rates Tribunal in its complete judicial capacity, or alternatively, or as supplementary to that, really to consider again the whole question of public transport on the basis of our own proposals, seeing how vitally necessary it is that there should be complete co-ordination, which would overcome financial interests, and give for the first time, a transport undertaking equipped to undertake a public need in its own way.

8.0 p.m.

The Minister of Transport (Captain Wallace)

I certainly do not intend to quarrel either with what the hon. Gentleman the Member for Clay Cross (Mr. Ridley) has said to-night or with the way he has said it. I cannot by any means go the whole way with him, but I fully appreciate that he has addressed himself to the case, which he honestly thinks he has, with a good deal of knowledge, soberly and without heat. I, in turn, will try to put the case which I think I have, with equal absence of passion. I do not think it would be proper to go into the wider questions which he has raised in regard to the capital structure of the railways nor again into the question of some of the fundamental provisions of the White Paper. While I fully appreciate the hon. Gentleman's point that the Debate, which was by way of being on the White Paper, turned out to be on a wider problem, that was not the fault of His Majesty's Government. I should, in fact, have been very glad, and it might, indeed, have saved me from creating at least one misunderstanding, if I had been enabled to devote an hour's speech to the White Paper, and not half the time to the wider issues. The hon. Gentleman, as I understand it, wishes to challenge the Government in general, and me in particular, on three points. First, the necessity of adjusting railway charges to meet increased costs; second, the actual amount of the increase under various heads; third, and more particularly, the fact that they have been authorised under the Defence Regulations to come into force on 1st May without railway users being given the opportunity to lodge objections and argue their case.

Mr. Ridley

I am sorry to interrupt the right hon. and gallant Gentleman, but I did not say that the 10 per cent. was not justified. I said that no public evidence had been produced to justify it.

Captain Wallace

If the hon. Gentleman thinks the increase justified, so much the better. [Hon. Members: "No."] I will try, then, to meet him by attempting to justify the 10 per cent. itself. I said in the Debate on 13th February, when we were discussing the wider issues raised by the right hon. Gentleman the Member for South Hackney (Mr. H. Morrison), that the whole foundation of the financial agreement between the Government and the railway companies was that the controlled undertakings should operate on an economic basis. In other words, that we should pay for the use of the railways as we used them and not allow liabilities to accumulate. I also said that "if increased profits are obtained, they will be obtained for the most legitimate reason—namely, because extra work by the railways has entitled them to extra remuneration." In deciding these financial terms of control—and I do not want to pin the hon. Gentleman down to having approved them, although I still think that if the party opposite had disapproved them, they might have put down another Motion—we were most anxious to avoid a repetition of the circumstances of the last war when the railways were guaranteed a fixed return irrespective of the work they did. The management, therefore, had no direct interest in receipts or expenditure; no attempt was made to maintain fares and rates at an economic level; and the consequence was that shortly after the war, when steps were taken to place the railways on a self-supporting basis, it was necessary to make drastic increases in charges.

In 1920 increases were imposed varying from 25 per cent. plus a flat addition of 3d. a ton, to 60 per cent. plus 1s. per ton, according to the class of goods. Within a few months it was necessary to impose further increases. Accordingly, passenger fares, which had been increased by 50 per cent. in 1917 with the object of discouraging travel, were further increased to 75 per cent. above pre-war rates, and the rates for merchandise were increased to 100 per cent., plus flat-rate additions of from 6d. to 1s. per ton. On top of all that, sums amounting to about £150,000,000 had to be found during and after the war to implement the guarantee of net receipts and to meet deferred liabilities, mainly as a result of failure to meet increased working costs by current increases of charges. In those circumstances it is not really surprising that the Government decided that in this war we would keep the railways solvent, and that, as they are bound to carry out the directions of the Government irrespective of the commercial advantage or otherwise of doing so, increases in working costs beyond their control must be met by such current additional charges as are justified by the facts.

The alternative to raising charges is a policy of subsidy, keeping the railway charges at an uneconomic level and thus, in fact, subsidizing industry and travel largely irrespective of whether in any particular case they happen to be contributing to our war effort or not. Moreover, a policy of that kind would have to be extended to other forms of transport in competition with the railways, as was the case in the last war. Uneconomic railway rates nearly bankrupted coastwise shipping in the last war, and to go in for a policy of first subsidising the railways and then other forms of transport would, in the view of the Government, be to follow a costly and mistaken precedent. There would probably be disastrous consequences at the end of control when presumably transport would once more become self-supporting.

In regard to one particular point the hon. Gentleman made in his speech I want to say quite frankly that a remark I made last Wednesday in answer to a Supplementary Question was completely misunderstood in more quarters than one. When I spoke of the liability to reimburse the railways by £400,000 a week, I was, of course, referring to the undertaking to increase charges to offset increased working costs. It has nothing to do with the guaranteed net revenue, which is the sole financial liability of the Exchequer under the agreement. Arguments based on the assumption that the actual net earnings of the railways were £400,000 a week below the guaranteed minimum are quite unfounded.

Mr. Watkins (Hackney, Central)

Will the right hon. and gallant Member tell us what he did mean? What did that £400,000 a week mean? Did the Minister have an increased cost of £20,000,000, which he divided by 52, as there are 52 weeks in the year, which gives £400,000 a week? Is that the case? If it is not, will he tell us what it is?

Captain Wallace

I hope the hon. Member will be good enough to listen to what I have to say, as I am coming to that point in a moment or two. The criticism has been made that in view of the great increase in railway traffic since the outbreak of war there is no justification for increased charges, because, it is said, the railways must be earning en- hanced profits. It is perfectly true that there has been a big increase in freight traffic, although the abnormal weather during the winter and particularly during February greatly reduced the tonnage of traffic which passed over the railways. But the war has by no manner of means brought increased traffic to all parts of the railway system. For instance, there has been a substantial falling off in passenger traffic, and the London Passenger Transport Board have suffered heavy losses in earning power. During the 32 weeks since the beginning of the war the gross receipts from freight traffic have increased by £13,750,000, or 24 per cent. over the corresponding period a year ago. On the other hand, passenger receipts have declined by £4,000,000, or 7 per cent. The net increase in gross receipts is, therefore,£9,750,000, or 8½ per cent.

It must not be assumed that the additional war traffic on the railways is carried without a substantial increase in expenditure. Hon. Members who have anything to do with railways know that much of this increased traffic is of an urgent character, which involves special working and serious interference with other services, perhaps more remunerative, and also entails costly adjustments and rearrangements of services. But it may be asked—although I do not think the hon. Member asked it—whether the benefit which is expected to accrue from the additional traffic which the railways are now carrying ought not to be offset against an increase in working costs.

There are several reasons for rejecting this view. In the first place, the moderate increase in gross traffic receipts is measured against a period during which the railway traffic was at an exceptionally low ebb, when the railways were working far below their normal capacity and were consequently carrying an unduly heavy burden in respect of non-variable expenditure. In the second place, if it is correct to treat the increased spread of railway non-variable expenditure as an offset against increased working costs when traffic increases, it should follow that a reduced spread of such expenditure should fall to be added to the increased working costs if traffic should diminish—owing, for instance, to damage from air raids. The effect of this might in certain circumstances well be to bring about an increase in railway charges far in excess of the rises in the level of prices and wages.

Mr. Ridley

I am completely mystified by what the right hon. and gallant Member is saying.

Captain Wallace

I am sorry, but I must do my best to put the case before the House. Other hon. Members will be able to take part in the Debate, and at the end the Parliamentary Secretary will be able to reply.

Mr. John Wilmot (Kennington)

Would it not rather short-circuit the Debate if the Minister of Transport would tell us what is the net revenue rate at which he is running?

Captain Wallace

I cannot tell the hon. Member. We cannot work it out week by week, but I have given the percentage increase in gross receipts.

Mr. Wilmot

But surely they are submitted by the Railway Executive?

Captain Wallace

I will ask the hon. Member to be patient. I am asked to take this question seriously, and I am dealing with it in a serious way. I have taken a great deal of trouble to present the case to the House, and I hope I may be allowed to do so. It is not allowed for in the agreement that if the traffic falls they should be allowed to have any increase in respect of overheads in their working costs. In the third place, one of the effects of introducing an element of increased spread into the assessment of railway charges would be to diminish if not actually to extinguish the profits which must legitimately follow additional traffic. It would remove the incentive which the railways should have for securing the maximum effort. If I could control both sides of the account, it would be perfectly obvious that the railway companies could be restricted in all circumstances to the net revenue they earned last year. By allowing them to be recompensed for additional working costs which are outside their control, and by allowing them to benefit from the larger user of the railways, the railway companies, working under Government control, have a chance of earning more than they earned last year. These seemed to the Government good reasons for not re- quiring that alterations in the incidence of the less flexible items in railway expenses, should be entered into the ascertainment of variations in working costs.

I want to turn now to the actual amount of the increases, which, under the terms of the Agreement, are to be met by increases in rates, fares and charges. That, I understand, is the second point upon which I have been challenged.

The increase in working costs is estimated by the Railway Executive Committee to be £26,750,000 in respect of the 19 months from the beginning of control up to 31st March, 1941. In the case of the London Passenger Transport Board the House will recollect that under the agreement the Exchequer bears the deficiency up to 31st December, 1939. Of this amount of £26,750,000, which the Railway Executive Committee has submitted as being a legitimate amount for recoupment by extra charges, £4,500,000 relates to the increased cost of operations under war conditions, the principal item being due to the slowing down of the movement of traffic as a result of the black-out. That is not very easy to put into pounds, shillings and pence, and I agree with the Railway Executive Committee that the estimate they have made of this particular sum should be further examined in the light of experience. This sum is not at present being taken into account.

That, therefore, leaves £22,250,000; and that is made up, as I told the hon. Member in my answer last week, of £9,750,000 increase in wage rates, £2,500,000 for allowances to employés serving with His Majesty's Forces, and £10,000,000 for increases in the price levels of materials. The estimated cost of the increase in wage rates has been arrived at by taking the number of employés concerned and multiplying these by the appropriate rates of increase. The principal item is, of course, the war advance to conciliation, salaried and workshop staff applied as from 1st January this year at an annual cost of over £6,000,000. The next largest item is represented by decision No. 6 of the Railway Staff National Tribunal—colloquially known as the Salter Award—which operated from 28th October, 1939, and accounts for £1,000,000 annually. The second main item, the allowances to employés serving in His Majesty's Forces, I think requires no justification in this House. In September, the Government agreed that the railway companies and the Board should make up to their regular staff serving with the Forces the difference between their civil and Service pay on the same basis as the Government apply to the Civil Service.

