RAILWAYS AGREEMENT.

HC Deb 22 October 1941 vol 374 cc1805-59

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

Mr. Pethick-Lawrence (Edinburgh, East)

On this Motion I desire to raise the question of the Railways Agreement as set out in the White Paper which has been published for our information. I make no apology for so doing, because I venture to assert—and I believe the House as a whole will agree with me— that the proper use of transport and our railway system in particular is a question of major importance in the prosecution of the war. It is no exaggeration to say that wars can be lost by the failure of transport. Indeed, a study of history will bear this out. To give one example, I do not think it will be denied that one of the causes which made the Russian drive fail in the war of 1914–18 was that the railway system of that country was so inefficiently handled that lines became congested and the necessary supplies could not reach the front to sustain their troops in their fight against the armies of the Kaiser.

One other fact of particular importance has to be borne in mind as far as this country is concerned at the present time. The coastal shipping trade has to a very large extent been put out of action, so that almost the whole of our domestic transport has to be carried by our internal communications—road, rail, river and canal, and airways. When it is remembered that to our peace-time civilian requirements there has to be added to-day the enormous movement of men and materials on Government account, the magnitude of the problem must be apparent. We have in this country a fine network of railways and some of the best roads in the world, but our internal waterways were wantonly and wickedly driven out of use many years ago, and air transport has not been developed on a very extensive scale. Therefore, it is essential that road and rail should be so organised that we may extract from them the maximum of carrying power. Before I conclude my remarks, I shall pose the question as to how far the Government's policy set out in the White Paper indicates that any such organisation is being undertaken by the Government, but before I come to that, I want to say a few words in relation to the purely financial aspect of the question.

In this matter we have to consider the White Paper in relation to the Railways Agreement of 1939–40, at present in force, which it supersedes. That Agreement was made by the Minister of Transport in Mr. Chamberlain's Government, and when it first came before the House it was opposed by my right hon. Friend who is now Home Secretary and by me, and by a large number of other hon. Members on this side of the House. Surely, it was one of the craziest bargains that a Minister of the Crown ever made with private interests, and the more its provisions have been understood, the crazier it has appeared. Indeed, I think the Minister who is to reply to this Debate will not deny that the Minister who immediately preceded the present Minister of War Transport said publicly that the more he studied it, the less he liked it; and to the general public it has always seemed to be the economics of the Mad Hatter. The basic fact of railway finance during the war is, as I have already said, that the Government have entered the field as a large user and that the railways should be run to capacity—and, in fact, are being used to a far greater extent than in peace time—and since the Government pay for these services, it would seem to follow as a consequence that both the expenses and the receipts of the companies would go up.

The Agreement provided that in so far as expenses went up, the railways could come to the Minister and demand an increase in fares and rates, and as I understand it, if they made out their case he was bound to accede to their request. No account whatever was to be taken of their increased receipts. Their profit and loss account might show a steadily improving position and yet, because their aggregate expenses went up, they were able to extract extra charges from the public. In fact, as we know, there have been, since the Agreement was made, two increases in passenger fares, and I believe increases also in freights. These profits, thus fortified, the railway companies were entitled to keep, in accordance with the Agreement, subject to certain conditions which I will now mention. There were two floors and a ceiling. The lowest floor was £39,500,000, and that the Govern- ment guaranteed. The middle floor was £43,500,000, and the companies could keep, and I think distribute, all the profits they made up to that figure. Above that, and up to the ceiling of £68,500,000, the railway companies and the Government divided the swag, and above the ceiling the Government took the lot. The essential thing to realise is that the ceiling and the middle floor were well above the earnings of the railways in recent peace years, and even the bottom floor was about up to the average.

What was the defence of this generous treatment? It was that the railways were doing more work and that it was only reasonable that they should, in consequence, make more money. There seems to me to be a good deal of confusion behind that idea. It is quite true that the railways have been doing a much larger trade, and consequently railway servants of all grades, including the management, have had more work to do and have rightly felt that they were entitled to more pay; but the profits are not paid to the servants of the railway companies as such—they are paid to the shareholders; and for the life of me I have never been able to see why railway shareholders, admirable people though many of them may be, are entitled to differential, preferential treatment over the shareholders of other enterprises in the country. We have said to the shareholders in other enterprises that, in spite of the fact that their enterprises are working very much harder and turning out perhaps two or three, or even more, times the result they were doing before the war, and in spite of the fact that in some cases before the war they were having a rather thin time, they were not entitled to make additional money out of the war necessities of the nation. Why a different line should have been taken with the railway shareholders, I have never been able to understand. Of course, during peacetime, granted private enterprise, the railway shareholders were perfectly entitled, in common with any other shareholders, to all they could get out of their enterprise, but that they should have had this special and generous treatment in war, I have never been able to understand. Instead of treating the railway shareholders as they treat the shareholders in any other enterprise, the Government treated them in an entirely different way.

To-day, we are being asked to substitute the policy of the White Paper for this crazy settlement of some 18 months ago. Before I conclude my remarks, I shall have much to criticise in the new policy, but I will say, in its favour, that it is, in my opinion, better than the old scheme. Gone is the absurd right of the railway companies to put up fares and rates after examining only one side of their accounts. Gone, too, are the ceiling and the middle floor. These are very substantial improvements, and I do not wish to minimise them or to suggest that the Government have not done better than their predecessors. But what is to be said on the other side? First, on the purely financial issue, the bottom floor has been put up to £43,000,000. That is, I understand, an increase of about £3.500,000, and for the period for which the agreement runs—that is during the war and for a year after—that profit is guaranteed. It is well above the average of the previous earnings of the railway companies, and, in view of that, what I have said in my earlier remarks with regard to the previous Agreement stands with regard to this figure of £43,000,000.

It must be remembered that this is not a precarious but a guaranteed amount, and, for that reason, it might have been expected that it would have been fixed at a lower rather than a. higher figure in relation to the average earnings of prewar days. Moreover, suppose that the Government had adopted a different procedure and had taken over the railways and bought them out, of course, the fixed dividend paid on what would then be Government stock would, naturally, be at a lower rate than a precariously earned profit. But I do not propose to dwell further on this aspect of the case or on the subsidiary financial provisions in this Agreement. These seem to me to remain, broadly, on the same lines as those of the previous Agreement, and in so far as they are on different lines may not yet have been finally announced. No doubt we shall have more particulars later with regard to them and possibly the Minister intends to explain some of them to-day.

I do not, as I say, propose to go further into that aspect of the question, because, important as it is that the amount which the nation as a whole has to pay for the use of the railways should be the right amount, neither too large nor too little, there are other considerations which seem to me to be of even greater importance and which this House ought to consider. Here I come into direct conflict with the policy of the Government. They have, it seems to me, tried to find a half-way house between private ownership and State ownership, and in the result, it seems to me they have got the worst of both worlds. It is true that the State may have the ultimate say on major policy, but it obviously cannot and does not: possess control of day-to-day administration. Therefore, you have a divorce between administrative control and financial liability.

The former Agreement which I have so roundly denounced had this, at any rate, to its credit, that it did give an incentive to efficient administration and economic working. Under the present Agreement, as I see it, it will be no one's business to insist upon this. In fact, I am inclined to think that those who have direct administrative control of the railways will be encouraged in extravagance, if it is found that this will work out to the advantage of the companies in the years when they regain full control. I cannot think, therefore, that this half-way house provides either an incentive to efficient working or a means of checking extravagance. On the contrary, I think it may easily bring about inefficient or extravagant working.

After the last war the present Prime Minister stated that the railway companies were to be unified and nationalised, but that policy was subsequently whittled down to the amalgamation into "the big four," which we know at the present time. Into the question of nationalisation I do not propose to go to-day. It would certainly require legislation and, I think, would be out of Order on this Motion. But unification is a different matter, and I cannot help thinking that considerable waste must be involved in the fact that the four main line railway companies are separate entities. That waste is not, I suggest, avoided by the fact that the Railway Executive in some way combines the views of all of them. There must inevitably be conflicting interests among the separate companies. These can only be removed by unification and by work- ing the whole railways of this country as one system. I put it to the Government and to the Minister that this is not an academic question but an urgent and practical problem which demands the immediate attention of himself and his chief and of the Government. Further, I put to him that this unification of the railways is really but one step towards a much larger unification of all transport, which, in my view, is essential to its full use.

To that aspect of the subject I shall now turn. Everyone realises that transport, in all its forms, presents really one problem. I think the Government have acknowledged that by setting up a special Ministry dealing with the whole of transport. An announcement of some plan for controlling road transport was made a few days ago through the B.B.C. I am not clear what it amounted to; it was rather vague. I do not know whether it was made in anticipation of this Debate or whether it was supposed to convey to the public a wide conception of future policy. Personally, I did not derive much consolation or enlightenment from it, but although the Government have not made it clear to me, I will assume that the Minister has it clear in his own mind and that he is going to carry out a really extensive control of the road transport system of the country. Frankly, I cannot sec that such an assumption is justified, but I accept it for the moment. I see no sign, however, of any appreciation of the fact that road and rail are not two separate and alternative methods of transport to be kept in watertight compartments, but rather two parts of one co-ordinated system.

I will put the point in administrative terms. It will not bring about the desired result if the Minister consults the Railway Executive about the use of the railways and takes certain decisions, and then, on another occasion, meets the road users to deal with their problems. Or again it will not do the whole business if he charges one set of his administrative officials with keeping in touch with the railway companies through their Executive and then charges an entirely different set of Civil servants to negotiate with and control the road transport authorities. Road and rail ought to be dovetailed together and in many cases not used merely alternatively but conjointly and concurrently.

I should be straying rather far from the subject matter of the Debate if I were to deal at any length with the use of internal waterways, but I think I am entitled to ask on this occasion how far the Minister has succeeded in rehabilitating them and, in so far as this has been done, I urge him to address himself to the same problem that I have been discussing, namely, coordination of the waterways with the employment of the two other major means of transport. With regard to air transport, I imagine that, with the heavy claims for military purposes, no great assistance can be expected from this source in carrying ordinary merchandise, but, even if transport by air is confined entirely to purposes of war, it is still an integral part of the transport of the country, and it is the duty of the Minister to collaborate with his Service colleagues to ensure that between them they survey and operate the whole field. In a word, I demand that the Minister of War Transport shall realise that he cannot perform his duty properly unless he treats all forms of transport as a single problem and relates them to one another in a single system.

Finally, I come to the question of ownership. I have no wish, even if you, Sir, allowed me, to enter on the academic field of controversy which separates the two main parties in the House on this issue, but this perhaps I may be permitted to say. I think it must be agreed on all sides that the old conception of private enterprise, with an immense number of small competing units, is gone for ever. In war, as in peace, we are moving more and more into the realm of monopoly and quasi monopoly. That involves an entirely different set of economic problems from what there was before, just as in the world of physics the mechanics of a heap of sand differs entirely from that of a pile of great rocks. The British people. are fond of compromise, and in these days of coalition government many compromises are being rightly made, but if you want to find a compromise between the two parties on this question, the wrong way is to try and secure in each industrial unit a compromise by itself. Some such attempt as I have already tried to show seems to have been made in this Railways Agreement. I believe it will fail, because it contains the disadvantages of both systems and the advantages of neither. It knocks out the profit motive, which is the mainspring of private enterprise, and fails to put any other motive power in its place. The right type of compromise, if compromise there is to be, would be to select certain undertakings, essentially monopolistic in character, already running on well established lines, essential to the life and work of the community, and bring them under the full control and ownership of the nation, and leave others to be developed by the initiative of private enterprise and private control. That is my conception of what a compromise ought to be, and my conception of the transport problem is what I have said. It ought to be regarded as one whole, and the railway part of it ought to be related to that larger conception. I fail to see in this White Paper any such broad conception as I have endeavoured to suggest ought to form the basis of the transport system.

