HC Deb 17 December 1946 vol 431 cc1785-894

Order read for resuming Adjourned Debate on Amendment to Question [16th December], "That the Bill be now read a Second time."

Which Amendment was, to leave out the word "now," and, at the end of the Question, to add, "upon this day six months."—[Sir David Maxwell Fyfe.]

Question again proposed, "That the word 'now' stand part of the Question."

4.5 p.m.

Mr. W. S. Morrison (Cirencester and Tewkesbury)

It has been considered a convenient course that on this, the second day of this Debate, I should invite the attention of the House to certain aspects of the compensation proposed for persons who are dispossessed by this Bill. I understand that the right hon. Gentleman the Chancellor of the Exchequer will be following me, and may be able to explain a number of things which are, as yet, gravely dark.

The people whom we are considering in regard to this subject of compensation are those whose property and livelihood the Government are asking us, in this Bill, to take from them by force. They are people who do not want to part with their property; they have what to them appear sound and just reasons why they should be left in possession of it. They are guilty of no crime, they can point with modest pride to services to the community both in peace and war which are the equal of the services rendered by their fellow citizens. They are a very numerous body. There are more than a million railway stockholders, and 50,000 road transport operators who will be directly affected by this Bill. The number indirectly affected it is not possible to calculate. Every beneficiary of a trust, a pension fund, a superannuation scheme or the like, which holds railway stocks, is indirectly affected by what we do on this subject in this House. Very few of the total of persons affected have committed the crime of being moderately well off or rich, so far as anyone can be today. There are different levels of income among them, as there are on both sides of this House, and it is a fairly safe assumption that a great proportion of the people affected have incomes much lower than any hon. Member of this House. Of course, they have dependants and charges upon them, just as we have. Therefore, I say that it is our bounden duty to consider carefully what we are about on this subject, because it would be a dreadful thing if we in Parliament should be guilty of an injustice towards this section of the people, whose interests, after all, together with the interests of other people, we are sent here to protect. I think this question transcends in importance even that of the large number of people who are affected by this Bill.

In past days, the State, in these commercial matters, confined its actions to seeing that people behaved decently towards each other, and the State worked through the law, in the last resort, to enforce contracts freely entered into or to exact damages for breach of those contracts. Now it is the declared policy of hon. Gentlemen opposite to abandon the role of referee, and join actively in the game. What a pity it would be if, in this now role, the referee should show himself guilty of conduct for which, in his proper role, he would send an ordinary player off the field. The trouble is that, with the referee himself playing, there is no longer anybody to whom one can appeal for fair play against him. He makes the rules to suit himself, and they are always changing.

The Bank of England has been paid for in one way; Cable and Wireless in another; the coalmines in yet another, and this Bill adds to the confusion by containing four different compensatory devices to be applied according to whether railways, road transport undertakings, the undertakings of local authorities or privately owned railway wagons are being taken. The absence of any coherent principle is, in itself, an alarming prospect not only to those engaged in the industry directly affected by this Bill, but to those whose industries are the next "cribs" to be "cracked." It removes all power to predict. There used to be a general optimistic feeling, "Oh, well, we do not know the details but, surely, we can rely on the Government to be fair." Those who have had that feeling have received a rude shock from this Bill. It the Government intend to proceed on the policy of taking away the property of the public, they will need to clear their minds on the principles of compensation.

The present chaos of compensatory devices lets nobody know where he stands or what he can expect. It breeds lack of confidence, and inhibits progress and production. As an instance of this lack of intelligible principle, I take the treatment which it is proposed to mete out to the owners of railway wagons. Under Clause 32 they are to get the original cost of the wagons less a heavy depreciation—what my right hon. and learned Friend the Member for West Derby (Sir D Maxwell Fyfe) yesterday called "scrapheap price". Besides being unjust, this is quite different from the basis proposed in Clause 48 for road vehicles, which is the cost of replacement with adjustments for age and condition of the vehicle. It may be argued that there is some difference between a vehicle which runs on rails and one which runs on the roads, which varies the canons of justice to be applied to them. Personally, I do not see the difference.