Miss Wilkinson (Jarrow)

Does that mean that the railway companies in fact do not pay anything towards the allowance to their staff serving in the Forces, and that the Government just pay the whole bill?

Captain Wallace

This is a legitimate increase due to the war.

Mr. Lathan (Sheffield, Park)

It is passed on.

Captain Wallace

These are items which, under the terms of the agreement, fall to be made up by increased fares, rates and charges.

Mr. J. Wilmot

The passengers pay them.

Captain Wallace

The increases in respect of materials are calculated by ascertaining the actual prices paid in August of last year and during the controlled period for a representative volume of the different classes of commodities used. Examples of individual increases are—rails, 22 per cent.; sleepers and crossing timbers, 40 per cent.; and canvas, 78 per cent. These increases are based upon the conditions which obtained in March. In the case, for example, of coal and coke for railway working, the price taken is only 1s. a ton over pre-war costs. Current prices are substantially higher than that, and every 1s. a ton increase means an addition to railway costs of about £700,000 a year. Taking it all round, the weighted average of the increases of costs in March, 1940, as compared with August, 1939, was approximately 17 per cent. I submit to the House that these additional expenses are matters of fact which have been proved to the satisfaction of my officers, just as, no doubt, they could be proved to the satisfaction of any other impartial tribunal.

If it is taken that those increases are proved, the Railway Agreement requires me to make such an increase in charges as will cover these additional working costs. An all-round increase of 10 per cent. in railway charges, if applied as from 1st May, is estimated to yield an additional £18,000,000 in a full year, or £16,500,000 during the 11 months from 1st May until 31st March of next year. On the assumption that it will be possible to obtain an additional £2,000,000 between now and the end of next March from increases in road fares on the London Passenger Transport Board system—a question with which I will deal in a moment—the total increase is estimated to produce £18,500,000; that is, £3,750,000 less than the proved increase in working costs, and £8,250,000 less than the estimate of the Railway Executive Committee of the total amount which, under the agreement, should be secured by means of additional fares, rates and charges up to March, 1941.

Of course, as regards the future, the product of any given percentage increase in railway charges depends upon the volume of railway traffic, and that, in these days particularly, is governed by a number of imponderable factors. I very much hope it will be found that the increase will in practice yield more than the estimate, and accordingly, I have not attempted at present to budget for the whole increase; but this does not alter the fact that sooner or later, under the terms of the Agreement, it will have to be dealt with.

As regards the question of fares on the road services of the London Passenger Transport Board, the House will appreciate the difficulty with which we are faced in endeavouring to impose a 10 per cent. increase on traffic which consists very largely of 1d. and 2d. fares.

Mr. Lathan

Will the right hon. and gallant Gentleman kindly make clear just what the railway companies ask for? From an earlier statement which he made, I understood that they asked for a 10 per cent. increase. He now refers to a larger claim which they have made.

Captain Wallace

I will make that point clear. The railways have submitted a claim for £26,750,000 to be made good between now and the end of March next year. We have agreed that £4,500,000 should be set aside for the present, leaving £22,250,000, which I regard as having been justified. The railways have asked for a 10 per cent. increase, and they and we hope that that increase, although at the present moment it is estimated to produce £16,500,000 between 1st May and March next, will, in fact, produce a bit more. I am not anxious at this moment to invite the House to agree to the imposition of more than 10 per cent. all round.

As far as the London Passenger Transport Board system is concerned, it is very difficult to impose an increase of 10 per cent. owing to the 1d. and 2d. fares. The method of dealing with fares under 7d., as far as the four main-line railways and the railway services of the London Passenger Transport Board are concerned, follows an established practice already hallowed by the Railway Rates Tribunal; but where the great majority of the fares are 1d. and 2d. the situation presents peculiar difficulties. Hon. Members opposite will be glad to know that in this case I have sought the advice of the three permanent members of the Railway Rates Tribunal, acting in a consultative capacity, as to the most equitable means of securing the necessary quota on the London Passenger Transport Board road services, and I have asked them to hold a public hearing.

If I have correctly appreciated the feelings of hon. Members opposite, not only as expressed by the hon. Member for Clay Cross, but as I have read them in particular organs of the Press lately, they object not so much to the fact that railway charges are to be increased—certainly the hon. Member opposite did not object to that—oreven to the actual amount of the addition, as to the fact that the new charges are to be imposed without any public hearing before the Railway Rates Tribunal. I explained to the House on 13th February that it was not possible to retain the jurisdiction of the Railway Rates Tribunal over the general level of charges of the controlled undertakings, and I put it on the ground that some more expeditious procedure than that of a court was required if the terms of the Agreement with the railways were to be carried out without a time lag which might well have very unfortunate consequences for railway users.

There is, however, another reason for which I have been obliged to abrogate the jurisdiction of the Railway Rates Tribunal over the general level of charges, and that is the reason to which I referred in my answer to a Supplementary Ques- tion last Wednesday. I hope the House will allow me to make the position clear by reminding them what are the functions of the Railway Rates Tribunal as laid down in the 1921 Act. In that Act, Parliament agreed that the four main-line railway companies were entitled to an aggregate net revenue of about £51,000,000 a year, and the duty of the Railway Rates Tribunal, as far as the general level of charges was concerned—this is the only one of its functions which has now been abrogated—was to see that they produced £51,000,000 a year, if it was possible for them to do so. That point, I think, has not been generally appreciated. The only reason that the Railway Rates Tribunal did not authorise increases in railway charges considerably beyond anything we have experienced in the last 12 years was that they were convinced that an increase of charges would not have achieved the desired object. We all know of the law of diminishing returns.

The war has made fundamental changes in the situation. The necessity for the rationing of imported fuel has affected the principal competitor of the railways, the virile and active road transport industry. If the Railway Rates Tribunal had been left with the functions Parliament gave them in 1921 so far as the general level of railway charges is concerned, they would have been bound to sanction an increase in railway charges sufficient to produce the standard revenue, if, as in my view would almost certainly be the case, they were of the opinion that the traffic would stand it. Therefore, I do not think that I was exaggerating when I stated, in reply to a Supplementary Question last Wednesday, that this particular function was abrogated more in the interest of railway users than anyone else. Of course, the hon. Member for Clay Cross, who opened this Debate, was no doubt perfectly right, in saying that Lord Stamp might consider the railways would have been better off without the White Paper. If we had no White Paper and the railways had been left to take advantage of the situation during the war years, then the Railway Rates Tribunal would have given an in crease in charges to produce the whole of the standard revenue—

Mr. Ridley

He did not refer to that.

Captain Wallace

But that is the point. I considered very carefully, in the light of what I said in the Debate on 13th February, which the hon. Member for Clay Cross has quoted perfectly correctly, whether I ought to seek the advice of the permanent members of the Railway Rates Tribunal or whether it was unnecessary to do so. I would ask the House to consider what sort of remit I could have given these gentlemen, or how far it would have been possible for them to assist me. They could not be expected to call in question the necessity of adjusting railway charges during the war, for that would upset the Agreement, nor would they have been in any better position to satisfy themselves as to the actual amount of the increases in working costs than have been the advisers of my own Department who have investigated them.

It seems to me, therefore, that all that these three distinguished gentlemen could have done in this particular case was to suggest variations in the incidence of the increase in charges—say, 20 per cent. for passengers, and only 5 per cent. for goods, or the other way about. It must also be remembered that if they were to hear evidence at all from railways users, it would be difficult, if not impossible, to limit the amount of evidence to which they would be asked to listen. Experience in relation to the Railway Rates Tribunal indicates that several months might well be needed for an inquiry of this kind. As I have already said, every week that a definite decision to implement this essential part of the agreement is delayed, an additional sum of something up to £400,000 is added to the sum which sooner or later has got to be met by increased charges. In view of this, I came definitely to the conclusion that the balance of advantage lay in favour of action at the earliest possible moment, and that I would be failing in my duty if, by seeking the advice of the members of the Railway Rates Tribunal on what was really a perfectly simple problem under the agreement, the Government were obliged later on to impose heavier charges on railway users, than would have been necessary if prompt action had been taken. Now, however, that charges are to be increased on 1st May so as to avoid what I consider to be this dangerous risk of a time lag, it is open to representative bodies of users to make representations to the Minister of Transport in regard to the increase. I have already promised to consider such representations and, if necessary, I will refer them to the permanent members of the Railway Rates Tribunal, acting as a Consultative Committee, for their advice. I want to make it perfectly clear, however, that the product of the general 10 per cent. increase all round must be maintained.

Miss Wilkinson

What is the good of putting them to that trouble?

Captain Wallace

Because that is part of the agreement, and with great respect to the hon. Member, the House assented and did not dissent to it on 13th February. I also want to make it clear that while the functions of the Railway Rates Tribunal in regard to the general level of charges have been abrogated for the reasons I have given, and I have not thought it right to seek their advice on the general question in a consultative capacity, the functions of the Railway Rates Tribunal in regard to the individual trader remain precisely the same as they were. It is still open to traders to go to them on questions of the classification of merchandise, exceptional rates, agreed charges, and all the other things.

It has also been suggested, and I want to deal with this point now, although the hon. Member for Clay Cross did not make it, that a prospective rise in railway charges of 10 per cent. all round was not consistent with the general policy of the Government. The Government have certainly never promised or suggested that it would be possible to avoid any rise of prices as a result of the war. On the contrary, the House knows that the outbreak of war produced in itself a number of new circumstances which rendered a certain rise in prices inevitable. The rise in wholesale prices abroad, the devaluation of the pound, difficulties in shipping and some inevitable general dislocation with industry at home in the change-over from peace to war-time conditions were all causes which contributed to an early rise in prices.

In the case of railways the Agreement reached is an Agreement to provide for, at the most, no more than a modest return upon their capital, and the conclud- ing sentences of the Chancellor of the Exchequer this evening make it clear that a further restriction is to be placed on them in that regard. It has never been any part of Government policy to subsidise rail costs, and it was therefore inescapably a term of the Agreement that an increase of rates and fares would be allowed to compensate them for any increase in working costs. The increase proposed for 1st May is, I think, the least that could be sanctioned in conformity, either with the railway agreement, or, indeed, with the decision that Exchequer subsidies could not in ordinary circumstances be made available to subsidise rail traffic. As to the method which I have adopted for imposing this increase, I have tried to show that if I had yielded to the temptation to take shelter behind the members of the Railway Rates Tribunal—and it might have been very comfortable to do so—the result would simply have been to put off the evil day and to increase the amount of the lag which sooner or later would have to be covered. The man who shivers on the brink of the sea does not find the water getting any warmer while he does so, and I saw no benefit to anybody, not excluding the railway users, in following a course so out of tune with the necessity for prompt action over every field of our national life. That is the justification for my action, and whether hon. Gentlemen opposite agree or not, I hope they will give me the credit of being perfectly frank about it.