The Joint Parliamentary Secretary to the Ministry of War Transport (Colonel Llewellin)

I think we should all be obliged to the right hon. Gentleman for initiating this discussion in the way he has, and at any rate I think we can welcome his assurance that he favours our Agreement more than he favoured its predecessor. I think my best course is to remind the House first about some terms of the old arrangement between the Government and the railways. The right hon. Gentleman alluded to them, but he took only one or two. The main things about that Agreement were that there was a minimum guaranteed to the railways of £39,444,000. After that the first £3,500,000 of any addition to the pool was to go to the railways, bringing the sum up to the £43,000,000 which we have in the White Paper to-day. After that there was to be a fifty-fifty sharing arrangement until the standard revenues of the railway companies were reached. It is just as well to see what those standard revenues are, when we are having some criticism of the £43,000,000. Under the procedure laid down by this House in the Railways Act the standard revenues of the four main line railway companies were fixed at £51,359,095. To that must be added the standard revenue of the London Passenger Transport Board under the London Passenger Transport Board Act, 1933, which amounted to £5,493,881. So the standard revenues added together—the comparable figure to the £43,000,000— give you £56,852,976. Those were the revenues laid down under the procedure passed by the House, to which the Railway Rates Tribunal was to give effect when altering rates and charges.

Under the fifty-fifty arrangement revenue in excess of £43,000,000 and up to the total standard revenue of £56,852,976 was shared equally by the railways and the Government, and beyond that the Government were to take the whole surplus if it ever amounted to that sum. The maintenance charges which the House discussed last time are a good part of the old Agreement which we have maintained in the present one. Then there was the provision, to which my right hon. Friend referred, that rates, fares and charges were to be adjusted to meet variations in the working costs. It should be noted that it was only variations in working costs and not variations in all general expenses. Then there was the provision that the cost of restoring war damage up to a maximum of £10,000,000 in any year was to be charged to revenue expenditure, and that again was to be taken into account in fixing fares and freight charges.

The final provision to which I will refer is that if a major cause arose, either party to the Agreement might propose a revision of it. In consequence of two Government decisions which have been approved by the House the railway companies agreed that a major cause had arisen and that a revision of the former arrangement was necessary. These decisions were that the Government would introduce legislation to place all public utility undertakings on the same basis as regards war damage, that is to say, the railways will bear 50 per cent. of the cost of restoring war damage; and the other decision, as announced by my right hon. Friend in his Budget speech, was to minimise the impact of the increasing cost of transport upon price levels. I should like to emphasise that the agreement to revise the former arrangement was a voluntary matter and not imposed upon the railways. It was followed by negotiations between my Noble Friend and the railway companies, and the White Paper which we are now discussing is the result of these negotiations. Perhaps the House will let me apologise for the fact that the full Agreement is not yet before the House. I do not think it will help the House very much when it sees the Agreement. I have seen it in draft. It is still with the lawyers. It is rather a dull and uninteresting legal document. When I announced to the House that it would be issued at an early date I had hoped that the early date would be before to-day. At any rate, I think the House will take my assurance that all the main terms are set out in the White Paper and that seeing the draft Agreement when it is laid before the House will not really carry us any further.

The new Agreement operates as from 1st January this year. It represents, as the House appreciates, a carefully considered public policy, and it has the endorsement of the War Cabinet as a whole. The five main differences are as follow: The fixed annual payment of £43,000,000 is, as it were, a rent for the undertakings. When it is taken out of the pool the Government will take any surplus or make good any deficiency. The cost of restoring war damage is not to be charged any more to working expenses, that is, to the revenue before assessing the pool. In other words, the railways cannot charge their 50 per cent. share to the pool but must find it in future from their own resources That brings them into line with the arrangements that will be made with all other public utility undertakings. The arrangement as to adjustment of fares, rates and charges is to cease, which will be a great benefit to the travelling public and the trader. The Government will adhere to their stabilisation policy unless they are forced off it by such an increase in, for instance, wages as would make its abandonment inevitable. The fifth point of difference in the Agreement is that control is to be continued for at least a year after the war ends; indeed, until such time as the statutory machinery for the fixation of the level of charges can again become effective.

What the House and the country will want to know is how this will work out, whether we have made a good bargain for the taxpayers, and whether, in doing so, we have acted fairly by the vast number of people up and down the country, those worthy citizens to whom my right hon. Friend has referred, who own railway shares. During the first complete year of control, namely, 1940, the pool net revenue for the main line railways and the London Passenger Transport Board came to £42,300,000. This year it will probably come to considerably more. I do not want to give what at best would be a rough guess at a figure. We shall issue a return for the full calendar year as soon as the accounts can be analysed after its conclusion, but even now, unless conditions alter very much, it will be substantially larger than last year. In that case the major proportion of the increase will go to the taxpayer as the figure last year was not far short of the £43,000,000. Apart from that, the cost of operation of the railways had increased and under the old arrangements the railways were entitled to ask and, indeed, did ask, for leave to raise fares and freights. This lag, as it is called, dated back to 1940 and would have eventually increased the net revenues of this and future years. Had the Government not taken the decision to stabilise as far as possible fares and freight charges, a further substantial sum would have been carried to the pool.

Again, when we are considering this sum of £43,000,000 it is relevant to recall that in the last war the rent paid for the railways—that is, a smaller undertaking as it did not include the Tubes, London buses and trams—was an average of £46,800,000 a year. Apart from that, the Government under this arrangement had to pay out £60,000,000 at the end of the war for the arrears of maintenance and other charges. We cannot say, therefore, that the railways, in asking for the terms that they did and in getting the terms that they have, are in any way acting as war profiteers. Indeed, it is because they did not want to be in this position that they accepted this Agreement. They made it clear that they had set aside ordinary commercial considerations because in their view the national interest was paramount at this time. That is why we have been able to get a good Agreement from our point of view. It is only fair to the railway boards that I should make it clear that they do not accept the £43,000,000 as in any way representing the existing or potential earning capacity of their undertakings. I think that from the taxpayers' point of view we can congratulate ourselves that we have made a good bargain.

What, however, of the railway shareholders? As my right hon. Friend said, they have got a stabilised revenue for the period of the war, and, indeed, for one year after, subject only to this qualification, that the railway companies will ultimately have to pay 50 per cent. of the war damage, whereas previously they had to pay 100 per cent. of any war damage over £10,000,000 in a year, the £10,000,000 coming out of the pool and being taken out of increases in freights and charges. Nothing of that will now be taken out of the pool revenue. What a certain number of railway investors, and perhaps what the House, would like to know is what, in terms of cash, is the extent of war damage up to date. Well, I am not going to give that figure. The Germans would be extremely interested to know, and so I cannot satisfy the inquisitive among the shareholders on that point. How this new scheme of war damage will affect dividends will depend, of course, on how the railway boards decide to find the money for their contribution, but it will be evident that unless the damage in any year exceeds £20,000,000 the railways will have to find a larger sum under the new Agreement than they would have had to find under the old. However, I think that in this Agreement we have done fairly by the shareholders. I do not see any reason for putting the rent we are giving the railways lower than the figure of the average years just because they have it guaranteed for a while. After all, railway shareholders suffered considerably from the effects of road competition in the years before the war, and even in the last war were getting under the Agreement considerably more than this £43,000,000.

Mr. G. Strauss (Lambeth, North)

The Minister has said there is no reason why the railway undertakings should receive less than their average yearly takings because the Government have guaranteed their revenues. To what average years is he referring?

Colonel Llewellin

The average years to which my right hon. Friend referred. He said that if their revenue is guaranteed that revenue ought, if anything, to be under rather than over their average pre-war yearly earnings. I was just replying to him and did not take any years at all myself. All I was saying was that in the last war the figure was £46,800,000, and that the standard revenue is £56,000,000, so that really there is nothing very handsome for the shareholders in the railways getting £43,000,000.

Mr. A. G. Walkden (Bristol, South)

Is the right hon. and gallant Gentleman aware that the standard revenue was never earned? It was fixed at a time when the railways were employing 750,000 men and to-day they are employing only 550,000, and therefore that figure for the standard revenue is out of the question.

Colonel Llewellin

I agree that the figure has never been earned, but if you have never quite achieved an end which was aimed at for years and the situation of the day gives you some chance of achieving it, then it must once again begin to bulk more largely in the minds of the shareholders. Whether it has been reached or not it was the sum which was laid down by the Railway Rates Tribunal after taking into account all the factors specified in the Railways Act, 1921. As my right hon. Friend has said, the Agreement is solely a financial one, and if the House will give me permission to speak again later I shall be happy to deal with any points on the financial side upon which my hon. Friends may seek information.

I now leave the financial aspect and come to deal with one or two points concerning general control. The only way in which this Agreement can be related to the control of the railways is that it has this indirect advantage, that when we are discussing the withdrawal of perhaps the the more remunerative railway services in order to get essential troop or goods traffic through we no longer have to consider the effect upon the revenues of the railway companies. That is the only way in which this changed Agreement alters the position from the operational side. I am not going, as my right hon. Friend did very warily, to discuss nationalisation today. It would be out of order if I did so, because that would need legislation and this is a discussion on the Adjournment.

Mr. G. Strauss

I wish to raise a point of Order. A very important point has been raised here. It is suggested that nationalisation would require legislation, and therefore it would be out of Order to discuss it upon the Adjournment. In point of fact, under present war-time legislation it would not need legislation to nationalise the railways, because the Government could do it by Regulation under the powers which they already possess. In view of that would the subject be out of Order?

Mr. Speaker

To discuss the nationalisation of railways on a Motion for the Adjournment would be out of Order, because it would need legislation.

Colonel Llewellin

It would, in fact, require legislation, because we should have to continue with nationalisation after the war, when the powers of the Defence of the Realm Regulations will, I hope, have ceased. At any rate, if I could have mentioned nationalisation I should merely have said that we ought to accentuate our war-time agreements rather than our disagreements. My right hon. Friend touched upon the point of how far we are, first, coordinating the railways and how, in the wider field, we are co-ordinating traffic as a whole. The co-ordination of traffic as a whole is the function of my Noble Friend the Minister and to a lesser degree of myself. We are the co-ordinating authority for coastwise shipping, for the railways, for the roads and for the canals. That work is done by our Ministry and, I frankly believe, it is being done with efficiency and success. There is one point upon which I should like to correct my right hon. Friend. He suggested that the coastwise shipping trade was now almost entirely out of action, but I am glad to say that that statement does not at all represent the true position of affairs. We are trying to carry by means of coastal ships, and are succeeding, a great amount of coal, steel and all sorts of commodities round the coast of this country at the present time. We are very much indebted to the officers and men of those ships who sail round our shores, carrying these goods into seas where their vessels may be mined, torpedoed or bombed, and at the end of their voyage coming into a port where they are still not safe from the bomber.