But this difference of treatment does not arise from any difference in the vehicles themselves. It arises, I think, simply from lack of attention to the problem. The Government have legislated already for the acquisition of railway wagons. During this year under the Coal Mines Act, a large number of privately owned railway wagons were acquired, and toy Section 13 (4) of that Act, the price to be paid for these wagons is to be the open market value at the date of vesting, as between a willing buyer and a willing seller, as if the Coal Mines Act had not been passed. So that we have two different values put on railway wagons. We might have a concern such as an iron company owning wagons for the transport of coal. These wagons have been taken over at one price under the Coal Mines Act. We may then have the same interchangeable wagons used for the purpose of carrying iron ore and so on, and the company will get another and worse price under this Measure. Where is the logic and consistency in that state of affairs? This lack of principle in the Government is very disturbing. The fact that, even within the borders of the Bill which we are now considering, there are four different systems of compensation does not increase our confidence. All these systems have only one principle in common, and that is that they all ignore the real value of the assets.

Throughout all these methods there is a tendency to shirk arbitration. Where it is allowed, the court of arbitration is severely limited. In the case of the railways there is no arbitration at all. This avoidance of independent arbitration, so far as I can see, rests on no principle at all, unless it be the principle enunciated yesterday by the right hon. Gentleman the Minister of Transport that inquiries are dangerous.

Road transport undertakings are to be valued on a complicated system which is described in Clause 48 and in the Seventh Schedule. It is full of technicalities. An arbitration tribunal is provided for, but, as I say, its powers to do justice are severely limited by the text of the Bill. All I would say at the moment of these Clauses and the Schedule is that as they are so technical and full of difficulty, they will require very close and detailed examination in Committee, but for the purposes of the Second Reading I think it will be sufficient if I indicate to the House how these provisions work out and what will be their effect on the people concerned, so that hon. Members may see, through the technical jargon which is perforce employed, the real impact of what we are doing here upon the human beings affected by this Bill.

I propose to give two examples. Of the 57,000 "A" and "B" licence holders in the road transport world, 11 only operate over 200 vehicles I take as my first case one of these. He has 250 vehicles. It is a family business. The present owner's grandfather started with two horses, and his father and himself have lived frugal and hardworking lives. They have "ploughed back" into the business every penny of profits as they earned them. They have not had any capital from outside invested in the business, and all their savings through three generations are locked up in the business. The business has flourished. [HON. MEMBERS: "Why not?"] Indeed, why not? Through these three generations, the business has grown to a size where its profits are estimated, for the purposes of the Bill, at £19,000 a year, less tax, with all that that means in wealth, growth of employment, public service and a steady yield of taxation to the country throughout the years. All the vehicles of this business were put at the disposal of the Government during the war. That business has been valued in accordance with the terms of the Bill, and the result is that the present owner will receive for his vehicles at the most £25,000. and for his other property £30,000. Taking his compensation for cessation of business at the maximum, which is five years— although the owner himself is gloomy enough to think only of three years—he will get £95,000 for that. The total is £150,000. Stock bearing 2½ per cent. interest on that sum will give him a figure of some £3,750 a year. The loss of yearly income is £15,250 per year. That man is 63 years of age.

I take another case. There is an operator now aged 50, who has been in business for 20 years. He started with one vehicle and now has seven. This he has achieved in the same way, by modest living and "ploughing back" all his profits as he could. His average profits are £1,747 a year. I am told he will receive for his vehicles £3,400, for his other property £1,500, and on three years' purchase for cessation of business he will get £4,875. That is a total of £9,775. At 2½ per cent. the yield on that is £244 a year.

Mr. S. N. Evans (Wednesbury)

Why take the figure of three years when the Bill specifically presents possibilities of five years, and when we can confidently anticipate five years, if the organisation is going out of being?

Mr. Morrison

That is not at all clear. My first example, though it was given to me at three years, was raised by me to five, because I thought that in a business of such stability I could not fairly argue that less than the maximum of five years' purchase of profits would be given. But in this last case I see no reason to be certain that more than three years can be given. Anyhow, the difference between three years and five years is so little that it makes very little difference to the income which the man is getting. It may swell the total by a figure that looks significant, but at 2½ per cent. it does not add very much to the annual amount. He gets £244 a year instead of his profit of £1,747; that is a loss to him per year of £1,503— six-sevenths of his income gone. I want the House to see what they are being asked to do. It is important that we should know, and not be befogged by the jargon in the Bill. The circumstances of the man of whom I am now speaking, left with £244 a year, are that he is married, with a family; his son, recently demobilised to carry on the business, will have no business to come to. The father has insurance premiums, I am told, of £300 a year, which he was quite entitled to take out with his income of £1,747. He will have to yield those up at a loss to himself. He is left, at 50 years of age, to support his family on £244 a year. What a reward for an honest life of self-denial and toil! That cannot be called compensation, whatever else it is called.