Mr. F. Anderson (Whitehaven)

The Minister spoke about subsidies. Has he taken into account the munitions traffic which is not at the moment charged at an economic figure or at the general rate applicable to the carrying of goods by rail? Has he taken into account what is being done in that connection so far as an agreed figure goes?

Captain Wallace

Various Government Departments have been negotiating with the Railway Companies to carry their traffic on the best terms available to them in accordance with the ordinary commercial custom. I dealt with that point on 13th February. These negotiations have not all been completed. For instance, certain large Departments may feel that the volume of traffic which they are asking the railways to carry and the regularity of it may demand some further rate concession. That is one of the reasons why I have not tried on this occasion to budget for the whole of the claims of the railway companies because there are certain items which may be subject to further adjustment up or down in the light of further working experience.

8.42 p.m.

Mr. Herbert Morrison (Hackney, South)

I listened very closely to the speech of the right hon. and gallant Gentleman, following on the admirable introductory speech of my hon. Friend the Member for Clay Cross (Mr. Ridley). I am bound to say that the more I listened to the Minister, the less clear I was as to any sort of principles upon which this agreement was framed or upon which it was being administered. I can follow that you can make an agreement on the basis that as the companies had not a statutory right, but a statutory hope, of certain standard revenues under the Act of 1921, they would be given that standard revenue. I can follow a basis upon which you get the figure of their average net earnings over a selected period of years and say that it will be made up to that. I can follow all these things, but I cannot follow what the Minister of Transport has done if the interpretation I feel like giving to his speech is what I think it may be. In that case it seems to me that this agreement is a fraud on the community, a robbery of the railway user and not a fair proposition to the taxpayer in any way.

I presume that the operative paragraph of the agreement is No. 10 in the White Paper, Cmd. 6168. It should be noted that, presumably, this is not the agreement. It is a summary of it. We are still in the funny position that the full text of the financial agreement between the companies and the Government has never been brought to the light of day. That is a funny business. It is not right. All we have got so far is a White Paper which purports to give the outline of the financial arrangement between the Minister of Transport, the four amalgamated companies and the London Passenger Transport Board. All this business vitally concerns the average citizen, possibly as a passenger, possibly as a manufacturer, or distributor, or wholesaler, and we have a right to know the precise terms of this agreement and what it means. The more I hear the various things the Minister says and the modifications he has to make from one Parliamentary statement to another, the more uncertain I and my friends, and, indeed, hon. Members on the other side, are as to what the agreement means. I cannot quote the agreement because the House of Commons has not got it. It is a pretty monstrous position that it has not got it, and I would like the Parliamentary Secretary to tell us what is the objection to the House of Commons and the public having the full text. If it is hidden in the archives of the Ministry, I want to know why the House and the public cannot have it.

Here is paragraph 10 of the outline of the agreement, and the Minister has given an interpretation of it to-night which I do not think was made clear in the Debate of 13th February. That paragraph says: Rates, fares and charges will be adjusted to meet variations in working costs and certain other conditions arising from the war, and machinery will be provided to this end. In the Debate of 13th February I and other hon. Members asked the Minister a number of questions about the wording of that paragraph. What does it mean? I think the general body of Members, perhaps foolishly, took the view on 13th February that it probably meant that if working costs went up, then, after taking into account the increase of gross revenue, whether from passenger fares, goods or otherwise, the Government gave an undertaking that in the light of both sides of the financial statement there would be an adjustment in charges. Now we are told by the Minister, however—and I hope he will correct me if I am wrong—that the Government have given an undertaking, and are operating the undertaking, that, whether the gross revenue goes up or not, if the companies can prove that their working costs have increased, they are entitled to increase fares and charges to the extent of the increase in the working costs. Is that right?

Captain Wallace indicated assent.

Mr. Morrison

Now we know where we are.

Captain Wallace

But that is precisely what I said on 13th February.

Mr. Morrison

I do not think the right hon. and gallant Gentleman was so precise on 13th February. Let us, however, give him the benefit of the doubt. What does it mean? We have no data or details; we have only the extemporary statement of the Minister which is made across the Floor of the House. We have no White Paper giving the alleged details and the facts. Therefore, I cannot accept as conclusive the generalised statements which the Minister has made. This presumably must be the correct interpretation of the agreement, namely, that if the working costs were estimated to have increased £10,000,000 over the year, and if the gross revenue had at the same time increased by the estimated figure of £20,000,000, the railway companies were entitled to increase fares and charges by £10,000,000 giving them a further increase of £10,000,000 over the £20,000,000. That is the agreement. That is the Government's interpretation. If that be so, I have never witnessed such a swindle on the public as this agreement in all my life.

Mr. Watkins

The Minister is wrong.

Mr. Morrison

I well understand the surprise of my hon. Friend, but the Minister made the agreement, and that is what he says. If it is to be interpreted as meaning that under the agreement, if working costs are up by £10,000,000, notwithstanding the fact that gross receipts are up by £20,000,000, the companies are entitled to a further £10,000,000 from the users of the railways—[Interruption]. This is what the Minister says, and he agrees. If that is so, the thing is a fraud and a scandal, and the Government have been guilty of conducting business with the railway companies in such a way that they have put the business and interests of the railway companies in front of the public interest. Of all the foolish, wicked agreements any Government ever made, this is about the last word, and I say that such a Government, capable of concurring with an agreement of that kind and the Minister capable of making it, ought to be cleared out of office. The thing is a positive scandal and ought never to have seen the light of day.

How are these increased costs made up? I cannot argue about all of them, like my hon. Friends who are associated with railway organisations, but there is included £2,500,000to make up the difference between the service pay of men who have enlisted and their wages or salaries. Many public authorities and statutory companies are paying that difference. I thought the railway companies were doing it out of the goodness of their hearts and from patriotic motives, that it was to be done at the cost of their own shareholders, or at any rate in substantial part at their cost. Now I find that in their patriotism, in their desire to be considerate to their employés who join the Armed Forces, the railway companies have carefully arranged—and His Majesty's Government have helped them—that that money shall come out of the pockets of the fellow workers of those railwaymen, of the users of the railways and of the industries of the country. I have no doubt that railway investors are patriotic people, according to their lights, but the patriotism which, while theoretically making a sacrifice, passes that sacrifice on to the ordinary rank and file of the people, does not strike me as being good patriotism.

The Minister has admitted that the gross receipts of the railways have gone up. They have risen by £13,250,000 in respect of freights during the first 32 weeks. The passenger receipts have declined by £4,000,000. The net increase is, presumably, £9,250,000. It is useful to have these desultory figures which the Minister has given us, and which I hope I understand, but that is not the way to conduct public business. The Railway Rates Tribunal has not been used for reasons which the Minister has advanced, but the House and the public have not been told the details of the business. The House ought to have a White Paper giving the figures and the statistics upon which the Government's decision has been reached, and I ask the Government to give us an undertaking that such a White Paper will be produced, and it ought to include details of the Railway Agreement itself.

My hon. Friend the Member for Clay Cross has quoted what the Minister said on 13th February. The Minister gave an undertaking then that in the ordinary way the members of the Tribunal would be consulted and their advice sought, but that there might be exceptional conditions in which he could not do that. The arguments which the Minister has adduced to-day are arguments which he ought to have put forward on 13th February, because it now becomes pretty apparent that he never meant to consult the Tribunal. His defence is that if he had formally consulted them, with the full judicial procedure, it would have taken a long time—though I should have thought that could have been adjusted; and that if the full judicial, procedure had or had not been followed they would have had to take action under the Railways Act, 1921, and allow the railway companies the full standard revenue. I do not think they ought to have the full standard revenue, and I said so on 13th February; but if it be the case—this is an argument against myself, but for the moment I am talking morals and ethics—that the Government has deliberately avoided submitting this question to the Railway Rates Tribunal in order to prevent the railway companies having their lawful statutory rights, it is slick practice at the expense of the railway companies.

If the Government came to the conclusion, as well they might, as I came to the conclusion, that the companies ought not to have this optimum standard revenue, but should be permitted a revenue bearing some relation to the real capital of the undertakings, about which we have heard from the hon. Member for Clay Cross, and also to the net revenue which they had earned over a fair period of years, that would have been a fair basis of earning-power during the war, because I do not think the companies ought to be permitted to profiteer at the expense of the community during war. The Government might have said, "You are not going to have your standard revenue; you have never had it yet and were not likely to get it; and we are not going to let you get it as an incidental result of the war." The Minister has used against the companies one administrative expedient to prevent them exercising their statutory right, which he ought to have taken away from them by regulation or law, and has used the same expedient to prevent the public getting fair play. But the joke of the matter is that, having carefully excluded the Railway Rates Tribunal from judging the case for an increase, the Minister, when he found himself faced with the more complex and tricky business of road transport fares in London—politically tricky, too, I warn the Minister—then said, "Here is a dirty job for the Railway Rates Tribunal and I will bring them in." And he has brought them in, not to say whether an increase of London road transport charges is justified, but to let them advise him as to how to produce the extra £2,000,000 which he has evidently promised the undertakings—not whether it should be done, but how it should be done.

What is the result of all this? There will be a material increase in the fares of the travelling public, and also in the railway freight charges, which industry may pass on to the public by an increase of prices. What is the next thing which will happen? There will be a movement for increased wages and salaries. And so you go on. The Minister is here encouraging that vicious spiral which the Government have sought to avoid. He quotes the last war as a precedent for what he has done, and says that fares and charges then went up more. I know they did, but that war was a scandalous exhibition of spiral, spiral, spiral, with more or less inflation towards the end, which did nobody any good. I am sure that the trade unions are content not to profiteer out of the nation on account of the war, but to keep things steady, as long as the Government keep the cost of transport and other things steady. If the Government assist to increase the cost of living, there are bound to be applications from the trade unions for increases of wages and so on, and then we are right off again.

I do not wish to detain the House any longer, but I would conclude by expressing my agreement with the views put forward by my hon. Friend the Member for Clay Cross in opening this Debate. The public are indebted to him for so doing. I ask the Minister whether the interpretation of his action which I have given is right in substance and in fact, and whether he does not think it his duty to see that a White Paper is laid, giving the details and the facts about this business, together with the actual text of the agreements.

9.1 p.m.