In regard to the railways, we have all the control that we want. It is a day-today control, through the Railway Executive Committee. Whatever the right hon. Gentleman may say about the old ex-Ministers of Transport, they were not fools enough to think that, when war began, you should immediately take out the general managers and the people who have experience in a great industry of this sort and put in Civil Servants or people like that to run the show. Of course, they did not do it and neither have we. What was done was to form the Railway Executive Committee with the general managers of the main line railways and of the London Passenger Transport Board. That body was presided over by Sir Ralph Wedgwood, brother of my right hon. Friend the Member for Newcastle-under-Lyme (Mr. Wedgwood). Sir Ralph Wedgwood has now retired, and I should like to take this opportunity of thanking him for the very hard work he put in when he was chairman of the Railway Executive Committee. Sir Alan Anderson, the present chairman of the Railway Executive Committee, is also Controller of the railways. He holds a meeting, which is now going on in the Ministry once a week. The rest of the time he is in constant touch and co-ordinating the effort of the railways at the headquarters of the Railway Executive Committee. We have complete unification by all those general managers working together.

You would have the same thing, whether you called the organisation the national railways or by their present names of Great Western, L.M.S., etc. The railways have been constructed to work on separate systems from various points to other points, and you cannot jumble them up and put them all together. You would still have to have general managers for each of the main line railway systems. We are satisfied that we have all the control we want, and we are very much indebted to the general managers for the way in which they work on that Railway Executive Committee and carry out the wishes of the Minister. I do not want to extend the scope of the Debate by discussing at length the road problem. The announcement was made only to show that we are taking under direct Government control a pool of vehicles to carry essential traffic, and no more. Complete control of the running of every road vehicle is obtained very efficiently by means of our Regional Transport Commissioners, who operate the petrol ration, without which, of course, the traffic must cease entirely.

Mr. A. G. Walkden

Will the Minister tell us whether the great road undertakings have been acquired by the railways? Are they under the control of the Minister, or are they worked in conjunc- tion with the railways? I notice that they are excluded in the White Paper.

Colonel Llewellin

Oh, yes, they were excluded during the last war from the financial part of the scheme. They are a road undertaking and not a railway.

Mr. Walkden

Is the Minister controlling them?

Colonel Llewellin

Only in the same way as we control any other road undertaking, that is, mainly by the allocation of the petrol ration. The persons running the road industries are just the same as those who ran them before the war, and they are ready to pull their full weight in the war effort, as we all are. They are ready to do what we ask. In addition, there is the small reserve pool which can be used as we require.

With regard to canals, may I remind the House that I happen to have been appointed by my Noble Friend to be chairman of the Central Canal Committee? We have done a great deal about the use of canals, but, unfortunately, when you consider how far you can develop this or that canal, you find that the canal may have a draught of one foot six inches or that the locks have not been repaired, or something of that kind. We have not sufficient surplus labour to undertake the work of putting those canals into action, and so we cannot make use of the whole of these waterways. On the main canals bulk goods are carried where possible. The canal industry is carrying more coal and other merchandise to-day than it has done for a large number of years.

Mr. Benson (Chesterfield)

Can the Minister give any indication of the proportion of canals so used?

Colonel Llewellin

I did not bring the figures for canals with me for a railway Debate, but I will get them for the hon. Member by the end of the Debate.

Sir Joseph Lamb (Stone)

Has the Minister considered using prisoner labour for the purpose of putting the canals in order as it is used in order to drain land?

Colonel Llewellin

I gave that fact only as one example of our difficulties with the canals. We have not as many barges as we should want, nor have we as many bargees. We are encouraging the train- ing of bargees and also of people who can mend barges. Here and there we may be able to adopt my hon. Friend's suggestion, but I am afraid that we cannot use all those canals. We are making the very most of the canals which are in suitable repair and condition.

Now to return to the White Paper which we are discussing, I would pay tribute to the patriotic attitude of the boards of directors, in making this Agreement, which is better for the taxpayer than the old one. I would pay also a tribute to the work of the general managers and to all those who work on the railways right down to the latest joined woman recruit.

With the additional strain which cannot be avoided in war-time and with the delays in journeys due to the need for giving priority to essential war traffic and perhaps occasionally due to enemy action—although that, I am glad to say, has not been so effective or persistent as our attacks on the present scale against the enemy's lines of communication in Germany—there must be many who feel that they have a grievance against the railways. What have the railways had to face? They have had to face the blackout, bombing and the bad weather of early spring; 80,000 railwaymen are serving with the Forces—and incidentally there are now 38,000 women doing work on the railways which was formerly done by men—and in addition they have been faced with this fact: In peace-time factories normally work for only eight hours a day, and even then the railways have had to work, in the marshalling yards and other places, 24 hours a day. But now the factories are working, not eight hours a day, but in some cases 24, or certainly 16 or 20, and the railways have to take the extra output made by the factories in that greater number of hours of work.

How have they done it? Last year they carried 17,000,000 tons more coal to inland destinations than ever in their history. Long-distance travel for Service personnel increased considerably. Workmen's travel increased considerably, sometimes over routes which were already very full. In the first six months of this year 11,218 special military passenger trains were run, and in the same period 11,739 special freight trains. The vouchers issued to the relatives of evacuees from London alone average 6,500 a week, and all this additional traffic has had to be arranged and carried. I hope the House will appreciate the work that is being done to help in the war. Let us pay our tribute both to the managements and to the operating staffs, to the engine drivers, firemen and guards, who, as they nightly go on the trains, peer through the black-out and try to see the shaded signals and detect whether there has been any bomb damage on the line. To the shunters too, who in necessarily ill-lit marshalling yards carry on their important work whether the alert has been sounded or not, and, last but by no means least, to the civil engineers and the various maintenance men who work under them.

When the tale of bomb damage can be told the country will know in full for the first time what wonderful work these men have done in keeping open our lines of communication. They have by their efforts greatly minimised the injury that hostile bombing has caused, and I am certain that whether hon. Members agree or disagree with my previous remarks, they would all like to join in a tribute to the men who are working on the railways. In regard to the Agreement, I would only say, in conclusion, that we have, in my view, given the railways a square deal and given the taxpayers a fair deal. I commend the Agreement to the House.

Mr. A. G. Walkden (Bristol, South)

While thanking the Parliamentary Secretary for his very clear exposition of the White Paper, and particularly for his generous appreciation of the arduous and exceptional labours of the railway workers and managements down to the humblest new beginner in the service, I wish to say that the whole position as explained by him to-day leaves the matter, in my humble opinion, in a most unsatisfactory state, which will cause further concern in the minds of the hundreds of thousands of workers who are interested in the great public service of railway transport and its sister service of road transport. I have an overwhelming feeling that we are in for a long war and not a short one; one can see no hope of an early settlement, and as one who went through the internal difficulties of the country during the war of 1914–1918, I feel that this war is far worse, will last far longer, and will be a greater tax upon our country.

Of all the things a country needs when at war, an efficient railway and transport service is the first necessity That is why, in the year 1871, after the Franco-Prussian war, the Government of that day took powers to take over the railways in the event of war, which shows the appreciation which existed of that fact as far back as 70 years ago. In the last war, within an hour of the declaration of war or of the expiration of the ultimatum to Germany, all our railways were under State control, but this time the Government seem to have been niggling about making this agreement and that agreement, and even now the way in which these things are being done is most distressing. The Parliamentary Secretary has told us that weeks and months have been spent in trying to arrive at the Agreement dealt with in this White Paper. I agree at once that it is less bad than the other one; I cannot say it is good or better, but it is less bad. Even now it is not finally settled; the lawyers are haggling about it. And that is not surprising, because they represent their clients, who are naturally concerned about their dividends and about the future of their property.

I well remember the fatal thing which was done after the last war in releasing the railways from the seven years' public State control and giving them back to the companies on 15th August, 1921. From that day the railways went down and down, and have been in a most unhappy position. Their grouping scheme has proved in practice a failure; their pooling scheme, for which they came to this House for powers, has been tried out, but they cannot agree about it; they are still footling and fussing about, and there are still strife and friction, with an army of professional people engaged. Here, when the Minister should be concentrating on the transport problems of this war, there is still concern with what the lawyers are finally going to do about the arrangements. It is amazing to me, when people are dying by hundreds and thousands in the struggle for humanity. This will not do. The whole tone and temper of the exposition are wrong; the whole approach, the whole attitude of mind, is wrong. This great service needs unifying at once, and completely. The canal question has been mentioned. What better illustration could you have than that of leaving it to private enterprise? As far back as 1896 a Commission reported that they could be made into a useful service for £15,000,000. The railway owners undertook nothing of that sort. Now another war has come upon us, and the canals are still not giving the service they might, because we have not an all-in central authority to control these things. There has been a wireless announcement about some control of road transport which shows how wrong, inadequate, and unsatisfactory the transport position is. I want to plead that transport should be unified completely without further delay.

Some people with very little experience and rather timid minds say that this cannot be done because no man living can control and direct all these aspects of transport single-handed. Well, there are great expectations about the gentlemen appointed to the Railway Executive Committee, and from what I know about managers there is quite a good collection of first-rate men and brains, any one of whom could take such a position and fill it effectively. He would have an easier job than any manager of any one of the four railways groups has now. He would have an easier job than the head of the London, Midland and Scottish Railway. It would be a less complicated job, the whole thing would be unified, all power would be in his hands along with his advisory board, to make decisions without let or hindrance from other interests.

A first-class illustration before- us is the London Passenger Transport Board. When that enterprise started, 92 separate undertakings were fighting one another for the passenger traffic: of London— several electric railways, tramways, buses, borough council buses, county council buses and the regional buses and trams all round London, all in conflict, all in chaos. The head of the London Passenger Transport Board, I know, certainly found it much easier to run the Board after these 92 undertakings had been merged into one than when he was head of the London Traffic Combine, with all these scores of people in competition. I am sure there is quite a number of first-rate men who could do just as well with a Transport Board for the whole country. This is only a little island about 600 miles long, which does not make the project such a stupendous thing.

The job of transport has become tremendously important, and for war purposes it is of primary importance. Every- one depends on transport every day of his life, but when war comes it is 10 times more important. That is probably why Bismarck, when he got the indemnity money out of France, used it at once to buy the German railways. The German railway system, as has been stated, is a magnificent, unified concern, which has about the same capital and just about the same yield of profit results—to the Exchequer instead of to shareholders—as ours. It was undoubtedly of tremendous value to them in 1914–18, much handier to utilise, direct and manage than our railways Again, they have the same advantage in this present struggle. This war will last for a long time, and I implore the Government to think again about the whole transport problem. They must not imagine that it will be left where the White Paper leaves it. The effectiveness of the service is impaired by a multiplicity of minds, each based on a different foundation, and the whole service is blighted by the fact that the primary motive of those directing is to earn dividends, not give a public service; they cannot divest themselves of that.