It may be that a small business which is the life's work of a man is almost incapable of being compensated for in terms of money if it is taken away. But that is a very good reason for not taking it away, for keeping one's hands off it. For all the trappings of arbitration in this part of the Bill, it is clear that its passage will bring griveous hardship into thousands of innocent lives. If this be the progress which the Minister of Transport promised us, there will be many who would give the right hon. Gentleman and the party opposite the five years for which he asks, but in a sense somewhat different from his desire. I think the error which produces this injustice lies in the limitation to five years' purchase of profits as compensation. It may be that when a man voluntarily sells his business, a sum of five years' purchase is reasonable enough. But such a man, doing it voluntarily, is probably wanting to retire, and certainly has some other plans for his own future. This has no relation at all to the man who is being forcibly dispossessed. I say, quite frankly, if these men cannot be dealt with more fairly, we should keep our hands off them altogether.

I now turn to the railways. Here I wish to mark a novel and, in my view, malignant departure from what has always been considered fair in this country in matters of compensation. In other cases of Government acquisition, there has always been some element of independent arbitration. This House has never before been asked in a public Bill to combine the roles of purchaser and valuer. The dangers of such a double role are obvious, and previous Parliaments have been too scrupulous to try to combine them. The acquisition of property by the State is no new thing, but hitherto we have contented ourselves in Parliament with declaring that it was necessary in the public interest that the property should be acquired.

Mr. Douglas Jay (Battersea, North)

Does not the right hon. Gentleman realise that it is not the Government who are acting as valuers in this case but the Stock Exchange?

Mr. Morrison

I am coming to that. The Stock Exchange Council themselves have indignantly repudiated that suggestion. If the hon. Gentleman will do me the goodness to follow my argument, he will find that I will not omit to deal with the error which is obviously in his mind. As I say, hitherto, in acquiring property for the State, we have contented ourselves by saying that we must have the property; but we have let the price be fairly determined by some independent person or tribunal. In that attitude, I say we have risen no higher than the common morality of those who sent us here. But I think that in this Bill the Government are asking us to fall below that standard. The price of railways is set out in the Bill—and this is my answer to the hon. Gentleman—by reference to known Stock Exchange prices at defined dates. Thus we, the purchasers, are asked, for the first time, to be the valuers of what we are acquiring compulsorily. The other side—the railways— is not to be given a chance to state its own case before an independent or any tribunal.

We are not merely asked to be the valuers of this property ourselves—and here I follow out the hon. Gentleman's interruption—but there is suggested to us a basis on which we should proceed to this invidious task. That basis is, in my view, wholly irrational and unjust. The basis is the listed price of the Stock Exchange of the small number—in proportion to the total holding—of railway securities which happened to change hands on six days recently. That is what we are asked to take as the price. I urge the Government to abandon this inequitable basis, for it can be clearly demonstrated to be quite unfair, and it is widely believed to be unjust. The Trades Union Congress themselves, as quoted yesterday by my right hon. and learned Friend, disdained it; and in this admirable pamphlet called "On the Way to Greater Service," which is produced by the Railway Clerks' Association, on page 15 is quoted the opinion of Mr. Harold Wilson, who sets out the various ways of paying for these railways. Among these is "Stock Exchange valuation," and the conclusion is "Would not be a sound basis for the purchase of the railways."

Major Cecil Poole (Lichfield)

Is it not a fact that when the Government of which the right hon. Gentleman was a Member took over the shares of Imperial Airways, they took a valuation, not on an average of six days but on one specific day? True, they gave half-a-crown more than the actual market value on that day, which one might have expected. Is not that a fact?

Mr. Morrison

I am afraid I cannot confirm the hon. and gallant Gentleman's recollection. I shall certainly look it up, but I shall be surprised if there was not, in that case, some reference to arbitration.

Major Poole


Mr. Morrison

Or some agreement between the parties. I will come to that general principle later. At any rate, there is this basis, which we are asked to adopt in our new role as valuers, condemned by the T.U.C., condemned by the Railway Clerks' Association, condemned by the Stock Exchange Council, and condemned by, I think, everyone who has really studied it. I now come to some of the reasons why I consider this to be a wholly irrational and unfair basis on which to value the railways of this country—these huge concerns comprising not only the rails, rolling stock and all sorts of things, but huge workshops, hotels, ships and aeroplanes. I want to give the reasons why I consider that Stock Exchange prices are not a fair basis for valuation.