Sir Reginald Clarry (Newport)

I have a very great deal of sympathy with the matter which is before the House, and I think that the House will be grateful to the Opposition for the opportunity of ventilating this very important subject, which affects everybody in the country. I noticed that the Minister, in his remarks with reference to the approach which was made by the railway companies, asked merely the rhetorical question: "What should he have offered them in answer to their request? What should he have replied to them?" I think that is the gist of the matter. I listened very carefully to the Minister's speech, and I heard no word about economy. I should have thought the obvious answer to the railway companies' approach would be: "Have you attempted to make every possible economy in administration before coming to me?" After all, there are war economies that could be made. Everybody in this country is now asked to make war economies, and surely the railway companies cannot be the only exception. I am sure there would be ways in which economies might be effected, in fuel, administration, staffing and wages. I do not mean by reduction in wages, but, for example, in stand-by jobs, where two men might take the place of a normal three. These questions should have been asked of the railway companies. I gather that the increase in revenue, during the same period as is taken for the increased cost, came to about £9,000,000. That should have been a set-off for any request made for an increase in railway rates.

I agree with the right hon. Gentleman who last spoke that the Government are encouraging the vicious spiral by granting this 10 per cent. and that it is contrary to the policy of the Government. As I understand it, that policy has been to endeavour to keep down the cost of living. To that end, the Government have subsidised food up to now to the extent of £1,000,000 a week, or £50,000,000 a year. This 10 per cent. on all rates and charges will put up the cost of living of everybody. Transport charges bear a very big relation to total costs in almost everything that we eat, use or wear, and it all has to be passed on. The Government are indirectly encouraging this spiral and are putting up the cost of living to that extent, apart from inciting the railway companies to discuss or agree with any increased charges for wages and salaries. Some thing ought to have been done in that respect.

I only wished for a few moments to lodge my protest against the steps being taken before proper investigation had been made as to economies that might have been effected, and which would have been a better way to meet any reduction in net revenue, even though the matter were left to the end of the war, under a guarantee to be adjusted then. As it is, this will give rise to a gradual increase in the cost of living and to the encouragement of the vicious spiral.

9.6 p.m.

Mr. John Wilmot (Kennington)

The Minister of Transport this afternoon has certainly exploded one of the major bombshells of the war. I am certain that very few people will believe that the interpretation which he has now put upon the meaning of the White Paper and the so-far-secret railway agreement is the right one. The statement about the Treasury being called upon to find means of providing another £400,000 a week has naturally been discussed in financial circles ever since the right hon. and gallant Gentleman made it last Wednesday. I have not found anybody who really believes that they were the facts of the case. Everybody thought that the Minister, in giving his answer to a Supplementary Question, had made a slip of the tongue. In reply to the most categorical questions from my right hon. Friend on the Front Bench, the Minister has supported the statement that he then made, about increased costs being made up, irrespective of increased traffics and falling overhead on-costs.

I would like the Minister to say even now whether or not this is the proper interpretation. It is almost unbelievable. If this method of dealing with big industries in war-time is typical, and if the Minister of Transport is behaving no worse than the Minister of Supply or the Ministry of Food, we really are in a monstrous state of things. What the Minister of Transport has said not only cuts across the principles of equitable policy which the Chancellor of the Exchequer laid down at the end of his Budget speech to-day, but it really states a major financial scandal. There must be some way in which, even at this hour, Parliament can assert itself and rewrite this monstrous arrangement. I believe that, even yet, the Minister has to lay an Order. I do not think that the White Paper agreement provided that the Minister could do the whole of this thing in secret.

I would like to reinforce the very able remarks of my hon. Friend the Member for Clay Cross (Mr. Ridley) with regard to the Railway Rates Tribunal. On 13th February the Minister of Transport made another statement with regard to his intentions in this matter. It has not been quoted, and with the permission of hon. Members I would like to quote it now. It is so absolutely misleading. He said: Although it is not possible, because of the necessity for quicker decisions than can be obtained by the machinery of the tribunal, to retain its jurisdiction exactly as it is in peacetime, we do not intend that the safeguards should be abandoned."—[Official Report, 13th February, 1940; col. 641, Vol. 357.] This is as clear as a statement can possibly be made. He said: We do not intend that the safeguards should be abandoned. What are the safeguards? They are a judicial body, with experience acquired over many years. There is a public hearing—a very important safeguard—giving the right to railway users, passengers, merchants, farmers and manufacturers to make their voices heard before the Tribunal. There is also an opportunity for the Tribunal to consider the wider aspects of the case. When the Minister gave that specific undertaking that the safeguards would be preserved, were we not entitled to think that the safeguards which I have mentioned would be preserved? Within a few weeks they had been completely abolished. This deal has been done by jiggery-pokery, in the dark, on the basis of an agreement which Parliament has never even seen and as to which it was misled by the terms of the White Paper and the Minister's explanation. There is not a single Member of the House who, on the day when the White Paper was approved, really thought that the railways would get their increased costs without any question as to what the increased revenue was. [An Hon. Member: "Not even the railway directors in the House."] I doubt if they did. Parliament must attend to this matter.

The Minister said just now that it was only hon. Members on this side of the House and the organs of the Press associated with them who took that view. But he is quite wrong. I have in my hand a copy of a journal which is in a different category altogether, the "Investors' Chronicle and Money Market Review." The learned writer in this journal is urging his readers to get into home rails as the best possible investment that he can see, but even he had not tumbled to the real truth; even he thought that there were some limits and that some consideration would be given to the rise in revenues of the railways due to the increased traffic. These falling overhead costs are being effected very largely at the expense of the convenience of the public and the service which the railway companies render, with crowded trains, reduced schedules, unpunctual runnings and enormous changes in railway service. We understand it. It is due to the war. The public are enduring these hardships of the war with fortitude and cheerfulness, but I do not think they will do so with such good grace when they know that all they are doing is to increase the profits of the railway companies whose revenues, according to the calculations of people who are usually very well informed on these matters and who if they are wrong are wrong to a small fraction over many years, are already running 30 per cent. above the average pre-war revenues. This financial writer calls the attention of his readers to the great strength of the railways' position vis-à-vis the Minister of Transport. He says: The railway companies are in a very strong negotiating position. When I read that phrase I remembered a speech which the Government's economic adviser made at the annual meeting of the London Midland and Scottish Railway, speaking of course in his capacity as chairman of that main line railway company. Speaking of his services to the Government, he said: I myself, so fully responsible for the major administrative decisions here,"— that is, of the railway board— have been giving a large part of my time helping the Government, but it was clearly placed on record that in agreeing to help the Government I should not have to compromise in any way my trusteeship for the shareholders' financial interests. Accordingly, I have taken my full share, and an arduous one it has been, in the negotiations leading to this settlement, and these matters have never led to the slightest embarrassment. I do not think they would lead to embarrassment. Nobody could feel embarrassed if he had been able to negotiate on behalf of the people he represented an agreement such as is now being disclosed to us to-night. I only mention this because it calls attention once again to the anomalous position in which Lord Stamp is placed. It is a great pity that so distinguished a public servant with his record should have allowed himself to be put in that position. The fact remains that the railways are in a very strong negotiating position. He says: For, whatever happens to costs, to charges or to traffics, the lines are guaranteed by the Government, and the minimum revenue sufficient for all their prior charges. Secondly, there is the gradually expanding prospect of rising dividends. Finally, as this week's news shows, the bogy of rising costs has but limited significance for the railway companies. This is a set of circumstances unparalleled in British industrial structure. Other essential industries and services have failed completely to obtain treatment in any way comparable to this. That is not a journal necessarily associated with hon. Members on this side of the House. It is, if I may venture to say so, the leading financial weekly. Let us turn to the pages of the "Economist," which is not associated with Members of this side of the House. The "Economist" says, commenting on this matter, that the method is objectionable and scandalous. It says, as was said by my hon. Friend the Member for Clay Cross, that nobody objects to fair play for the railways and fair play for the railway stockholders, many of whom are quite small holders of railway stock. But, as the "Economist" says, this is something more than fair play. It goes on to say: The railways are being assisted to increase revenues by a method which forces up the cost of transport, one of the most vital elements in the price structure. Moreover, the present increase is only a beginning. It is not difficult to see what will be the next step—applications for increased wages which the companies will have no incentive to resist, and other inflationary tendencies. It would be hard to imagine a more disastrous example of economic impolicy. To-night for the first time this agreement turns out to be something entirely different from what Parliament believed it to be when it approved the White-Paper in February last. The Minister must lay an Order, and I understand that Parliament must approve that Order. If in war-time procedure some quicker way has been found, with all respect, it seems to me that Parliament must assert its rights and must insist upon having this Agreement upon the Table before we are bound by what has been done under it. Anything short will open the floodgates to undesirable tendencies which all of us wish to avoid. What of the munition industry? What of the aircraft manufacturers? Are they going to be given their increasing costs without any question being raised as to the rising turnover and the rising revenue? What of all the other industries in the country which have to bear, among other things, the increased cost of transport which the Minister by this agreement is inflicting on them? Are they to be allowed, in their dealings with the Government and in respect of Government contracts, to ask for their increased costs irrespective of turnover? Nothing of the kind. There we find the Minister of Transport alone—I hope he is alone; I hope other Ministers are not doing the same thing—vitiating the principles of financial rectitude, vitiating the very principles which the Chancellor laid down at the end of his Budget speech, and acting on an agreement which turns out to be something radically different from what Parliament and the people believed when it was passed.

9.21 p.m.

Sir John Mellor (Tamworth)

I want to draw attention to one aspect of these additional authorised charges, and that is the effect upon men serving in His Majesty's Forces. Even without these additional charges, a very large number of these men suffer considerable hardship at present rates. Very many of them, even though still serving in the United Kingdom, have been stationed, through no fault of their own, through no choice of their own, very far away from their homes, and it is often extremely difficult for them to raise the money to get home on leave. In many cases, where soldiers are making allotments to their dependants, they are drawing only about a shilling a day in pay. It means, therefore, that, when they have to save up what they draw in pay, it very often requires much more than a month's drawings to get them home on leave. It is true that they have considerable concessions. They get, I think, two free warrants a year. That is good, but it is not good enough. Further, on presentation of a leave pass, they can obtain a single ticket for half the single fare, but that is not really a great deal of help, because it is not very often for holiday purposes that either a member of the general public, or still less a member of His Majesty's Forces, has occasion to purchase a single ticket. It is not good business. The ticket upon which people normally travel for holiday purposes is the monthly return. On presentation of a leave pass a man serving in His Majesty's Forces can obtain a monthly return at the single fare, but that does not represent very much of a reduction, because the general public can buy a monthly return ticket for a single fare and one-third, so that in that case the reduction to a man serving in the Forces is not 50 but 25 per cent., and, bearing in mind that a very large number of these men are stationed so far from their homes that it may mean saving up six weeks' pay in order to get back, that reduction of 25 per cent. on the monthly return ticket is not enough.