When I joined the railway service, a friend of mine entered a competition which the late Lord Rosebery, who had got himself made a railway director, instigated, by offering a gold medal for the best essay on a railway subject written by any clerk in the service under 35 years of age. My friend won the gold medal. The theme he had chosen was the function of the railways in relation to trade and commerce. He wrote that the object of the railways was to serve trade and commerce, that that was their function. He wrote about it nicely, and the academic gentlemen who adjudicated awarded him the gold medal. He went to receive it from the chairman of the company, who said to him, "You have overlooked the first function of railways." When my friend inquired what that was, the chairman said, "The first function is to pay a dividend." That was straight from the chairman's mouth to the innocent clerk. That is true all the time. All my life I have been up against that, as a railway clerk and as a trade union representative. That must be eliminated from this great service. No one would suggest that the Post Office should be given to private contractors to earn a dividend. Of course not. This transport service—railways, canals, coastal traffic and road services— ought to be all under the control of the community through the Government of the day. If control was made public instead of private, there ought to be compensation, of course.

Mr. Deputy-Speaker (Sir Dennis Herbert)

I have been listening to the hon. Member for some time, and I am afraid his ingenuity is not sufficient to save him from having transgressed Mr. Speaker's Ruling.

Mr. Walkden

The representative of the Minister himself, in referring to public ownership, said they would have to eliminate managers and replace them with civil servants.

Mr. Deputy-Speaker

I did not hear that, but I am afraid that misconduct on the part of one Member of the House does not justify it on the part of another.

Mr. Walkden

I will leave it at that. I do say that further powers should be sought, if the Government feel that they do not possess them, to go a great deal further than this White Paper. Let me give this further warning. I may be dead and gone before this war is over, but something will happen before the war is over. Out of war there is always the risk of revolution. It is much better to forestall it, and if the Government handle things of this kind in a bold, comprehensive and fearless way, as Disraeli handled the Suez Canal question, they will prevent the uprising of public feeling that will want to overturn the present order of society. I know that is a big thing to suggest, but we have seen it in other countries, and we do not want it here. By more statesmanlike action on the part of the Government we could have a better transport service for the nation and for the purposes of the war, and a much better atmosphere throughout the country when we have won the war and have set about rebuilding our own country.

Mr. Mander (Wolverhampton, East)

I should like to join in the tribute that the Minister paid to all who are playing a part in the running of the railways at present. They are working under most difficult conditions, and they deserve that tribute. In these few remarks, I do not want to deal with the details of the Agreement. As a result of Government control of the railways during the war, we have been able to see certain advantages in their administration coming to the State as a whole. For example, the question of fares, workmen's tickets and that sort of thing, has been dealt with in response to a demand from this House. The question of first-class carriages has been raised and pressed here, and the Minister is making an experiment in the London area to see the effect of abolishing first-class carriages altogether. It may be that, as a result, such a development will take place on a wider scale throughout the country. I cannot see that there is much case for maintaining the distinction anywhere. I know that a concession was made in regard to allowing Service men to enter first-class carriages which were empty, but I feel that, even there, an attempt has been made to get around the concession by keeping certain compartments locked. It is true that if he gets out of a train at a station and walks up and down to see where there are empty carriages a soldier may obtain a seat, but while the train is in motion he cannot go from one end of the train to the other to search for a seat. That is not quite carrying out the spirit of the concession. The condition of London termini has been greatly improved as the result of pressure in this House.

I should not be so rash as to put forward any suggestion which would involve legislation, but I am going to make a specific suggestion which could be carried out by administrative action of the Government any day. I am going to ask that they should appoint a committee or commission of inquiry to go into the questions of the administration of the railways and their future. This White Paper refers to the fact that the Agreement is to extend for one year after the termination of the war, but I think that no one can seriously contemplate a back-to-1939 policy for the railways. I should have thought that there was pretty general agreement that certain changes will have to take place as a result of what we are learning during the war. I suggest that that matter should be investigated by an impartial body set up by the Government to consider whether or not, and in what manner, changes might be brought about. I was looking the other day at an example of agreement among all parties in the form of a book, published some years ago, called "The Next Five Years." It con- tains the signatures of members of all parties, and it agreed that the railways were ripe for coming under some sort of Government control or ownership. You need not necessarily do it on the lines of the Post Office—although we have been, in the last year or so, going very much on those lines, and having direct questions put to Ministers about the railways. It may be that something in the nature of a public utility company, like the B.B.C. or the London Passenger Transport Board, might suggest itself to the committee of inquiry.

Mr. Deputy-Speaker

Does the hon. Member suggest that that could be done without legislation?

Mr. Mander

No, Sir, I am not suggesting that.

Mr. Deputy-Speaker

Then the hon. Member must not discuss it.

Mr. Mander

I shall be glad to have your Ruling, Sir. I am not suggesting legislation; I am suggesting a committee, to be appointed by the Government, to consider whether or not steps should be taken to make these changes.

Mr. Deputy-Speaker

When it is ruled that certain things may not be debated, the hon. Member cannot get free of that Ruling by merely refraining from using the word "nationalisation." He must not discuss matters which would require legislation to carry them out.

Mr. Mander

I quite appreciate that there is a rather narrow line between the appointment of a committee of inquiry and any subsequent proposals which might grow from their decisions. I must not, and will not, develop that any further, beyond saying, if I may finish the sentence, that, so far as Members of my party are concerned, we are perfectly satisfied that the case for some State control of the railways has been proved over and over again.

Colonel Llewellin

Then why ask for a Commission?

Mr. Mander

For the very good reason that my party are not at present in control of the machinery of the Slate, and that it is necessary, therefore, to convert other people to that point of view. I want to refer to thr need for close co- operation and integration of all the different means of travel—roads, railways and canals. It is true that so far as air travel is concerned very little can be done at present, but in so far as anything can be done, even on the military side, that ought to be brought in too. Arrangements ought to be made so that the railways and the roads may not be competitors but may be regarded as the main public carrier services, which should play into each other's hands in a common unity. I hope that the Ministry in dealing with questions affecting railway and road transport will bear in mind the importance of that. I hope that my right hon. and gallant Friend will also bear in mind the suggestion I have made about a committee of inquiry.

Sir Joseph Lamb (Stone)

I have very great hopes that I shall be able to keep within the Rules, because I shall confine myself to particular points in the White Paper, and not deal with transport in general. The Minister used the expression that he thought he had made a good bargain for the taxpayer. I hope that he included the ratepayer. I am speaking for the County Councils' Association, who feel considerable uncertainty as to the effects that this White Paper will have upon them as rating authorities, the effects that it will have upon the valuation on which they receive contributions from the railway companies. We have grave fears that this White Paper will alter the basis of the valuation laid down in the Acts of I930 and 1933. The White Paper gives an intimation that the Government are going to provide £43,000,000, and also that they are going to control rates, fares and charges which the railway companies will have the opportunity of making. The receipts are to be pooled, but under the 1930 Act they had to ascertain, the receipts of the separate undertakings and arrive at averages. I want the Minister to make clear how they are to determine the receipts for each undertaking. If they are to be pooled, it will be very difficult.

I want to know how that is to be done. Is the £43,000,000 from the Government to be put in as receipts, and how will that be allocated to the undertakings for rating purposes? The Act says "normal receipts". I believe that there have been cases where it has been decided that the receipts which accrue where Government interference has taken place cannot be taken as normal receipts. I would like to know whether that difficulty will be overcome in ascertaining the normal receipts when those receipts have been controlled by the Government in the various ways. These are all points which have to do very largely with the ascertainment of the rating values which is to be made for the railway companies and upon which basis the local authorities will have to receive their rates. This is a matter of very great importance to the county councils and to other rating authorities, and I shall be glad if the Minister will deal with it, so that we may put the views of the Government before them.

We have to remember that in the White Paper the Government are to make good any deficiencies which may acrue to the railway companies, but, in regard to the basis of valuation for the purposes of providing rates, it must be remembered that it is the local authorities that have to spend money for the benefit of the public in their area. I hope that they will make good any loss which may accrue to them in their rates through the effect of the White Paper. We do not believe that the White Paper should have such an effect upon the basis of valuation that it would ultimately mean that the ratepayer would lose in the receipts he should have for the performance of the duties placed upon him by the Government in the various localities. I do not wish to discuss the matter further, but these are points which are causing a considerable amount of concern to the local authorities, and I shall be glad if the Minister will be able to give a reply and an assurance upon them.

Mr. Ridley (Clay Cross)

The House listened with interest and, I think gratitude to the careful and attentive survey of the White Paper which the Parliamentary Secretary made, and he is to be congratulated upon his first statement on finance at that Box. I say that without prejudicing what I may subsequently say about what the Parliamentary Secretary has said. The present Prime Minister, when sitting below the Gangway, usually proceeded to praise an hon. Member and then to attack, saying, "Having fortified myself, I will proceed with my speech." I wish to make a few comments on the speech of the Parliamentary Secretary. I thought he used a rather unfortunate analogy. I do not want to misinterpret him, but I understood him to say that rates and fares under the new Agreement or under the Government's general policy were stabilised at their present figure, unless there is a substantial or major increase in general costs and, he said, for instance, in wages. I thing that he would have been happier if he had chosen another instance rather than the wages instance. There are many other cost increases of which I can think which could have been used to illustrate the general argument, and I would not like it to be assumed by several hundred thousand railwaymen that an increase in wages would be the particular objective of Government policy in this respect.

Colonel Llewellin

I used the instance of wages only because the labour bill is the major running expense of the railway companies. If there were a substantial rise, we probably could not help paying out taxpayers' money in subsidies every year to railwaymen or increasing fares and freights to cover the cost.

Mr. Ridley

I do not want to pursue the point, but there is some understandable tenderness on this matter, and I am very anxious to avoid undue reference to it. I think that the Parliamentary Secretary has been seriously misinformed about the facts of the standard revenue, and unless he has the situation a little clearer in his mind, his objective views may lack the accuracy which is desired.

I and many other hon. Members are grateful to him for the tribute he paid to the work of the railway workers under existing war-time conditions. I am connected, as are other of my hon. Friends, with a trade union organisation in which railway shunters are not taken for membership. We are entering a period of the year with a 14-hour black-out and shunters in large shunting yards, where every moving wagon is a dangerous projectile to life and limb, are faced with imperfect lighting conditions in which the shunter may not raise his own hand-lamp more than a glimmer above the horizontal, and, sometimes in the winter, as in the case of the winter before last, with conditions in which, as one London newspaper said, everything that could freeze, froze twice. When these circumstances are aggregated together, they present a condition of work that requires a display of heroism if the railway industry is to continue in any sense at all to serve the national purpose. It is a remarkable thing that the railways are able to carry on in these circumstances in the splendid fashion that they do, and I am sure that many people will be indebted to the right hon. and gallant Gentleman for what he said.