The first is that the proportion of shares which change hands, to those which do not, is, in the case of these securities, negligible as a pointer to the value of the whole holding. Railway stock is largely held in trusts of one sort or another. I see, for example, that eight London hospitals have some £700,000 of this stock in their funds. These stocks are held, of course, in expectation of a steady yield of income. The small parcels of shares which change hands and come on the Stock Exchange market are often the result of sales forced by some domestic necessity such as death, the winding-up of an estate, or some sudden need for cash. One cannot estimate even the market price of the entire holding by such fortuitous sales. I say that if the Government were to go into the market for the entire holding of these shares they would soon find the price stiffening abruptly against them. Anyone who has tried—I am told, I have never tried myself—to buy even a control in a concern, far less the whole of it, knows that as soon as the demand for the shares which he creates exceeds the willing or forced supply, the price at once stiffens. So I say, that even on the market price criterion, these transactions during six days are quite unrepresentative of the value of the shares as a whole. It is, therefore, unjust for this House to force the sale of the whole at this unrepresentative price.

In the second place, the market price of shares which happen to be on issue on any day or series of days is affected by considerations which have nothing to do either with the value of the assets, or the earning power of the concern. Let me give an example. Among these many factors, which have nothing to do with the real value of the shares, is the price of competing securities of other kinds For example, the price and the yield of the stock of a municipality will affect the mind of an investor, and the amount he is willing to pay for competing railway stock, even though there is not the remotest connection between the town in question and the railway's real financial position. All these things affect share prices; they are no criterion, I submit, of the real value of the business itself. Indeed, the truth is that the stock market is a market of its own. It is distinct from the market in goods and services for which ordinary commercial concerns cater. It is actuated by hopes and fears, intelligent and unwise; it is swayed by rumours and gossip; there is in it, also, a certain element of sheer speculation, such as actuates other men who sit down and burn the midnight oil filling in coupons for a football pool. There is no monopoly of speculation in any section of the public.

Railway stocks, in this connection, have been surrounded for some time with an atmosphere of adverse speculation due to fears of Government action. Those who took a gloomy view of their prospects have had their worst fears amply confirmed by this Bill. But speculation, be it hopeful or the reverse, is not valuation of assets. There should be valuation of the railways' assets, and arbitration before an independent tribunal. The only precedent which I can discover— and this is in further reply to the hon. and gallant Member for Lichfield (Major Poole) who asked about Imperial Airways—for the attempt to value a concern by Stock Exchange prices is the case of Short Brothers, a firm which was taken over during the war under Defence Regulation 78 That may be what was in the hon. and gallant Member's mind.

Major C. Poole


Mr. Morrison

The Regulation provided that the price to be paid should be one which, in the opinion of the Treasury, was not less than the value of the shares as between a willing buyer and a willing seller The Treasury adopted the Stock Exchange price at the date of acquisition, and that price was 29s. 3d.; but there was a provision for arbitration, and the arbitrator found, viewing that undertaking as a whole, that the shares were worth 41s. 9d. per share. As there were 750,000 of those shares the difference to the company was in the neighbourhood of £450,000. That illustrates, I think, the fallacy of taking a small amount of shares that pass in the ordinary way of business, and saying that it is representative of the value as a whole. There is a fourth factor which affects the price of shares so as to make it no criterion of the real value of the concern. Here my argument has a wider bearing than this Bill. That factor is the financial policy of the directors of a company. The extent to which they distribute the profits of the company in dividends increases the yield of the shares, and, therefore, their price. If they are prudent, and plough back into re-equipment the bulk of their profits, their shares will have a smaller yield and a lower price in the market, than if they squander their profits on high dividends. It is precisely here that this novel and illusory method of valuing business is so harmful to the public interest at this time. If we are to win the battle of production, there is a high task of reconstruction and re-equipment to be undertaken. Why, at this of all times, encourage directors to pay high dividends in order to try to get fair prices under nationalisation? The industries of steel and electricity have been mentioned as being next on the chopping block.

Mr. Kirkwood (Dumbarton Burghs)

And high time, too.