I feel that we must really concentrate upon the price of the monthly return ticket, because that is really a sort of general index of the cost of travelling to the general public. I leave out, of course, reference to the season tickets and cheap day tickets, which only affect people travelling for certain particular purposes. I am sure the intention always was in the past that serving soldiers, sailors and airmen should travel at half rates, because, before the introduction of the monthly return ticket, they did get return tickets at half rates. That is to say, they got return tickets at half the rate that the general public had to pay. I think that privilege should be extended to the monthly return ticket and that soldiers, sailors and airmen should now be able to buy a monthly return ticket at half the price the general public pay for it. I hope my right hon. Friend will give that his very careful consideration and, far from increasing what these men have to pay now, that he will do everything in his power to reduce it, so that in no circumstances does a man serving in His Majesty's Forces have to pay for any particular kind of ticket more than half what a member of the public pays.

9.27 p.m.

Mr. Watkins (Hackney, Central)

I had not intended to intervene, because I thought the point that I chiefly wanted to make was very well made by my hon. Friend the Member for Clay Cross (Mr. Ridley), but in the course of the development of the Debate the Minister of Transport has given a point of view about the meaning of the agreement regarding Government control of the railways which astounds me. He has said many times that the interpretation which was submitted to him by my right hon. Friend the Member for South Hackney (Mr. H. Morrison) was the correct one. Even now I think he is completely wrong, and he is in this tremendous difficulty. He has either to say "I am sorry, I had not understood the agreement which I myself signed," or, on the other hand, he has to maintain that the point of view that he has recently put is correct, in which case he has undoubtedly produced all the ingredients of a public scandal of a very major kind. I understand that his case is this: "When the railway companies bring to me their balance sheet and say, 'On the expenditure side, we can demonstrate that so much more was required for labour, so much more for coal, so much more for timber and so much more for other costs,' I am going to say, 'I have a right to say, as Minister of Transport, that they can increase their charges to the public to recoup themselves for these increased costs.' On the other hand, all the additions on the income side of the balance sheet, all the millions of Government money paid in for carrying munitions and soldiers and sailors, and all the general prosperity of the railway transport industry, all the millions of money to be added to that side I, as Minister of Transport, will completely disregard." That is the interpretation that he is giving to the agreement. The railway companies can engage 10,000 new servants to cope with the increase in traffic, and, according to the Minister, they can come to the Minister of Transport and get, by increased charges on the public, a sum to meet all the wages of these new servants.

Captain Wallace

No, Sir. All they can get is an increase to cover increased costs which are entirely outside their control. If they engage 10,000 more servants, they cannot get increased charges to meet their wages, but if the rate of wages goes up, they will have a claim for increased charges to cover the difference.

Mr. Watkins

If the Minister can find any comfort in that hair-splitting, he is entitled to it, but I believe that the general public will not see much distinction. Quite frankly, I approach the matter from the point of view of the railway worker. Our members are concerned about the good name of the railway industry. We favour the belief that the railway industry has never profiteered, that it has never overcharged the public unduly for railway services. If the Minister is to allow the railway managements to come to him from time to time and say, "We have this much extra expenditure; we want to recoup ourselves from the public to that extent, and take no account of the increased revenue on the other side of the balance sheet," that, as my right hon. Friend the Member for South Hackney said, is a wicked agreement that the Government ought not to have entered into.

As to whether the Minister was right or wrong in settling this himself, he must realise that he is an interested party. Of every pound of additional net revenue that the railways get over the £43,500,000, he will get 10s. It is to his interest—I do not mean his personal interest, but the Government's interest—to let the railway companies make huge profits, because half of those profits will come as additional grist to the Chancellor of the Exchequer's mill. That is not the right way of handling the business of the railways. If the Chancellor of the Exchequer wants money out of the railway industry, let him put a tax on all railway fares, honestly and above board. The result of this will be that the railways will get the odium; the railway workers will get some odium, too; and the Minister will get half the profits over the £43,500,000.

I ask this question because, although I have no right to speak for the railway managers, I believe that they would have preferred that this application for a 10per cent. increase should have gone to some third party for decision, or, at any rate, for an opinion. Did the railway companies come to the right hon. and gallant Gentleman and say, "We want this 10 per cent., and we want you to give it to us without consulting anybody else"? If the right hon. and gallant Gentleman could find it in his heart to be frank with the House, I believe he would say that the railway companies came to him and said, "We should prefer you to have a third-party opinion on this and to submit the matter, at any rate in a consultative way, to the Railway Rates Tribunal."

Captain Wallace

The hon. Member has addressed a straight question to me, and I will give a straight answer. They certainly did not come to me and say anything of the kind. It seems to me that it would have been rather miserable conduct on my part to shelter behind these gentlemen, who, in my view, on the facts could only have confirmed the decision that I reached.

Mr. Watkins

The right hon. and gallant Gentleman has twice used that phrase about sheltering behind the Railway Rates Tribunal. That kind of language impresses nobody. He forgets that he is an interested party. It is to his interest to concede this 10 per cent., and because of that very reason he ought to have consulted these other expert people and got from them, at any rate, an opinion. I say frankly for myself that if he had come to this House and had said, "I did not feel, as an interested party, that I was competent to decide this thing, and I submitted the matter to the Railway Rates Tribunal; they have investigated the figures, the increased costs and the increased income of the railway companies, and, in the light of their investigations, they recommend me to concede it"—if he had come and said that, I would have accepted the 10 per cent. as being a reasonable arrangement between the railway companies and the public. But if, as an interested party, his Government have to decide the matter without any third opinion, it is an unfair way of settling the business.

Once again I appeal to the Parliamentary Secretary. I want him to state categorically the financial terms upon which the railways have been taken over under the control of the Government, and what are the terms of the arrangements which enable the railway companies to increase their charges on sanction being given to their request by the Minister of Transport. Is the acquiescence which the Minister of Transport gives to the interpretation that my right hon. Friend gave of the agreement correct and right, or not? I would like a clear and definite understanding on that point.

9.37 p.m.

Colonel Sir George Courthope (Rye)

Some little time ago the hon. Gentleman the Member for Central Hackney (Mr. Watkins) interjected that there was not a railway director in the House who was prepared to get up and defend the position. I am a railway director, and I have the honour, or may be the misfortune, to be the chairman of the Committee of Railway Directors, and I would say at once, after having listened to this Debate, that almost everyone who has spoken has had an entirely false impression of the position. Most of them have spoken as though this were a demand by the railway companies to the Government. If a demand had been made by the boards of directors of the railway companies I would, inevitably, have been involved in the preparation of the claim and the making of the demand, but I never even heard of it until I saw the announcement in the Press. What has led to all this misconception is the fact that the railways are run now by the Railways Executive Committee under and for the Minister of Transport in the interests of the country. An agreement was prepared on which there was a good deal of discussion, and I want to say a few words more about that presently. I would now merely say that I had something to do with the negotiations dealt with in the White Paper, and, as far as I am aware, the White Paper is an absolutely faithful setting out and summary of the Agreement. The Government, through the Minister of Transport, are under an obligation to carry out the terms of that Agreement which they made with the railway companies.

As I understand the position, the figures which have been quoted to-night of £26,750,000 of increased expenditure and the demand for a 10 per cent. rise, which it is estimated will give £18,000,000 of increased revenue, are made in a report from the Railway Executive Committee to the Minister of Transport, whose servants they are, for the purpose of managing the railways during the war. Hon. Members opposite are wrong in suggesting that all increased labour cost can be claimed. It cannot; it is only the increased labour cost due to decisions of the Government which can be claimed. The normal increase of cost is due to the normal war traffic. It does not come into the calculation at all and the £9,750,000 which has been referred to, is the increase of wages which the railways have to pay, due to the increased scales approved by the Ministry of Transport, to which the railway companies have no say at all. They have merely to obey orders. The other £10,250,000 which was the increase in cost of raw material due to the war is not a matter over which the railway companies have any control.

The hon. Lady opposite, with whose view I sympathise a good deal, raised the question of the increase of cost, just over £2,000,000, represented by gratuitous payments by the railway companies to serving men as the difference between their military and civil pay. Personally, I have the greatest sympathy with the suggestions made on that point. I believe shareholders would be perfectly willing to bear that burden, but when the Railway Executive have to make a return of their extra costs on running, due to the war, I do not see how they can avoid including that figure because it is, undoubtedly, extra cost due to the war. It is interesting to notice the figures set before the House. There is no room for that £2,750,000; there is £18,000,000 on one side and£26,750,000 on the other, of which £4,500,000 has been left over for further discussion. It looks to me as if the amount of just over £2,000,000, representing gratuitous payment for men serving with the Forces, has not been taken into account by the Railway Executive in asking for the 10 per cent. increase in order to meet additional war costs.

One or two other things have been mentioned to which I should like to refer. If they were not dealt with, I think they would give an impression which would be grossly unfair to the railway companies. The right hon. Gentleman the Member for South Hackney (Mr. H. Morrison) talked about the vicious spiral which, he said, the Minister was encouraging. We all wish to avoid the vicious spiral, but hon. Members opposite must not take the view that wages, and wages alone, may be put up by the Board. It is no use saying that if wages are put up it is not a vicious spiral, and that if anything else is put up it is a vicious spiral. We cannot accept that point of view. Substantial increases in wages must, in some cases, inevitably be followed by compensating increases in fares, charges or costs.

The other point made by the right hon. Gentleman was a suggestion which I have heard before—a suggestion that the capital of the railway companies was inflated and that if the companies were considered at their true capital value, there would be a great cutting down of their figures. I want to point out, as I have done before, that anybody who examines the facts will find that the method of annual replacement which has been adopted by the main line railway companies has led to a position in which the railways are greatly under-capitalised. A certain mileage year by year has been replaced out of revenue regardless of increases in cost, and a certain number of coaches and locomotives have, in the same way, been replaced out of revenue year by year. That has led to this position, that the permanent way and rolling stock on the main line railways stand on their books at less than half their cost, and it there was any adjustment of capital I have no doubt it would be found that the main line railways—I cannot speak about the London Passenger Transport Board—are substantially under-capitalised, in spite of the fact that certain items of watered capital appear in their balance sheets.

Mr. Latham

This is a very important matter. Does the right hon. and gallant Member suggest that the railways would be entitled to regard as a correct item in their capital account the original cost of the rails, and the cost of the rails which have replaced those rails?