The White Paper, I suppose, represents not only the terms of the financial Agreement between the Government and the controllers of the undertakings but also the extent and limits of the railway policy of the Government. If I am not correct in the latter part of my assumption, I can only say that the Government have been very reticent in indicating their general policy. If I am correct—as I fear I am— I can only say, as some of my hon. Friends say in other language, that it is a "poor thing." It may not be the right hon. and gallant Gentleman's opinion, but it is a poor thing notwithstanding. It is unimaginative, and it is confessing complete inability to understand either the necessities of the transport situation or the way in which that situation should be dealt with. Let me indicate what I think are the comparative advantages of the new arrangement over the old. I say "comparative advantages." It is only a question of comparing bad with worse and not bad with good. The first advantages are these: Although the guarantee has been lifted by £3,000,000, the maximum has been dropped by £13,000,000. The old guarantee—the £40,000 000 guarantee— represented in terms of average distribution a distribution of 3.3 per cent, on all railway capital. The ceiling figure represented is 4.7. The new figure of £43,000,000, which is at once a guarantee and a ceiling, represents an average distribution, as I understand it, of 3.6 per cent. That means that whereas the guarantee has been increased by 3 per cent., the maximum figure had been lowered by 1.1 per cent. The standard revenue has been abandoned, and I am grateful, because the standard revenue has been for years the bugbear of the railway unions.

Here I wish that the Parliamentary Secretary had not left the House for a moment or two, because I would have liked to have told him that he is wrong in his assumption about the standard revenue. The standard revenue was the figure fixed by the Railway Rates Tribunal as a figure which the companies could retain if they got it, but it was never a thing which the Tribunal said the companies ought to have if they could get it. The companies have always proceeded to argue as though, in fact, the latter were the case. They have tried by every sort of economy—including staff economy, wages, and salaries—to get their standard revenue. They have never got their standard revenue. But I am glad for another reason altogether to see that the standard revenue has gone. It was a very bad figure, because it was based mainly on the pre-1914 profit level, which was in itself a high profit figure because of the almost intolerable poverty conditions of employment in those years.

I regard this as a very important point. A week ago I visited a railway station in South Lincolnshire, where in those years I was employed as a railway clerk. I was employed at a time when companies were prosperous in the matter of distribution and when the total profit figure exceeded the aggregate wage and salary figure. I was a very experienced railway clerk, earning 24s. per week. I made out pay sheets for railway porters earning 15s. a week and for railway signalmen, in a 12-hour box for 72 hours a week, earning 19s. 6d. per week. It was bad enough to endure that poverty in those years, but it was much more painful to bear the reflection of that poverty in 1938–39. It was on a basis of that kind—intolerable poverty—that the standard revenue figure was very largely calculated. So if for no other reason I am glad that this White Paper, if it does not abolish the standard revenue altogether, does at least lay it low. But the weakness of the White Paper as a financial arrangement is that it guarantees a profit of £43,000,000 to the existing owners while leaving the entire direction of the whole industry in the hands of the existing owners. This, to many people, startling figure of £43,000,000 per annum has no doubt been insisted upon by the railway companies, because they must cover as far as they can their very heavy capital obligations.

Anybody who reads for the first time the history of railway development from the early part of the nineteenth century will be astounded at the story of its unsavouriness. The capital of the four companies exceeds £1,000,000,000, but this figure has never been reached on the Stock Exchange since the last war. There ought to be reorganisation in order to make it more closely conform to the modern conditions. I shall be told by the orthodox railway economists that the justification for the £1,000,000,000 figure is that the industry could not be rebuilt at that price. Well, I do not think anybody would want to do that to-day. I can think of railway stations which would be rebuilt by no one outside Bedlam. The Greeks may have a word for it but not true economists. Many of our railway stations are a disgrace to the public service, and I am quite confident that nobody will want to rebuild many of them in their present shape. I wish to urge that the capital structure of the four railway groups, which is intimately related to the figure of £43,000,000, needs drastic reorganisation in order that the figure shall conform with modern valuation on the Stock Exchange or, at any rate, with modern valuation. It would have been cheaper to have bought the undertakings than to hire them at £43,000,000 per annum. If the money had been raised at 3 per cent., £30,000,000 would have been required, and something like £8,000,000 to £10,000,000 would have been left for sinking fund purposes.

That brings me to my final point about railway finance. It is a point of public importance. Some companies cannot rebuild their stations or widen their permanent ways even if they wanted to do so. They would need to raise capital to do it, and without a State guarantee they could not get their capital. Indeed, during the last seven or eight years they have become mendicants of the State. They have had capital raised for them on the basis of State security through the Railway Finance Corporation. We ought not to continue to live in this sort of halfway house between private enterprise on the one hand and private enterprise which lives only on the basis of State guarantees and is, therefore, in a position of a mendicant. I do not see how there can be reorganisation of railway capital except on the basis of public ownership and control. There is no reason for the continuance of four separate capital structures, four boards of directors, and four general managers. They ought to be one. For the moment I will content myself with urging that there should be unification of the industry for the purposes of properly pursuing the war effort. The present Minister of Aircraft Production said when he was Minister of Transport that the four group companies would combine to fight the enemy but would insist on fighting each other at the same time. That is the essence of the conflict. The continued existence of four separate organisations is inconsistent with the proper pursuit of the national war effort.

There is a suspicion of manœuvring and of jealousy as to what is to happen in 1946 or some later year. That is inherent in a system based on the private profit motive, and I suggest that the private profit motive must be abolished if there is to be an effective harnessing of the railway industry to the pursuit of the national effort. In other words, there must be public ownership and control. In terms of legislation in this House, that is no new idea.

Mr. Speaker

It has been ruled several times that that subject is out of Order in this Debate, and I must ask the hon. Member to keep to that Ruling.

Mr. Ridley

I apologise if I have disobeyed your Ruling, Mr. Speaker, and all I will say, if I am in Order in doing so, is that Mr. Gladstone was responsible for placing on the Statute Book in 1844 an Act which laid down the terms of purchase of the British railways on the basis of which they could now be nationalised. I suggest that the Parliamentary Secretary might usefully and with some interest find out what Mr. Gladstone said, not in some hypothetical year, but in 1844.

As to the second point, the Minister is presumably being advised about railway matters by the Railway Executive Committee, a body of railway officers who, in their own sphere, deserve all proper respect. But their sphere is the railways, and not transport in the wider sense. I suggest that, retaining this administrative control in this form, there should also be a body for the purpose of directing the industry in the widest sense and advising the Minister, consisting of officers, users and employees. Not only do I urge that the four groups should in some fashion be made into one group, but I also urge that, for the purpose of effectively pursuing the national effort, there should be a unification of road and rail trans- port. The continued idea of regarding these as two separate industries and two different kinds of undertakings is a totally erroneous and fundamentally harmful idea. There can be an effective transport system only when every important unit of it is made to play its proper part within the ambit of a single unified organisation. The Transport Advisory Council, whose work has largely been forgotten in the excitement of war, made a report to the Minister of Transport on 4th April, 1939. In referring to the report, the Minister of Transport said that due regard should be had to the ultimate objective of the co-ordination of all forms of transport. That is what I ask. The Council, in reporting to the Minister at that time, said that an all-in system of transport under an appropriate and co-ordinated system of control was essential to the community as a whole. I ask for no more than that the Government should implement the report of the Council which was appointed two years ago. There is now neither co-ordination nor correlation. Long-distance traffic is recklessly hauled on the roads when it could go much better by rail, and short-distance traffic which could be conveyed better by road is still being very expensively conveyed by rail. There is no transport plan. In the ultimate all transport on road and rail must be brought under a unified ownership within the authority of a single control.

If the Minister says that the position on the roads now is so complicated and involved that any transfer is impossible in the circumstances of war, he merely confirms my view that the position is, in fact, intolerably chaotic; but for the moment I accept his dictum and urge upon him the following considerations. In my view, all traffic, whether destined eventually to be carried by rail or road, should notionally pass through a traffic control centre, and the traffic controller should direct the way in which all traffic should flow. I would simplify that process by adding to it something like a "navicert" system by which some firms and undertakings of substance would be given general authority as to the transport of their traffic between certain defined points. But the essential thing is that nobody should be allowed, as they now are, to do exactly what they like. Everybody should be required to do what is best in the national interest. It is often urged in some parts of the House that industry has not been as efficiently organised as it might be in pursuit of the national effort. I do not know enough about the matter either to support or deny that as a general statement, but I assert that in the industry in which I have some experience not nearly enough has been done, and that the White Paper is really no contribution to a policy that should have as its object the harnessing of the transport system to the national effort in the most effective fashion. It has been urged for some time that to press the question of nationalisation now is to rake the fires of acute political controversy. That would be alarming, but it is far more alarming that the Minister of Transport should think that in transport matters the war can be conducted on the basis of the status quo.

Colonel Sir George Courthope (Rye)

The hon. Member for Clay Cross (Mr. Ridley) has made some statements about railway finance which are so misleading that I want to comment on them at once. He spoke of the £43,000,000, which, to use the term employed by the Minister, is the rental to be paid to the four main line railways and the London Passenger Transport undertaking, as yielding 3.6 per cent, on the whole railway capital, and he quite clearly suggested that all the holders of railway stock would get something out of that. The hon. Member knows very well that the holders of many million pounds' worth of railway stock will get nothing.

Mr. Ridley

The right hon. and gallant Gentleman is looking a gift horse in the mouth. I was trying to show that the minimum provided only 3.6 per cent.

Sir G. Courthope

I am explaining to the hon. Member, what he knows to be true, that under this Agreement the holders of many millions of railway stock will get nothing, and can get nothing. The stockholders are not all in one class, as there are debenture holders, guaranteed holders, and so on, and a great many of the preferred ordinary stockholders and deferred ordinary stockholders will not get anything under the Agreement. I do not attack the Agreement, because under some pressure the railway companies have accepted it, but I do not think it is right that misleading statements of that kind should go unchallenged. I cannot give an exact figure, but in the case of not less than £80,000,000 of railway stock, the holders will receive no dividend during the currency of this Agreement. Not unnaturally, a great many railway stockholders feel that it is very unfair to them, representing as they do very substantial assets and having subscribed either in the original issues or in purchase through the Stock Exchange these large blocks of stock, that their stock should be sterilised so that for the duration of the war they will get nothing.

Then I want to challenge the extraordinary statements that he has made about railway capitalisation. If there was a valuation by modern methods of the railway enterprises, I think he would be astonished at the results. He has referred to obsolete railway stations. Of course, there are obsolete railway stations, and no one wants to put a big value on them, but he has overlooked the fact that the practice of replacement of permanent way and rolling stock has been done in such a way that it has not increased the capitalisation in spite of the greatly increased cost of replacement. Some people may feel again that the junior stockholders have a grievance, because there has been by this method a bolstering-up of the security behind the premier stocks at the expense of the common stockholders. The replacement has taken place on the basis of calculated life. After so many years the whole of the permanent way has to be replaced. It costs double now what it did, but it has not increased the capital of the companies nor the peak figure at which the permanent way stands in the railway books. If that was valued by modern methods of valuation, I am confident that the total figure would be considerably greater, instead of considerably less, than the, roughly, £1,000,000,000 at which it stands to-day.

Mr. Ridley

I said that what a thing is worth is what a man who wants to buy is willing to give to a man who wants to sell, and that, or the Stock Exchange figure, is a great deal less than £1,000,000,000.

Sir G. Courthope

I have not made a calculation on the Stock Exchange figures, but I should be very much surprised if the hon. Member is right.