Mr. Morrison

There is no doubt that the re-equipment and expansion of these industries will be vital to our recovery as an industrial nation. While these industries are ploughing back millions, in order to achieve this end, their dividends are modest, and their shares are lower in the market than if they were to expend this money on the greatest possible dividends. Thus, while sanctioning this unjust and irrational method of compensating the railways, the Chancellor of the Exchequer is making it as difficult as he can for directors to do what the national interest demands. In addition to the natural desire to satisfy shareholders, there is the fear that, unless the share price is pushed up on the market, advantage will be taken of their very virtues to give them a raw deal, if and when those industries are nationalised.

The argument for holding back profits from the shareholders has been based on the argument of the future of the company, but if the company is to have no future, and it is to be acquired as the railways are being acquired, this argument loses much of its force for it imposes a lower degree of compensation than would be attracted by a less strict financial policy in the company. I urge the Chancellor of the Exchequer, very seriously, if I may, to look at this aspect of the case, because its repercussions, in my view, extend far beyond the transport industry; and those who would desire to see this country march again to prosperity have to watch the effect on the public mind of a method of this sort. So much for the method we are asked to take. I do not intend to say any more about it.

But having valued the railways we have to pay for them. I hope the Chancellor will say something today to help us through this part of the Bill, for as it reads it is very far from clear. We know that the dispossessed are not to get cash but stock. We are told it is to be called British Transport Stock, and that it is to. be issued at some undisclosed future date. But we are told very little else about it. I presume it will be redeemable stock, because otherwise Clause 94 makes nonsense. It says the Treasury may guarantee the principal as well as the interest of this stock, but if there is no date of redemption there is no principal to guarantee. Consequently, if Clause 94 is to be given any meaning, I presume that this will be redeemable stock. If so, I should like to ask on what terms and at what date will it be redeemed. We are told in Clause 93 (2), that The British transport stock which is to be created and issued under paragraph (b) of subsection (1) of this section in satisfaction of a claim to compensation of any amount shall be such stock as is, in the opinion of the Treasury, equal in value at the date of the issue to that amount, regard being had to the market value of government securities at that date. "Regard being had to the value of Government securities at that date "— we are completely away now from any regard to the value of the property that is being acquired—and the time when we shall calculate what is actually to be paid will not be the time when the undertaking is purchased, but will be after the Chancellor of the Exchequer has had a further undisclosed period for rigging the market in Government securities, in the absence of some further information from the Chancellor today, the recipients of this stock are being promised for their property no more than a pig in a poke. What sort of animal it will turn out to be when the bag is opened remains to be seen.

Returning to my main argument, which is the effect on the people concerned, I am assuming that the yield of this stock will be 2½ per cent. I have to assume that that is so. In round figures, the effect will be this. In 1945 the total yield of the four main line railways in interest and dividends was £41,499,262. The annual interest on the British Transport Stock which they will receive will be £22,694,593. The recipients then will lose of their income on the whole, £18,804,669. There are, of course, different reductions in different stocks, which I think is very unjust in itself, but the average overall reduction of income for the holders of these stocks—trustee stocks, a great number of them—is 45.3 per cent., very nearly half the income on the whole. This is a grave slice of the income of many a humble home It is also a big slice of the resources of trusts, and I think it should further make hon. Gentlemen opposite question whether this bitter fruit can possibly grow from a sound tree. All the railway shareholders will puffer, but it is a further vice of this method of compensation that they do not suffer equally. By this "hit or miss" method of valuation, grave inequalities are introduced as between the different classes of stockholders. They are all in the tumbril together, but comparing one with another some get a first-class ride as opposed to a third-class ride in that gloomy vehicle. I will give some examples.

Southern Railways 5 per cent. deferred ordinary stock, which has paid its dividends constantly—with, I think, one slight diminution one year—as a result of rumours and fears was depressed into the 70's. If we take 75, the return was about £6 13s 6d. per cent. The Government's terms for this stock are £77 12s. 6d., which at 2½ per cent. will give a yield of £1 18S. 6d. per cent.; three-quarters of the yield is taken away and the holders are left to whistle for it. Take the holder of £1,000 of London Midland and Scottish 4 per cent. debenture stock. The present income on that is £40 Under this Bill he will get £1,180, which at 2½ per cent. gives him £29 10s., a loss of 26 per cent. of his income. On the other hand, £1,000 of L.M.S. 4 per cent. first preference stock has a present yield of £40, the holder gets £850, which at 2½ per cent. brings in £21 5s., a loss of 46 per cent. of his income. Here are these three good stocks; the holder of one loses 75 per cent., the second 26 per cent., and the third 46 per cent. Surely, if nothing else will, this should demonstrate the inequalities which flow from taking six days' Stock Exchange prices as the datum line for a transaction of this magnitude. The deprivation is not merely general on all stockholders, but is very unfair as between the different classes. The deprivation will, I repeat, fall heavily on a peculiarly defenceless class of people, on widows elderly spinsters and young children, to whom the reduction will make all the difference between narrow comfort and absolute want. [An HON. MEMBER: "What about the big ones?"] An hon. Member asks what about the big ones. Would he, in order to injure some of the big ones, inflict a lot of injury on an undoubtedly large number of innocent small people? His interruption means nothing else.