Sir G. Courthope

What I suggest is that the railways would be entitled to regard as capital expenditure the excess by which the cost of replacing exceeded the figure in their books. The result, for instance, is that the priority stocks of the railways are secured on fixed assets which are now worth a great deal more than their original cost, and that the system of replacing them regardless of the growing annual cost has really led to a bolstering up of the assets upon which the priority shares are secured at the cost of the ordinary shareholders. I have no doubt that an examination would lead to a writing up, not to a writing down, of the capital of the four main line railway companies; and the writing up would far exceed, in my own opinion, the amount which would have to be written down as watered capital. Let me end as I began by saying that I believe the criticisms which have been made on this Agreement are based on a misconception of the true position. It is perfectly natural and easy for persons who are not intimately concerned with the railways to make such mistakes and for hon. Members opposite to assume that because the Railways Executive includes general managers, they have put up certain figures to the Minister of Transport on behalf of the railways in order to get something.

Mr. Woodburn (Stirling and Clackmannan, Eastern)

The right hon. and gallant Gentleman has explained very carefully that the railway companies have been building up plant out of revenue. Is it not the case that in the normal way that revenue would have been carried to profit, Income Tax would have been paid on the profit, the balance would have been carried to reserves, the reserves would have been used for replacing Capital and would have been capital; and is it not the case that by building it up out of revenue the railway companies have been saving a payment of Income Tax on money which would otherwise have gone to profit?

Sir G. Courthope

That is a little complicated, but if I have got the same impression of what is meant by it as other hon. Members have and if that impression is the correct one, I think hon. Members will agree with me that one can not accept that proposition. When it is agreed, as it was originally, that certain capital assets, like the permanent way of a railway, have a life of several years, when provision is made annually for replacement and that provision has to go steadily up and up and up—

Mr. Woodburn

Is it not the case that there is a calculation of Income Tax every year; that every firm is allowed depreciation without the payment of Income Tax for just that purpose, and that the depreciation of the working of a railway company which is allowed before profit is charged with Income Tax, is for the purpose of replacing the capital which is worn out in the course of the year?

Sir G. Courthope

That may be true, but my experience of the Inland Revenue is that they never allow anything to escape them. I am certain that Income Tax is charged on the full amount on which the Inland Revenue can possibly charge it. But this does not affect my point, which is that a hundred miles, say, of permanent way which stands on the books at a certain figure, and is security for so many millions of debentures, is now worth at least double the figure at which it appears on the book. Therefore, I hope hon. Members will get out of their heads the idea that the railway companies are grossly over-capitalised.

The suggestion has been made to-day, as it was made in the Debate in February, that the agreement with the railways was a gift, almost to a scandalous extent, to the railway companies and their shareholders. As one who had something to do with the negotiations, I can assure the House, as I did at the time, that the directors of the railway companies accepted that agreement most unwillingly. In our view, it would have been perfectly reasonable but for the fact that the London Passenger Transport Board, with all its road undertakings as well as its rail undertakings, had to be brought into the pool, upon which the main line railways were dependent for their chances of profit. We believed then, and we still believe, that that fact will tend to keep the distribution of profits to the railway companies down near to what is called the floor and not give it much chance of rising towards the ceiling.

9.55 p.m.

Miss Wilkinson (Jarrow)

I think that the right hon. and gallant Member who has just spoken with such authority as chairman of the committee of railway directors in this House has put us in a further difficulty. The Minister, in reply to a question that I put to him, said very definitely, that the amount paid by the railway companies to make up the railwaymen's Army pay to their civilian pay was being passed on, whereas the right hon. and gallant Member who has just spoken has said they did not want it passed on, and that they were perfectly willing to carry the burden themselves. He went on to say that he did not think the burden was being passed on; but the Minister says definitely that it is. So we are faced with the position once again of the Minister having a different interpretation of his own agreement. I am very anxious that these men should have their Army pay, but it is apparent now at a time when we are considering national economy in these matters, that a burden of £2,500,000, which the railway directors are perfectly willing to pay themselves, has been taken from them by the Government, and I should like to know why.

I read very carefully the speech of the Minister on 13th February. With the exception of the right hon. Member for South Hackney (Mr. H. Morrison), my hon. Friends and I are very closely connected with the railways, and I am looking at the question from the point of view of an official of the largest distributive workers' union in this country. We are concerned about this question from another aspect. When the Minister made his speech on 13th February he spoke of economies, and when we asked him why the Government had not come to some arrangement by which there was some flat or agreed rate for the carrying of goods for Army and Government purposes, his reply was that it was in the interests of economy that each agreement should be dealt with in the ordinary commercial way. I would like the House to understand what is happening, and how the taxpayer is to be mulcted. I will give an illustration, involving only a few hundreds of pounds, to show how the same principle can be carried on, involving very much larger amounts. A large number of growers of Jersey potatoes, imported to this country, decided that they would have one organisation to deal with the railway companies, and that they would make a flat-rate agreement to save a large amount of overhead costs to themselves and to the railway companies. The railway companies' reply to them was, "Oh, no, we insist that it shall be done in the ordinary commercial way." The result is that hundreds of agreements will have to be made instead of one rate, and this is at a time when we are told it is absolutely necessary to economise in money and man-power.

I wish to apply this principle to the whole question of the carriage of Government goods during war time. If the Government had made an agreement as the Government with the railway companies, they would have been in an immensely strong bargaining position. As they did not, the railway companies are in a position to play off one Department against another and to get rates from the Government which they would not have got if they had been dealing with the Government on a flat-rate basis instead of on the ordinary commercial rates basis. We have, therefore, the position in which the Government are paying twice over. They are paying, in the way with which my right hon. Friend the Member for South Hackney dealt, and also as a commercial user, more than they might otherwise do. At the same time that the Government are showing unparalleled generosity, to put it charitably, to the railway companies, they are acting with extraordinary meanness and niggardliness towards members of His Majesty's Forces, their wives and dependants. Those of us who have northern constituencies are continually being asked to deal with cases of men who have been sent to southern camps, have exhausted their one free warrant and cannot get home, while men living near to their service are able to get home easily. It is causing a great deal of heart-burning, and if all these millions are to be handed out so cheerfully by the Minister of Transport, he might give a more generous deal to those men who are giving their lives to the country and have left their civil jobs.

There is a more pathetic class of case, namely, that of the wives whose husbands are ill. I brought up in a question the case of a woman in my constituency whose husband was ill and who applied for a free railway warrant so that she could visit him. She was told that such a warrant was not issued. She received a pathetic letter and was so worried that she borrowed the money for the fare. Fortunately, she was able to get to her husband before he died. If she had not been able to raise the money by loan, she would have been denied by the Government the right to visit her husband, who was in a dying condition. I know that the Government cannot give warrants to wives to see their husbands every time they are unwell, but in case of serious illness, as in the case I have mentioned, which is one out of hundreds that are being raised, the benefit of the doubt ought to be on the side of the wife. No one would say that it is not very much better to give the warrant and allow the wife to see her husband than to refuse the warrant and, if the wife cannot raise the money, leave the husband to die before she can get to him. These matters seem small in the light of the millions which we are considering, but I want the Minister to realise that they cause a great deal of feeling and that something ought to be done. Though this Debate will be completely blanketed in the Press because of the news value of the Budget, I feel sure that when the public learn how handsomely the railway companies are being treated, they will expect that soldiers, sailors and airmen, and their wives, shall receive more generous treatment in the matter of railway warrants.

10.5 p.m.

Mr. Lathan (Sheffield, Park)

I should like to add a word to commend the suggestion of the hon. Lady the Member for Jarrow (Miss Wilkinson), because I know that railway men, equally with others, are utterly unable to understand what seems to be the extraordinary meanness with which men serving with the Forces, and their relatives, are treated in the matter of railway facilities. The railway organisation with which I am connected has made representation in that sense to the Ministry of Transport and would desire to support the expression of opinion which has fallen from the hon. Lady.

The Debate on this subject has reached what I think hon. Members will agree is almost a painful stage. It reached that situation some time ago, and I have no desire to add to the pain and agony of those who have been compelled to listen to what has been said. The right hon. and gallant Member for Rye (Sir G. Courthope) made an interesting contribution to the Debate, and I hope he will forgive me if I say that I do not think he said anything which was very illuminating from the railway companies' point of view or which would enable us to understand the agreement which has been reached between them and the Ministry of Transport. He chided us with failure to appreciate it, and charged us with lack of sympathy. We desire that the railway companies should be treated fairly, but we also want the public to be treated fairly. He told us that until he saw the announcement in the papers he, although a railway director, and chairman of the directors in this House, had no information about the arrangement which had been made by the Ministry of Transport.

I will not follow him in his involved argument affecting what is an important aspect of the railway situation vis-à-vis the public, the charges, railway employés'pay and other things, and that is the capital position of the railway companies; but I think I could extract from him some measure of assent to the suggestion that whatever may be said about replacements and the rest the real capital value of the railways is their ability to earn profits, and judged from the standpoint of their net profits in recent years—and I speak as one who has worked for them as well as against them in that I have on occasion found myself in conflict with them—I think it is fair to say that their capital value would be assessed by all fair judges at much below the figure at which it stands in their balance-sheets to-day.

Reference has also been made to the control of the railways by the Minister of Transport. As one who had experience of railway control in the last war, I say that the measure of actual control from the Ministry, except perhaps in matters of high policy, is limited and docs not extend to the operation of the railways. As the right hon. and gallant Member is well aware, the railways are being run to-day, under the Executive Committee, by precisely the same people as ran them before. The same policy, the same influences are at work in the conduct of the railways. From my experience from 1914 to 1920 or 1921 I should be disposed to say that so far from the influence coming from the Ministry of Transport it frequently comes much more emphatically from the office of the Railway Executive Committee. The Minister of Transport could, with advantage, read up the facts in relation to the conditions which existed in the last war, which he apparently allows to influence him in his attitude towards rate advances now.

I speak now from memory and am therefore subject to correction. My recollection is that, during the last war, there were very few increases in railways rates. The increases which took place came in the early years following the last war. During the period of that war, the railway companies were guaranteed a net income, on the basis of the year 1913, which, as my hon. Friend the Member for Clay Cross (Mr. Ridley) has pointed out, was a boom year. The conditions at the beginning of the period of the war were regarded as very favourable to the railway companies, although, at a later stage, it became necessary to give attention to their justifiable claims. Many people, and among them those closely associated with the railway companies, believed that the settlement which was ultimately made with the railway companies in the matter of replacements and renewals, was a rather good deal, and that the railway companies were left no ground for complaint from that point of view.