The Agreement itself has not been very substantially attacked, but the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) and the two hon. Members opposite have all spoken as if the figure under the Agreement was a great concession to railway stockholders. The last speaker almost suggested that it was a question of subsidising the railways. I am not going to give the figures, although I know them, as my right hon. and gallant Friend who spoke for the Government said he could not give the figures of net revenue, but everyone knows perfectly well that, short of something catastrophic during the remaining two months of the year, the ceiling figure under the old Agreement, the standard revenue figure, will not be reached. Not only has this House insisted on setting up a standard revenue figure for the four main line railways, but also as recently as 1933 in the case of the London Passenger Transport Board, so that the House is definitely going back on its view twice expressed in legislation. It drops all idea of the standard revenue. It is true that we never earned the standard revenue.

But I want to say something else. Last year this House solemnly approved, after consideration, and not without opposition, the White Paper which was issued in February of last year which set out the heads of the old Agreement. Early this year the Government informed the railway companies that they wanted to abandon that Agreement. The railway directors agreed to abandon it and to negotiate a new Agreement on the understanding that it should be not less favourable to stockholders than the old one. Not only was that understanding met, but the chairmen of the main line railway companies were authorised to make that statement to their stockholders at their annual meetings at the beginning of this year, when it was announced that they had agreed to negotiate the new Agreement. The heads of the new Agreement are in the White Paper which we are considering to-day, and no one will suggest that, in the present year at all events, they are anything like so favourable as the figures would be if the old Agreement was allowed to stand. Those who had to speak for the stockholders under some pressure agreed to these terms, in spite of the fact that it is preventing large blocks of stock from getting any dividends and in spite of the fact that it is much less favourable than the Agreement it replaced, because everyone felt that it was not a time when any public service should seek to increase its earnings and lay itself open to the charge of being war profiteers. But it is right that the House should be reminded of its actions in the past and should recognise that those who speak for the railway stockholders have gone a very long way in the direction of the public interest in agreeing to this document.

I should like to add a word to what has been said in all parts of the House in praise of those of all ranks who are serving the country through the railway companies. In some of the worst days of enemy action their behaviour was magnificent. When it is possible for the public to be told the story of some of the bombing, and the rapidity with which the services were restored, they will think it was almost miraculous. No praise can be too great for everyone concerned from the general managers right down to the humblest railway workers, for what they have done. I should like to thank the House for the patience with which they have listened to the few remarks which I felt bound to make, in view of the statements that have already been made by others in this Debate.

Mr. Moelwyn Hughes (Carmarthen)

At the outset I should like to join issue with those who have spoken on the other side on the question of the relevance of the standard revenue to the discussion today. I find it difficult to think that the railway shareholders arc giving up anything in abandoning their right to try and choose the standard revenue. They are giving up only a right or a claim to do something which this House in legislation and the Government by their administration have denied to every other industry. All they are doing is to give up the right to take advantage of the war situation to place themselves in a better position than they would otherwise have been. The standard revenue, in any event, was, as we have already heard, a figure based upon the heavy earnings prior to the last war, fixed at a time between the—for the railway shareholders—prosperous years of the last war and the prospect and the hope of the post-war boom that followed. It was based again, as we have heard, upon a grotesque capital structure and estimated —and this has not been emphasised so far—without any regard to the potentialities of road competition.

This discussion ought to proceed upon the basis that the standard revenue is completely irrelevant to it, and we should consider the £43,000,000 on its merits and without regard to any fanciful "might have beens." There is one other confusion which ought to have been avoided in discussing these terms. That is the confusion between the two sets of railways. One set are the shareholders' railways, and the other set are the railway men's railways. In the Debate that took place following the previous Agreement an hon. Member used this language: What I want to ask is why should not railway companies be paid extra remuneration if they have to render extra services during the war? It is a new doctrine to me that you should say to any particular form of industry, 'For three years we know that trading was bad that you were not able to earn a sufficient remuneration. We arc now going to call upon you to fulfil extra services, to put every energy you possess into this work for the nation, but on no account shall you be paid an extra penny for those services.' "—[OFFICIAL REPORT, 13th February, 1940; col. 66S, Vol. 357.] This Agreement concerns only what has to be paid to stockholders, and nobody is asking them in any sense of the term to fulfil extra services or to put any additional energy that they may possess into work for the nation. It will need no stronger fingers at the scissors for cutting off the coupons, whatever energy may be asked and services demanded of the railways during the war—not from the stockholders. When the railway companies advertise, as they properly do, the way in which they carry on during the war and give us pictures of the lines behind the line, they are referring not to the shareholders' railways but to the railway-men's railways—those railwayman who have been quite properly praised from all parts of the House to-day. All honour to them for the work they have done, but nothing that we say in praise even of the managers has any relevance to the consideration of this Agreement, which is with the shareholders' railway companies.

This Agreement was negotiated by the railway chairmen and not by the managers of the railway companies. I should like to examine one or two items in it. First, the figure of £43,000,000. In 1938 the railway companies made only £33,500,000. That was the pre-war earnings. Therefore, they will be nearly £10,000,000 better off as the result of this Agreement. When they negotiated the previous Agreement they managed, by what means I know not, to persuade the Government not only to ignore the 1938 figure as a proper basis, but to accept an average which even excluded the 1938 figure altogether. The average accepted was the average net revenue of 1935–1936–1937. That selected average, hand-picked by the railway companies, gave them only £40,000,000. In this Agreement we are to give them £3,000,000 more than their own selected average years. Suggestions have come more than once that the Agreement really does not give the shareholders a great deal. I have had sent to me a magazine called "The Railway Stockholder," which I have never seen before. It purports to be the issue for October, 1941. I want to take my figures from this magazine because I imagine from its title that any figures appearing in it will not be biased against the view of the railway stockholders.

Let us apply the test of stock values and of dividend possibilities, or, if I may so describe them, the bread and jam of the stockholder. I find set out on one page in this magazine a comparison of prices of British railway stock on the third Friday in September, 1940, and the third Friday in September, 1941. That is a pretty fair date to take, because the third Friday in September this year was three weeks after the Agreement had been published, and it had given ample time for the profit takers and others to fade out of the picture and for the shares to steady themselves at what the Stock Exchange regard as a proper level. I find that if I had had a sample of each one of these stocks to sell in September, 1940, I should have got £661 for the packet. If I had kept them till the third Friday in September, 1941, and had put the same packet of samples on the counter I should have got £890 10s., an increase of 25 per cent.

Mr. Henry Strauss (Norwich)

Has the hon. Member made a similar test of changes in the prices of stocks in any other section of the Stock Exchange between the same two dates?

Mr. Hughes

I am doing my best to keep within the rules of Order in this Debate. Take the other test of dividend possibilities. There are listed here the dividends of what are described as the marginal stocks of the main line railway companies, and the 1940 dividends upon them averaged 2.2 per cent. In another column there is worked out the surplus available for distribution upon these marginal shares out of the amount now paid to the main line railways, and the surplus available, if it is distributed, works out at an average of 2.8 per cent., again another 25 per cent, addition as compared with 1940. How, therefore, can those who speak for stockholders come to this House and suggest that they are getting anything but a really generous donation from the Government for the use of the railways during the war?

Captain Cobb (Preston)

Has the hon. Member compared the present day prices of railway stocks with the prices of the same stocks a year or two before the war began?

Mr. Hughes

No, Sir, that seems to me to be irrelevant. What we are considering is the effect of this Agreement upon the shares. We have had bleats from those who speak for the shareholders, and I am demonstrating, and I think I have demonstrated conclusively, that they have done very well indeed. They have done 25 per cent, better than last year, which is quite enough to enable me to suggest that the language used by the Parliamentary Secretary was not quite appropriate.

General Sir George Jeffreys (Petersfield)

Has the hon. Member taken the trouble to find out how many of the ordinary stocks, in particular, have paid no dividends at all for many years past?

Mr. Hughes

We have heard in this Debate that there are many millions. Is it suggested that because there is a war on those who hold shares which could not produce anything in peace-time have now the right to demand to have dividends upon them out of the community?

Sir G. Jeffreys

It does not show that they are doing very well, which is what the hon. Member has been saying.

Mr. G. Griffiths (Hemsworth)

It seems to me that the hon. Member for Carmarthen (Mr. Hughes) is hurting somebody on the hon. and gallant Member's side.

Mr. Hughes

Consider another phrase used by the Parliamentary Secretary. He described this £43,000,000 as a rental. It is a queer use of the word. Take the position of the railway managers. They have the day-to-day responsibility of running the railways, though it is true that they are, as a railway executive, consulted by the Minister. Now they are, in effect, paid by the State, and yet they are appointed by the shareholders and can be dismissed by the shareholders. In that position they cannot help thinking of their position in the future. They are responsible to the shareholders as much as they are responsible for the efficient running of the machine, which is the one thing they ought to be concerned about, especially at the present time. It is as though I rented a furnished house and the housekeeper and the gardener were paid by me but were appointed by the landlord, that he could dismiss them and that I could not change the drawing-room furniture around or plant a row of cabbages without consulting the gardener and the housekeeper whom the landlord had appointed. If the word "rental" is a proper term to apply then I say this is a tenancy on usurious and ignominious terms.

I have one or two questions to put to the Parliamentary Secretary about the Agreement, because there are one or two matters which I confess that I do not understand, though, perhaps, they may be elucidated when we see the Agreement itself. In paragraph 7 it states: Maintenance charges including renewals) are standardised on the basis of an average pre-war charge adjusted for variations in assets in services and in prices levels. It is a matter of some moment to the State to know what that means. In the previous Agreement there was a provision for standardising maintenance charges, and I wish to know whether they have been standardised. There have been 18 months in which to do it. If they have been standardised what is the figure and why have we not been told it now? There follows in paragraph 7 a complicated provision. Many hon. Members have read it and tried to understand it. I have read it many times and, as I see it, it means this: Assume that a railway company was in the habit before the war of replacing 10 railway engines a year, and that as the cost of building an engine has doubled they are able to replace only five now. As I see it, enough money to replace those railway engines which are not to be bought or built now at the existing prices has to be put aside and invested and even though it represents a price for those railway engines which may not be the price of them at the time when they are replaced. The paragraph concludes by stating that the balance of the funds for maintenance and renewal which have not been used during the period of control will be passed through the pool account for the final accounting period of control. We ought to be told what that means. I hope it means that the Government will get the credit, whenever the railways are decontrolled, for the fact that replacements may be cheaper when the money comes to be spent than they were at a time when the money was put into this fund.

Paragraph 10 provides for the determination of the levels of rates, fares and charges. I believe that the effect of what the Parliamentary Secretary said was that it was intended to stabilise these as much as possible, but even within the policy of stabilisation it may be necessary to make alterations in some of the rates and fares without affecting the general level. In that case I would like to ask the Parliamentary Secretary what procedure it is proposed to adopt. Is it to be clone in the secrecy of his office, or by the Railway Executive, or are we going to have the advantage of a public inquiry either before the Railway Rates Tribunal or before a consultative committee in order that those whose interests may be affected should have their voice heard? I hope that the right hon. Gentleman will follow that course. I hope that I shall not transgress the Rules laid down for this Debate when I say that whatever form it may take some reorganisation is called for.

We have heard a great deal of what railwaymen have done on the trains and in the shunting yards. They have been performing national service, and not only national service but Defence service. There is no reason why these men upon whom the life and economy of the country depend should be employed by private enterprise any more than soldiers or sailors. This should be a national service, nationally organised. I will not say anything about who should own it, but it should be a national service, nationally organised and nationally co-ordinated and controlled.