I can well imagine the Chancellor of the Exchequer contending that the substitution of Government guaranteed stock justifies a lower yield. I think the right hon. Gentleman the Minister of Transport said yesterday that the Government should use their credit, but I await with interest, I must say, his justification of such a large, savage cut as this overall average of 45.3 per cent. I also await his explanation of the disparity between the different stockholders. I think he must be conscious in using the argument about the peculiar validity of Government credit, of the grim spectre of the London Transport 3 per cent. stock, 1967–72. This stock was guaranteed, as to principal and interest, by the Government under the Finance Act of 1934. The Council of the Stock Exchange, whose function as a guardian of the investing public, by the way, has been recognised by the Government in the new Companies Bill, say on this question: This matter has already been the subject of question and answer in Parliament, and the Council desire to state their view that whatever legalistic argument may be brought forward to justify the present proposal, the broad effect upon the public mind will be one of the repudiation of a British Government guarantee. These are very serious words, and they will not be answered by saying that the holders of this stock will do not so badly, even if that can be shown. There has hitherto been an implicit reliance on the letter as well as the spirit of a British Government guarantee of a stock. A legalistic interpretation will not appeal to people who used to believe that the Government meant what they said. This is causing great embarrassment to those in the City who, from patriotic and other motives, are doing their best to help the right hon. Gentleman with his problems. I beg him to reconsider this matter because it is casting a shadow over the whole national credit, in the maintenance of which we in this House are all deeply, concerned.

To sum up, I say the following things about these terms for the railways. I say, first, that Parliament should not be asked in a public Bill to be purchaser and valuer at the same time. In the second place, I say that Parliament should not be asked to value these great properties upon such an irrational and unjust method as the Stock Exchange prices, for the reasons which I have given, reasons, I would remind the House, not only of private hardship but of public interest. I say, thirdly, that the Government should return to the hitherto unvarying practice of submitting to independent arbitration the ascertainment of a just price. The right hon. Gentleman the Minister of Transport claimed yesterday that the method proposed in the Bill is simple, easy and fair. Simple and easy it may be, but it is not fair, and mere simplicity and ease should not make us sacrifice fairness. I say that the terms offered to the road hauliers in this Bill are harsh and unconscionable. The State, which should protect them, has become predatory, and is devouring them. Apart from the injury to our trade and agriculture which I apprehend from this throttling of our transport system, I say that the terms of compensation offered to those who have hitherto carried on this public service are so illusory and unjust that the Bill should be withdrawn or rejected.

4.45 p.m.

The Chancellor of the Exchequer (Mr. Daltan)

This is the second day of a Debate full of interest, sometimes of fire and sometimes of reason, but always full of interest, on what is generally regarded as a very important Socialist Measure. My right hon. Friend the Minister of Transport yesterday laid out in great detail and, I think the majority of the House thought, very effectively, the broad case for the Bill. [Laughter.] I said the majority. Majorities and minorities will often differ, but I speak in this case for the judgment of what I believe to be the majority. The purpose of the Bill, as he explained, is to provide, for the first time in our history, a unified system of inland transport in all its forms, to provide a more efficient and economical service than we have had in the past, and to provide also an essential instrument in any national economic planning that can be worthy of the name in the future. With the general case I shall not deal today, because I understand it is for the convenience of the House that I should devote myself to the financial side of the Measure and, in particular, the terms of transfer of these private undertakings into public hands. I shall therefore concentrate my observations on that side of the case.