Surely the Minister of Transport does not suggest that the increases which were made necessary in post-war years, in railway rates to enable the railway companies to carry on with a measure of satisfaction, arose out of acts of commission or omission during the war. They arose, I think he will agree, out of the distressed conditions attached to the early post-war years. As we know, the railways always reflect the conditions of trade and commerce in the country, and it was that situation which caused them to seek to increase their rates, rather than anything which happened in the war period.

Captain Wallace

I do not want to be in the least unfair or to press any argument further than it can fairly be pressed. I accept what the hon. Gentleman says about conditions after the last war, but the fact remains that the kernel of our case to-night is that the policy pursued during the last war simply put off the evil day and presented the taxpayers of that time with a very large liability after the war.

Mr. Lathan

The evil day arose after the war was over, and not because of the situation which had existed during the war. I believe I can say that the railways did not call for increases during the war period. The right hon. and gallant Gentleman was asked about the remission of this case, as my hon. Friend so strongly urged, to the Railway Rates Tribunal. If that procedure had been followed, as we urged in the general interests of the community and, we believe, in the interest also of the railway companies, the reflections which are now cast upon it, and the suspicions which are entertained in regard to the disposition to exploit the community could not then have been made.

We believe that a claim should have been lodged by the railway companies. The claim would have been open to public inspection, and anybody concerned or interested could have ascertained the facts in regard to it. By the processes of inquiry, investigation, pleading and cross-examination which take place at the tribunal, there would have been an ascertainment of the facts of the case. The railway companies would have had an opportunity of justifying their claims, and, as has been the case with other claims before the Tribunal, there would ultimately have been a report and recommendations to make the position clear, at any rate, if not acceptable, to all the parties concerned. The case which has been made by my hon. Friend the Member for Clay Cross is that the Minister has made a serious mistake in the action which he has taken in failing to utilise the services of the Tribunal, or, at any rate, in not summoning them. I hope that the Parliamentary Secretary in replying for the Ministry will be able to give the House an assurance as to the policy which will be adopted in future.

10.15 p.m.

The Parliamentary Secretary to the Ministry of Transport, (Mr. Bernays)

The hon. Member for the Park division (Mr. Lathan) has said that this Debate has caused pain and agony. It certainly has not caused pain and agony to my right hon. and gallant Friend and myself. My right hon. and gallant Friend and I are very glad to have this opportunity of doing what we can to put right certain misconceptions which appear to exist in the minds of hon. Gentlemen opposite as to this Agreement. I would like, first of all, to deal with one or two direct questions put to me by the right hon. Gentleman the Member for South Hackney (Mr. H. Morrison). He asked me, first of all, why we have not got the complete Agreement in front of us. The reason is that the Agreement is still being drafted. It is a very complex and complicated question, and what we have here are the heads of agreements; to these heads of agreements both the Government and the railway companies are bound. The right hon. Gentleman asked me further whether my right hon. Friend would consider the publication of a White Paper. In answer to that, I would say that all the facts have been communicated to the House. The actual increases in cost in the past, the estimates of future increases in cost and the estimated yield of increased charges have been stated and the figures can only be approved by an accountant's examination, which has been done in the finance Department of the Ministry of Transport. In these circumstances my right hon. and gallant Friend really feels that a further White Paper would be of no value to the House.

Miss Wilkinson

If the House itself thinks that a White Paper would be of value, would it not be a good thing to have it? Have we to take the Minister's judgment of what he thinks we should have?

Mr. Bernays

We have to save paper in these days, and in any case, the only thing a White Paper could possibly give would be the figures which my right hon. and gallant Friend has already given.

Mr. Ridley

I do not wish to be unkind to the hon. Gentleman, but he is making in this Debate a series of new disclosures. An Agreement which the House thought had been terminated by the White Paper is now in process of being terminated at some non-definable date. When agreement has been reached, surely it is possible for the Minister to lay the Agreement on the Table of the House or to produce a White Paper which would embody it.

Mr. Bernays

Certainly we will consider laying before the House this extremely complicated Agreement, but the drafting is not yet completed. The hon. Gentleman said that there were matters of which the House was not aware, but during the Debate on the original Agreement it was fully understood that the White Paper contained the heads of agreement.

Mr. Ridley

Nothing of the kind.

Miss Wilkinson

Are we to understand that the White Paper is refused and that you will not let us have that Agreement?

Mr. Bernays

There is no question of there being anything in this Agreement which the House does not know already. It is simply a question of drafting, and the full draft of the Agreement is not ready to place before the House. There will not be anything in the Agreement—

Miss Wilkinson

In view of the misstatements that have been made, can we have from the Minister an assurance that when that Agreement is signed this House shall have it?

Mr. Bernays

No misstatements have been made. I can assure the hon. Lady that due consideration will be given—

Miss Wilkinson

We do not want considerations.

Mr. Wilmot

Does the hon. Gentleman mean that money is being paid away in spite of the fact that the Government are not committed to pay it away and that the railways do not expect to get it?

Mr. Bernays

I have said the Government are committed by the heads of agreement and by the exchange of letters which has taken place.

Miss Wilkinson

Are we to have that Agreement?

Mr. Bernays

I have already given the answer. If it is possible to put it in a convenient form, most certainly. The Debate, strange to say, has centred not so much on the increased charges as on the procedure by which these charges have been increased. It is reasonable to ask why if such strong exception is taken to the Agreement now, it was not more strenuously opposed at the time of its inception. I contend that there is nothing in the Agreement which was not fully understood by the House. My right hon. and gallant Friend made the position perfectly clear and I am astounded at the main charge of the right hon. Gentleman the Member for South Hackney that the House had no knowledge that increasing costs would be met by increased charges.

Mr. Wilmot

That is not what he said.

Mr. Bernays

It is quite plain in paragraph 10 of the White Paper. My right hon. and gallant Friend, also in his speech of 13th February, made the situation quite clear. He said: I turn to the major question of charges, which is of paramount importance to the consuming public. We intend, so far as charges are concerned, that the controlled undertaking shall operate upon an economic basis. This means the adjustment of charges to variations in working costs, including wage rates, prices of material and other circumstances arising directly out of the war, such as the cost of making good war damage, or in the case of the Transport Board, the cost of making good the loss of earnings."—[Official Report, 13th February, 1940; col. 640, Vol. 357.] I contend that that was a very plain statement. The right hon. Gentleman will realise that it is not fair to say it was a fraud and a scandal and that my right hon. and gallant Friend was concealing something from the House. The whole four stages of the revenues of the railway companies under the Agreement depend on the fact that increased working costs beyond the companies' control are to be met by increased charges. It is that which gives them their incentive for economy and for enterprise. Against receipts from additional traffic must be set the costs of working this traffic. This is apart from the elements of increased prices, and is not recovered through increased charges. The sums recovered through increased charges merely recoup to the companies the amount of their increases in costs, leaving profits to depend upon the increased work done. It is, therefore, I suggest, quite misleading to add the increases in gross receipts to the increases in costs, as it has been suggested should be done. I know there is an important point in the minds of hon. Gentlemen with regard to the spread on overheads; they argue that they ought to be taken into account. I will deal with that point later.

I really do not think that, with regard to consultation with the Railway Rates Tribunal, hon. Gentlemen can say that they were not aware that they were giving the power to the Minister of adjusting rates and fares to the increases in costs. If I may say so, a lot of wild words have been used on this subject. The hon. Member for Clay Cross (Mr. Ridley), for instance, said that everybody thought that the Minister would take the advice of the Railway Rates Tribunal. But he cannot have included in "everybody" even the Members on his own Front Bench, because the right hon. Gentleman the Member for South Hackney was fully aware of the position. The right hon. Gentleman said in the Debate: The adjustment of fares, rates, and charges will presumably be a matter for decision by the Railway Executive with the concurrence of His Majesty's Government, and presumably the user of the railway, whether passenger, trader, merchant, or what not, will not have his customary remedy of going before the Railway Rates Tribunal and arguing his case before the railway companies get permission, as soon as they do get permission, to make an increased charge."—[Official Report, 13th February, 1940; col. 62.5, Vol. 357.]

Mr. Ridley

Since I have been challenged, might I say that the statement by my right hon. Friend was made before the statement of the Minister to which I referred? The Minister, in the statement which he made, subsequent to my right hon. Friend's statement, did give the general impression that there would be a reference to the members of the Tribunal.

Mr. Bernays

The hon. Member cannot get away with that. In fact, as he knows, the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) wound up the Debate, after the Minister had made his statement, and he used these words: The pre-war machinery has gone by the board, and there is nothing left but the railways and the Government to decide what changes, if any, are justified in fares, rates, and charges."—[Official Report, 13th February, 1940; col. 711, Vol. 357.] Therefore, I do not think it can be contended that my right hon. and gallant Friend in any sense deceived the House on that matter. I think it is very unfair of hon. Members to accuse my right hon. and gallant Friend of committing some form of what I think the hon. Member called "jiggery-pokery." Hon. Members must admit that my right hon. and gallant Friend, in raising the rates and charges without consulting the Railway Rates Tribunal, is acting within powers which were fully explained and understood at the time the Agreement was adopted and approved by this House.

Mr. H. Morrison

I am sorry, but the hon. Gentleman is now relying on the observations of opponents of His Majesty's Government. We have many unkind things said about us, but nothing so bad as that. I must remind him of what the Minister said. He said this did not mean that the members of the Tribunal would be set aside, but that, on the contrary, he would make use of them.

This is what he said: If it appears that an adjustment of charges is justified the Minister will, unless he considers it in the circumstances unnecessary or undesirable, seek the advice of the permanent members of the Railway Rates Tribunal acting in an advisory capacity."—[Official Report, 13th February, 1940; col. 641, Vol. 357.] It is clear from that statement that the Minister contemplated that he would seek their advice unless there were exceptional circumstances.

Mr. Bernays

I do not think that that view can be taken of that statement at all. Certainly one of the hon. Gentlemen who sits by the right hon. Gentleman on that bench did not take that view. My right hon. and gallant Friend said definitely that: It is not possible under the stress of war conditions to retain the jurisdiction of the Railway Rates Tribunal over the general level of charges."—[Official Report, 13th February, 1940; cols. 640–641, Vol. 357.] He only said that he would consult if he thought it was necessary, and he did not think it was necessary. In face of that, really it is a little absurd of the hon. Gentleman opposite to contend that my right hon. and gallant Friend has in some curious way deceived the House on this question. The right hon. Gentleman the Member for East Edinburgh did not think it was conflicting; he quite understood the position.