Mr. Austin Hopkinson (Mossley)

May I ask the hon. Member whether he suggests that railwaymen should be paid at the same rate as men in the Defence Forces?

Mr. Hughes

I do not see why because men in the Defence Forces are not being paid as much as they ought to be paid that that is any reason for bringing railwaymen's wages down. When the matter has been left to the railwaymen they have expressed their preference for the method of organisation under which they would like to be employed. For these reasons I would ask the Parliamentary Secretary not to treat this Agreement as marking the final stage

Major Maxwell Fyfe (West Derby)

Before coming to the many points on which I disagree with my hon. Friend who has just spoken, I should like to ask the House to consider whether we can agree on the points which we think important and decisive in testing this Agreement. I think the first one has been generally agreed, namely, Has the State made a good bargain in making the Agreement at all? The second test I should suggest is whether the needs of the travelling public and consignors of goods have received due regard; the third whether the essential need of rail transport and transport in general has been regarded; and the fourth, Has due weight been given to the effects of local rating? Within those four questions we can make our judgment of this Agreement. With regard to the first, I would suggest to my hon. Friend who has just spoken that there are more accurate and more fair methods of trying to decide whether the amount of £43,000,000 is justified or not than taking market values a fortnight after heavy bombing had started in this country, comparing them with values at a time when heavy bombing has ceased for some six months, and ignoring the movement in other stocks without which it is impossible to isolate the effect of the Agreement on railway stocks.

Mr. Hughes

I would like to point out to the hon. and gallant Gentle man that I did not choose those two periods. I got them from the "Railway Stockholder." There are two sets of figures. I did not take two out of six. There are two sets of figures on page 45 and page 51. I used them. The "Railway Stockholder" took them; I did not.

Major Fyfe

If my hon. Friend is so confined in his argumentative approach as to be limited to figures on one page of one issue of one magazine, I think we may try to proceed to get a better test. The first I would suggest is a comparison with hap- penings in the last war. My hon. Friend said a great deal about standard revenue, but he will remember that the figure in the last war was based on net earnings for 1913, and on that basis payments were made during the last war. Because there was not a similar provision with regard to standarisation of maintenance and the provision of a fund to meet it at the end of the last war, the railway companies received, after proper adjudication on the matter, an additional £60,000,000. Therefore the position is that in this war they are not only receiving a smaller sum when their capital and potential earning power have greatly improved and increased, but a step has been taken—personally, I regard it as a sensible step—to standardise maintenance charges instead of piling up against yourselves the possibilities of a large claim after the war. I suggest that the Agreement comes out of the test unscathed. I would ask my hon. Friend, at some time when the many calls on his time allow him, to read the Debates in Committee when the Railways Act of 1921 was going through this House. Although it is 20 years ago, my recollection is very clear—I shall be corrected if I am wrong—that it was not on standard revenue that the real criticism was made, because standard revenue as the aim and goal of the railway companies' activities was taken from the earnings of the constituent companies in 1913, and had no regard whatsoever to, and was in no way connected with, the capital structure of the constituent companies, some of which I agree may have contained a certain amount of stock which was very low at that time.

Mr. Ridley

But standard revenue was fixed and was not related to a recommended capital structure.

Major Fyfe

The basis of the standard revenue was the 1913 earnings of the constituent companies, plus a due allowance, about which there has never been any argument, of fresh capital, and the basis of the standard revenue was laid down in the Act, although the actual calculations were made afterwards by machinery which was provided either in the Act or in the Appendix. The point I am making, and I am sure that the hon. Member for Clay Cross (Mr. Ridley) will appreciate the force of it, is that the basis of standard revenue was the net earnings of the constituent companies. On that point I shall pledge to my hon. Friend whatever accuracy of recollection I have.

However, he proceeds from there and says that this standard has never been reached. Everyone knows, especially the hon. Member and I who have appeared for and against the railway companies in cases which introduce this fact, that we immediately came into the period of road competition. This House, and various bodies set up by it, were considering one scheme after another for co-operation and co-ordination of the different forms of transport. At that time the figures were quite accurately put. The railway companies were required during the whole of that difficult period to make provision, and to equip themselves and their undertakings, for such a situation as the war that has come. I do not think that my hon. Friend went so far as to say that, but I can see no basis whatsoever for suggesting that, if there were no Agreement of this kind, the railway companies could not now earn the £51,000,000 which is the main companies' standard revenue and the £5,500,000 which is the standard revenue of the London Passenger Transport Board. We who have to take as detached a view as we can of these matters bear in mind that road transport is restricted by a strategic matter, the shortage of petrol and the restriction of petrol, and we recognise that the railway companies, just as everyone else, should not be allowed free play to earn in this time. In fact, it has been cut down.

That is the position of history. I remind the House that we are discussing the Agreement before us and, as everyone has admitted, by that Agreement, the railway companies are foregoing their chance to share in the higher ranges of the pool. They are also foregoing the loss that they sustained during the time-lag which must inevitably occur in the raising of charges under the old Agreement, to meet the various factors which bring that loss about. I would ask the House to consider the first point either from the point of view of the history of these undertakings or of the last war, or by balancing the benefits which have been obtained, for I suggest that on that ground the State has made a good bargain at this time. From the point of view of the travelling public—in which I include the consignors of goods—there are, of course, two matters which stand out. In the first place, war damage is no longer taken into the pool and made directly correctable by charges and rates. It ceases to be an immediate burden upon those who pay the fares and freights. Apart from that, they have also got the benefit of the general policy stated by my Hon. and gallant Friend, quoting from the Chancellor of the Exchequer, namely, that an attempt is to be made to prevent an increase in the price of goods and services because of high transport costs.

There are three points which I should like my right hon. and gallant Friend to consider, and the first is the question of payment for national goods and personnel. It is extremely important, from whatever angle we may consider the future of transport, that we should know, at some time convenient to the national interest, what the carriage of goods and personnel for the State has meant. It is important from the point of view of the avoidance of extravagance, and it is important also from the psychological point of view, for if the system of carrying actual goods and personnel free is adopted, that will have to be remembered in connection with any such suggestion as was made earlier in the Debate that the railways are being subsidised.

The second point which I hope my right hon. and gallant Friend will consider is that we shall have regard in the future to the movement of price levels and other charges in the planning of national transport. The other point was with regard to the suggestion of waste. I have been waiting for some specific charge, but I have not heard any so far, and I should like to put it to my right hon. Friend who initiated this discussion, and to those who have followed, that after every amalgamation, for example, that of 1921, there is inevitably a long period during which the main constituents run as independent bodies. Whatever my right hon. Friend's, view, I cannot see how to avoid such a period during which the independent existence of the constituent structures would have to be maintained.

The third test which I have applied to this Agreement is the position of transport in general, and in that connection I wish to be brief, because it is easy to transgress the real purpose of this Debate. I would ask my right hon. Friend, and others who have obviously given so much consideration to this matter, to consider whether a time like this, when you have the petrol factor which I have mentioned, various factors affecting coastwise shipping, and a road transport system based essentially on the "C" licence, is really the time when unification should be introduced, because at the same time it is impossible to exclude special war factors and impossible to make inquiries into the whole of those war factors. But apart from that, what this House expects is that the coordinating guidance will be given in this matter by the Minister of War Transport. With regard to that, I think we are in general agreement, and that is our genera! expectation.

I want to deal for only one moment with the local rating position, because that is a matter which has given great concern, not only to those bodies mentioned by my hon. Friend in front of me, but to the Association of Municipal Corporations and, if I may be particular, to my own local authority, the Liverpool City Council. What we want to know is this —and if my right hon. and gallant Friend could give me his attention on this point, I think it would ease the doubts of a number of Members of the House on this point. The first question, to take the £43,000,000 itself, is whether that money is to be considered revenue within the Railway Assessment Act. That is the broad point, and the difficulty on that is the words Lord Atkin used in the piping days of peace in giving a judgment in regard to this matter. He said: Government funds may in the future be paid to the railways either in the circumstances of war, which Heaven forefend, or in other circumstances, as by way of subsidy or otherwise. I cannot think it was ever intended that sums received in such circumstances were ever intended to come into the computation of rateable value. If that is the position with regard to the £43,000,000, then local authorities would indeed be in a serious position with regard to railway hereditaments within their area. The second point is, assuming that the net revenue of the railway companies does not amount to £43,000,000, and you have a portion of the £43,000,000 paid from State moneys, does that figure, if it ever comes into existence, come into the revenue for rateable purposes, and conversely is the excess of net earnings over £43,000,000 excluded from the figure for rateable value? These are points which are gravely exercising local authorities at the present time. I am sure that many of us in the House would be most obliged if my right hon. and gallant Friend would reply to them. I do suggest that, taking those four criteria which I have—I think, with general consent—adopted, and considering the various points that arise under each, the Agreement does survive the test, and is one which the House should approve.

Mr. Silkin (Peckham)

I should like to associate myself with the point which the hon. and gallant Member made with regard to rating. This is a matter which is concerning many local authorities, and I hope that the Parliamentary Secretary will be able to make it quite clear. I do not think I need labour the point which was clearly made by the hon. and gallant Member. The dispute that exists between this side of the House and the other about the terms of the Railways Agreement arises, I think, on the point that both sides are looking at it from a different angle. I will readily admit that if this Agreement were negotiated freely, without any restrictions, if it were negotiated in an atmosphere in which every industrial undertaking was allowed to make as much profit as it could in war time, and in the light of the fact that there was already in existence an Agreement which gave the railway companies an opportunity of making greater profits, then the present Agreement would be a fair and reasonable one from the point of view of the public.

It is undoubtedly a great improvement on the former Agreement, which nobody has attempted seriously to justify, and I think we might have congratulated ourselves upon having made a not unreasonable deal. Hon. Members opposite are looking at it from that angle. But, even on the existing terms, the railway companies are put in a privileged position. I have heard nobody on the other side deal with this point. All other undertakings are subject to 100 per cent. Excess Profits Tax, and are not allowed to make a greater profit than they made in the standard year. On that basis, the railway companies would have made not more than £31,500,000. Why have the railways been allowed, instead of that figure, a figure of £43,000,000? I hope that the right hon. and gallant Gentleman will direct himself to that point when he replies. If other undertakings were allowed to make more profits during the war than they did in peace-time, this consideration would not apply—it would merely be a case of the railways having so much more profit, and one might not object. The only reason put forward is that they were entitled to make the additional profit because they were doing additional work. My hon. Friend the Member for Carmarthen (Mr. Hughes) has completely demolished that point, and it is not necessary for me to comment further upon it. It is worth bearing in mind also that this £43,000,000 is State guaranteed. It is possible that if the railways had been allowed the opportunity of making profits as they pleased during wartime they might, with all the restrictions on travelling, have made even less profit than previously. That, however, is a pure gamble. They might have made more, but it is conceivable that they would have made less.