Mr. H. Morrison


Mr. Bernays

As the Opposition always do when it suits them. There is a considerable misconception as to the nature of the Railway Rates Tribunal. It is argued by the hon. Member for Clay Cross as if in some way it represented the voice of the user. [Interruption.] I was not attributing these actual words to the hon. Member for Clay Cross.

Mr. Ridley

Really, the hon. Member should not resent being interrupted. What I said was that regardless of the position of the Tribunal—I never discussed that at all—it received an application, heard evidence from every party, considered it and reached its decision judicially.

Mr. Bernays

I am sorry if I have given the medicine to the wrong patient. It was the hon. Member for Kennington.

Mr. Wilmot

Not at all.

Mr. Bernays

Last Wednesday the hon. Gentleman asked why the voice of the user had not been heard?

Mr. Wilmot

That is a very different thing. If the hon. Gentleman is not capable of appreciating the difference between a judge acting as judge and a judge hearing evidence, I cannot help him. I said the voice of the user was entitled to be heard before the Tribunal. My right hon. Friend is good enough to give me the actual words. What I said was: Does the right hon. and gallant Gentleman appreciate that, by abolishing the judicial protection of the railway users which the Railway Rates Tribunal afforded, he is getting into a position where only one side of the case is being heard."—[Official Report, 17th April, 1940; col. 956, Vol. 359.] Surely it is perfectly clear. I was asking that the safeguards of the judicial tribunal should be maintained, as the Minister promised, on 13th February that they would be.

Mr. Bernays

That was precisely the point I was trying to make. The additional protection of the hon. Gentleman was asked for the users of the railways. Otherwise there does not seem to be any point in his making such a point about consulting the Railway Rates Tribunal if it is not for the purpose of helping the user. That is the whole point of the case that hon. Members opposite are making to-night. My argument is that only to a limited extent is it true that it has afforded protection. It is the function of the Railway Rates Tribunal to see that these charges are not made on a scale that would have brought the railways' income above the standard revenue. At the same time it was its statutory duty to impose increased charges to produce that standard revenue if it thought the traffic would bear the increased charges. Therefore, the judicial protection of the Railway Rates Tribunal would not have operated in present circumstances. If the Railway Rates Tribunal had been permitted its unfettered pre-war powers, the community would have been faced with something much more formidable than a 10 per cent. increase in railway charges.

What, in fact, could a consultation with the Tribunal have achieved? The items that justified the increase have been fully explained by my right hon. and gallant Friend. They are facts; they are not subjects for argument and cannot be disputed. Take the main items—£9,750,000 for increased wages and £10,000,000 for the increased cost of materials and commodities purchased by the railway companies. This latter amount is made up of ascertained price increases, including the cost of steel, timber, coal, electricity, gas, etc., all controlled by the Government. Then there is the £2,500,000 for allowances for employés serving with the Forces. I am surprised to hear arguments, put forward by the other side, that these allowances ought not to be paid for by railway users, particularly when this argument comes from the right hon. Gentleman the Member for South Hackney. As the leader of the most important local authority in the country he has, I know, arranged for the payment of allowances to employés of the London County Council who are with the Services. Who is paying for that? It is coming out of the rates, and why should not allowances to railway employés come out of the railway users?

Mr. H. Morrison

Where else can they come from? Our only source of revenue is the rates. If I was a private profit-making company and wished, from patriotic motives, to act in such a way, I could pass it on to the consumer or sacrifice myself as a capitalist and shareholder, and I say that that is where it ought to come from. The right hon. and gallant Gentleman the Member for Rye (Sir G. Courthope), I understood, did not dissent from the view that the railway companies should bear part of the cost of such allowances, and it seems that the Minister is worse than the railway director.

Mr. Bernays

Where else can it come from unless out of the scanty profits made by the railway companies before the war? The right hon. Gentleman talked as if the railways were profiteers and making a good thing out of the war, but we must remember that before the war they were in such a bad way that they had, unfortunately, to make a cut of 2½ per cent. at the expense of their employés. I would like to direct the attention of the House once again to paragraph 10 of the White Paper, which says: Rates, fares and charges will be adjusted to meet variations in working costs and certain other conditions arising from the war, and machinery will be provided to this end. I do not think it can be disputed that all the items in the increased costs come within the ambit of that paragraph. What in fact was there to consult about with the Railway Rates Tribunal? To refer the question to them would have simply led to a long investigation covering many weeks, and covering also exactly the same ground and reaching precisely the same conclusion as the finance department of the Ministry of Transport. All the time arrears would have been mounting up at the rate of nearly £400,000 a week. It has been argued by the hon. Member for Kennington (Mr. Wilmot) that we ought to have waited until we could assess more accurately the costs arising out of the war.

Mr. Wilmot

I did not say that.

Mr. Bernays

The hon. Member quoted the "Economist" with approval on the point.

Mr. Wilmot

I said that the Government ought to have taken into account not only the rising costs but the rising revenue as well.

Mr. Bernays

He also made the argument that we ought to have waited until we could assess the exact loss on the year's working. I suggest that if we had done that, the proposed increase would have been substantially in excess of the present 10 per cent. Surely, if there are to be increases in railway charges, the users of the railways would prefer that they should be made as and when the necessity arises and that they should not take the form of a salmon leap, as was the case after the last war. The Leader of the Opposition, in the "Daily Herald" yesterday, was writing about a more businesslike administration. Surely it is businesslike in the matter of an increase in rates to make the increase at once and not wait until arrears have accumulated. Hon. Members opposite are always pleading for action, decision and foresight; and when we give them action, decision and foresight, they turn round and blame us for being high-handed and dictatorial. There is really no pleasing hon..Members opposite. Indeed, since I have been on the Front Bench I have realised what "Heartbreak House" really means.

How can these increased costs be met except by increased charges? It is argued that they ought to be paid by the railways themselves out of their present revenue on the ground that the railways are saving on a wider spread of non-variable expenditure. In other words, it is suggested that though costs are going up in one direction, they are coming down in another, owing to a decrease in overheads. My first answer to that is that it is really based on a misconception of the increased gross receipts of the railway companies in war-time. It is argued that the railways are already making profits fully 30 per cent. above pre-war, and that this extra £18,000,000 which is taken from the railway users will enable them to make larger profits. That is the gravamen of the charge brought against us to-night. I admit that as I travel on our railways I get the impression of a very substantial increase of traffic, which is really not borne out by the facts. As my right hon. and gallant Friend pointed out, the net increase in the gross railway receipts is £9,750,000, or only 8½ per cent. I do not think that an increase of only 8½ per cent. in the gross receipts of the railways can be called profiteering.

Mr. Wilmot

Is the London Passenger Transport Board included in that figure?

Mr. Bernays

Yes, Sir. It must be remembered that even this relatively small increase must be compared with a period when the railways were working very far short of capacity. Before the war, each train, whether freight or passenger, had to bear far too high a burden of overheads, judging by normal business experience. There was thus a great amount of slack to be taken up, and if in fact this element of increased spread had been introduced in the assessment of railways rates, the principle that the Control Account should be allowed to retain the profits derived from the extra services would have been prejudiced, and the railways would have received no adequate return for the services they are rendering.

This brings me to the crux of this Debate. Is it really suggested that the railways ought to reap no increased benefit from the increased use of their systems? If that is the view of hon. Members opposite, they are applying to railways a principle which is applied to no other concern. While every effort is made to see that no undue profits are made, it is not suggested—at least, I have never heard it suggested—that industries should not be allowed to make a penny more now than they made in the worst days of the slump. That certainly has not been applied to such industries as coal-mining and cotton. In the days before the war, the railways were not making normal profits. They were making sub-normal profits. Let us see what was happening in those pre-war days. The hon. Member for Central Hackney (Mr. Watkins), who is President of the Railway Clerks' Association, put his finger on the point in the Debate on the Railway Agreement on 13th February last. He was referring to an hon. Member who was concerned about the possible rise in freights, and he said: It seems to me that in those years"— the pre-war years— he and others were not paying sufficiently high rates because the industry had to be subsidised by cuts in wages. The workers do not want that to happen again. These terms"— the Railway Agreement would provide for a minimum of 3.3 per cent. on the total book capital and a maximum of 4.7 per cent. Are there any other industries in the country that are satisfied with such a small amount?"—[Official Report, 13th February, 1940 col. 695, Vol. 357.] The hon. Member made that speech on 13th February. To-night, he made a rather different speech. But I suggest that the position is exactly the same now as on 13th February. He said that he hoped the railways would not profiteer; he admitted, on 13th February, that they were not profiteering. The position has not changed. They are not profiteering now. Really it is only out of these proposed increases in charges that the general level of wages can be maintained. We often hear the cry that the stockholder is doing well. But the railway worker is intimately concerned in these increased charges. I cannot speak with the same authority as hon. Members opposite on the subject of coal, but I would remind them that it was out of the increase in the pit head charges for coal that the rates of wages in the mining industry were increased. It is only out of these increased charges to the railway users that the level of wages can be maintained. The Railway Agreement and the steps taken to implement it are benefiting the workers in that industry.

My hon. Friend the Member for Newport (Sir R. Clarry) argued that this increase represented a factor in the vicious spiral and that the Government ought to do something to prevent it, but what steps can the Government take to prevent this rise in railway charges except by subsidies? They would have to subsidise the railways at the expense of the general taxpayer, and I cannot see any justification for that. If the Government subsidise the railways, then they must subsidise all forms of traffic. If road transport was not similarly subsidised, it would place it at an intolerable disadvantage as compared with the railways, and that is true too of coastwise shipping. In giving such a subsidy, the Government would be subsidising in part traffic which had no relation whatever to the war effort. It was deliberately decided by the Government, with the grim example of the last war in front of them, that the railways must be placed on an economic basis, and from that position His Majesty's Government cannot depart. That does not give to the railways freedom to charge what rates they like. Every item of increased costs has to be submitted to my right hon. and gallant Friend, and is subject to rigorous examination before it can be offset by increased charges.

It has to be proved that these increased costs arose during the war, and were of a nature beyond the railways' control. The Minister will always have at his hand, when necessary, the advice of the members of the Railway Rates Tribunal. It remains open for any body of users to make representations to the Minister as to the level of the charges, and for him to forward them to the Consultative Committee for further consideration. That was the procedure laid down under the Railway Agreement, that was the procedure followed by my right hon. and gallant Friend, and that was the procedure agreed upon by the House. I believe that the railway users will accept these increases, burdensome though they undoubtedly are, as fair and reasonable, and that they will agree that it is in the best interests of transport as a whole that the railways should pay as they go.

Question, "That this House do now adjourn," put, and agreed to.

Adjourned accordingly at Six Minutes before Eleven o'clock.