I would like to ask one question about capital improvement. There is no doubt that during the tenancy—if I may put it that way—by the Government of the railway concerns, considerable capital improvements will be made. The Minister, speaking in another place, said that with the changes brought about by the incidence of war production, a large amount of work had been carried out during the period of Government control where, by reason of these changes, exceptionally heavy traffic had to be handled. I have no doubt that in the next year or two considerable improvements will be made in the railway undertakings by the Government, and I would like to know at whose expense these will be made; whether the railway companies will be expected to make some contribution in so far as the improvements benefit the companies? I do not expect them to contribute to something which, while it may be of national advantage may not necessarily benefit the railway undertakings. But in so far as the improvements benefit the railway undertakings, I would like to know what contribution, if any, the railway companies will be expected to make.

On the question of management, my right hon. Friend who opened the Debate made the point that it was extremely difficult to expect a number of managers of undertakings who were to a certain extent competing with one another to have an eye on the national advantage and not to have at least a portion of an eye on the post-war position of their own undertakings. It would be almost more than could be expected from any human being not to consider at all what would be the post-war condition of his particular undertaking. One would have hoped that in order to get the most efficient unification of the railway companies, we would have got a management which was not so directly related to the existing railway companies. There is nothing in this Agreement or in the previous Agreement which requires that the management should be so directly related in this way. I hope it will be possible to give farther consideration to the question of management so as to secure the maximum amount of unification of the railways and not allow the Agreement to be prejudiced by the fact that managers must have some concern over the post-war position of their undertakings.

I want to say a word or two about the question of road transport. I feel that the unification of the railways without unification of road transport will not be very effective. A previous speaker said that a large number of persons with "C'' licences were carrying out transport services. I do not think anyone would seriously suggest that they ought to be brought into a national organisation, bur certain holders of "A" and "B" licences should be unified and brought into the national transport organisation. There are some 40,000 of them. I admit that that is a measure of the complexity of the problem, but it is also a measure of the complete chaos of the road transport undertakings. In these days the number of road vehicles is decreasing, because very few new road vehicles are being made and a number are becoming old and incapable of use. There is a difficulty in getting spare parts, and there is a petrol shortage, and, for all these reasons, it is essential that we should make the most effective use of the vehicles that are running and not allow them to run at their own sweet pleasure inefficiently, each undertaking merely being concerned with its own profits and not with the national interest. It is a hopeless position at the present time.

I have mentioned the road transport of goods, but the same thing applies with road passenger transport. Everyone knows that one of the great problems in production is the lack of adequate transport facilities for the workers. Probably that is the biggest single factor in the loss of production. Even to-day under these conditions, when probably our whole existence depends upon securing maximum production, there is no power to require any particular transport undertaking to run its vehicles in the national interest. There is no power to require an undertaking to run a service from one place to another.

Colonel Llewellin

We can certainly direct them to do so.

Mr. Silkin

Can you really direct an undertaking to run a particular service?

Colonel Llewellin

Yes.

Mr. Silkin

Then perhaps when the right hon. and gallant Gentleman replies he will tell me of one instance in which that power has been exercised because all over the country we are told of transport difficulties. I am not aware of any case in which, if that power exists, it has been used. On the other hand, regional transport commissioners are constantly saying that they have no power to force a particular undertaking to run a service from one place to another. We are told that they have some indirect method of exercising pressure, by the rationing of petrol and so on, but I have yet to learn that, if they have this power, they are exercising it. I hope the Minister will exercise control over road transport as well as over railways and will unify road with rail transport. In many instances it happens that there is an alternative method of transporting workers by rails but fares by rail are substantially in excess of fares by road. I hope the right hon. and gallant Gentleman will look into that question and also that he will do with road transport generally, both goods and passenger vehicles, what he has done with railways, bring it into unified control, unify it with railway transport and see that if it is more efficient to carry goods by road, goods will be carried by road without any question of private profit entering into the matter. The only question that should arise is that of national interest. But the Minister cannot do this until he has attained complete control of road transport. While I feel that the Agreement is unduly generous to the railway companies I, personally, am prepared to wink at it if the Minister will take over all goods transport of the country, other than "C" licences, and harness it to the national effort.

Colonel Llewellin

I should like, first, to thank the House for the reception which has, in general, been given to this Railways Agreement. I know that, in principle, some people would have liked it otherwise but I think, on the whole, I can claim that I have had a pretty good House to-day. I can only speak again with the leave of the House, and I will try, in my concluding remarks, to be brief. The hon. Member for South Bristol (Mr. A. G. Walkden) said he wanted something that we have not got, an all-in central authority. With great respect to him, he is wrong, for we have an all-in central transport authority; that is the very thing which the Ministry of War Transport is. To co-ordinate and control transport is the function we have to perform, and are doing our best to perform. The hon. Member for East Wolverhampton (Mr. Mander) wanted a commission of inquiry into the future of the railways, although he said frankly that he had made up his mind what ought to be done with regard to the railways. It seems to me that when large numbers of people have made up their minds one way or the other, a commission would waste its time in drafting a report which might not change anybody's opinion and which would at any rate result in people concerned with seeing that the railway companies operate to the best advantage of the nation being taken off their job in order to give evidence before the commission.

The hon. Member, who said that he was speaking for the Liberal party, also wanted to bring the air services into the picture. I suggest that he should take up that point with my right hon. Friend the Secretary of State for Air, who is leader of the party for which the hon. Member said he spoke. My hon. Friend the Member for Stone (Sir J. Lamb) raised a point concerning rating, which was also referred to by my hon. and gallant Friend the Member for West Derby (Major Maxwell Fyfe) and the hon. Member for Peckham (Mr. Silkin). The first thing to remember about this Agreement is that it cannot affect the rates until 1946, and I do not think we need trouble ourselves very greatly now about the effect of the Agreement in 1946. Having more than once appeared for rating valuation committees and county authorities on rating, I do not intend on the spur of the moment to give a legal opinion in the House. The matter is not really one for the Ministry of War Transport, but for the Ministry of Health and I will certainly see that the attention of my right hon. Friend the Minister of Health is drawn to the remarks of my hon. Friend the Member for Stone.

Sir J. Lamb

I hope my right hon. and gallant Friend will say something a bit more substantial than that. This will have an effect on the basis on which the valuations are made in future years.

Colonel Llewellin

If this Agreement goes through, it will be a transaction, not between the rating authorities and anybody, but between the Government and the railway companies. As to what will be its effect on rating assessments, I must decline to give an opinion to-day, because very likely any opinion that I might give would be upset the first time the matter came before the court, and thus only serve to mislead.

Mr. Douglas (Battersea, North)

May I point out to the Minister that the form in which the Agreement is framed will be decisive on rating? Several times in the course of his remarks he has referred to the payment of £43,000,000 as being a rent. Will it be so expressed in the Agreement?

Colonel Llewellin

I was using language which I thought it would be easy for the public to understand. The wording in the Agreement is not actually "rate" or "rent" but "a fixed annual payment."

Mr. Douglas

It will produce the adverse results foretold.

Colonel Llewellin

I pass now to the speech of the hon. Member for Carmarthen (Mr. Moelwyn Hughes). One of the things he said was that railway managers are appointed by the shareholders. That, of course, is wrong. They are appointed by the boards of directors. We have made an arrangement with these companies that in the case of any new senior appointment—we are not going to worry about the lower ones—we shall be consulted. He asked about stabilisation of fares. We shall, of course, alter fares here and there and adjust them, as indeed he wished them to be adjusted without going to any kind of consultative tribunal. If there was an idea that rates generally would have to go up we might agree to it as a Ministry, which we can do, or we might take the matter before the Railway Rates Tribunal. The next point I think I ought to deal with was made by the hon. and gallant Member for West Derby, who asked whether we were going to pay for Government goods and personnel. That matter is still under discussion between the Government Departments concerned. Whether cash passes or not, I think we are bound to keep a record of costs. My hon. and gallant Friend also asked whether we were going to keep a record of variations in costs of labour and material for each year of control. We shall certainly do that.

Sir J. Lamb

Will these be available to the rating authorities for use in ascertaining the valuations?

Colonel Llewellin

I think I had better have notice of that question. As this matter, which concerns my hon. Friend so much, will have no effect whatever until 1946, I think we have a little time to think over what will happen between then and now. If some hon. Members had their way there would only be a contribution in lieu of rates, rather than any payment of rates at all. The hon. Member who spoke last mentioned lack of travelling facilities for the workers. Wherever a shortage of such facilities is brought to our notice we do our best to remove it, sometimes by putting on special workmen's trains. Here the hon. Member for East Wolver-hampton was rather inaccurate in dating workmen's fares from the time when the Government took control, because there have been workmen's fares since the very start of the railways, even in the days of Mr. Gladstone. They were first stabilised in 1881. We can also put on extra buses, although I am sure the House realises that the number of buses and trains and everything at our disposal is short and we have a difficulty in meeting all requirements. But wherever any hon. Member sees a case where men in essential work are not getting proper travelling facilities, I hope he will bring it to my notice so that I can see what can be done to improve matters.

Mr. Silkin

The point I sought to make was that you are barred in regard to road transport; you can put on an extra train, but you cannot put on an extra bus.

Colonel Llewellin

We control it through the Regional Transport Commissioner. If you go along to one of the passenger transport bodies and say you want an extra bus put on on a certain route, they will in practically every case agree to do it for war workers. That is, of course, provided the need for the bus is recognised by the Regional Transport Commissioner. If there is any case of which the hon. Member knows where they refuse to do it and lets me know, we will soon see that it is done. The people who are running the bus services are just as anxious to give proper facilities to those engaged on war work as any Member of the House.

Mr. Silkin

These cases were dealt with fully in the 21st Report of the Select Committee on National Expenditure.

Colonel Llewellin

I will look at it again to see whether any cases quoted there have not been made good. I was making the point that if there is any person who refuses to use his transport we can easily take steps, for there are plenty we are empowered to take, to see that extra services are put on.

The hon. Member made a point in regard to capital expenditure and also about the Excess Profits Tax. All large contracts for work or supplies on maintenance account during control are to be subject to the prior consent of the Minister. We are strengthening the transport accounts branch of the Ministry, which since the last war has had a nucleus of ex-railway accountants, and it will examine the control accounts jointly with railway accountants. Capital charges will not be allowed to come into the ordinary expenditure as a revenue charge. In regard to the Excess Profits Tax, the hon. Member overlooked the fact that Section 27 of the Finance Act, 1940, provides that a substituted standard may be allowed by the Commissioners if it can be shown that the profits for the standard period were depressed. This substituted period is to be such as the Commissioners or referees think just, not exceeding an amount sufficient to pay 6 per cent, on the ordinary share capital. The £43,000,000 will not pay anything like 6 per cent, on the ordinary share capital of the railway companies.

The hon. Member said that we were looking at the solution of this problem from two different points of view. I can assure him that the only point of view from which my Noble Friend and I and Members of the Government look at this matter is how to get the most effective service out of the railway companies in the national effort during the war. If you have people taken off their jobs— and it is going to be a difficult job this winter running through the maximum number of trains—to consider how their position and that of their companies will be affected now and after the war and in getting out accounts and statements to see how the arrangements can be made, it will simply mean throwing a spanner into a machine that is working extraordinarily well. For that reason we certainly should not during the course of the war take any such steps as the big ones suggested by some hon. Members. We believe that it would greatly hamper the solution of our transport problems to do so and that we had far better go on as we are, with the general managers working in with us and together unifying the control of the railways. They and those who work under them are performing a grand work for the country at this time. Let us therefore close with this Agreement and allow them to get on with that work.