Many interesting speeches were made yesterday but, following my right hon. Friend, none more interesting than that of my hon. Friend the Member for Rotherhithe (Mr. Mellish), who made a maiden speech full of interest and not untouched by political drama. My hon. Friend represents now a constituency in which, as he told us, more than 60 per cent, of the male population are actually engaged in transport. They are not stockholders; they are workers in the industry. My hon. Friend himself has spent 20 years, not as a stockholder-though he may own shares as well, I do not know-but as a worker in the industry. He can, therefore, speak with first-hand knowledge of it and its problems, and he has recently been returned to this House by a very substantial majority after a fight in which, as he has told us, the nationalisation of transport was the principal issue, this having been declared by the Government, before he was elected, to be one of the key Measures which they were introducing this Session. Therefore, my hon. Friend placed the nationalisation of transport in the forefront of his election campaign. So did his Conservative opponent, and the consequence was that my hon. Friend was elected to the House, and his Conservative opponent made a contribution to the Treasury.

Therefore, we can say for this Bill that we have not only a mandate given to us by the electors at the General Election, but a mandate which has been fortified by a whole series of by-elections, in which we have not lost one of the Labour seats that we won at the General Election, and fortified most recently by the victory of my hon. Friend the Member for Rotherhithe. [An HON. MEMBER: "In a pocket borough."] That is a very disrespectful way to speak of a constituency which once returned a lady Conservative Member, a certain Mrs. Runge.

Quite an agitation seems to have been stirred up in the outer world, outside this quiet House, on behalf of the railway stockholders, and I propose mainly, although I shall speak also of road hauliers, to deal with the railway stockholders. The right hon. Gentleman the Member for Cirencester and Tewkesbury (Mr. W. S. Morrison) opened, as it were, a wide field of detailed debate regarding the railway stockholders, and therefore, I propose to deal at greater length with their case than with the others. We are selecting market values on certain dates -I will go into details about the dates in a moment-as the principle of compensation for the railways, and I shall seek to defend this decision, covering both the principle and also the practical application to this particular case. It is true that, from time to time, different bases of compensation have been adopted when private property has been taken into public ownership. That was true even before this Government was returned at the General Election. If we look back to various Measures of socialisation proposed by the Conservative Party-and there have been some-no one single principle has been consistently applied They, too, like us, have sought to apply common sense, practical considerations, and in view of the obvious fact that circumstances vary from one industry to another, from one service to another, and in general from one case to another, they have varied their methods, as we, quite frankly, have varied ours, and reserve the right in future to vary them again. The only element in common in all cases is that what is done should be broadly reasonable and fair and in the public interest. [HON. MEMBERS: "Hear, hear."] We are all agreed on that. I am carrying the Opposition with me so far, and I hope we shall not part company prematurely. When this plan was first announced, there was a chorus of approval in the Press for our decision to base compensation for the railways upon market values. That was before there was any artificial stimulation of concerted opinion. The first thoughts of the various gentlemen who are experts on these matters, and who so faithfully serve the various important organs of opinion, were quite favourable. On 79th November, the day after the announcement, the "Daily Telegraph" said: The method appears to be fair. … The quarrel is not with the way in which compensation will be paid, but with the policies which make compensation necessary "— in other words, the Socialist intention on the part of the Government. But the "Daily Telegraph" was quite content the day after the announcement. Before quoting what "The Times" said, I want to remind the House of the surprising phrase used by the right hon. Member for Cirencester and Tewkesbury, who said it was a novel and illusory method to look to Stock Exchange quotations. "The Times," on the other hand, said, on the morning after the announcement: On the whole, it is not surprising to find that this Government has been forced back to the orthodox conception "— not the novel and illusory conception— of the Stock Exchange valuation of the undertakings. Then we come to—[An HON. MEMBER: "The 'Daily Worker.'"]— no, a higher authority than the "Daily Worker," the "Financial Times." No Debate on these subjects is ever complete without a citation from this high and spirited authority. What did it say on the morning after the night before? It said: The market is the place where all differences of that sort are valued in arriving at daily quotations … And the day after, still pursuing the topic, it said: The investor is doing no worse, in terms of capital values, than if he had chosen to sell his stock in the market around current prices. It went on to say—and I beg the right hon. Member for Bournemouth (Mr. Bracken) not to miss this one— That the terms of compensation for the railway and other transport concerns to be nationalised are fair, if not generous, seemed to be the most general view among Members of all Parties.

Mr. Brendan Bracken (Bournemouth)

Although I am not a particularly careful reader of the newspaper to which the right hon. Gentleman is referring, I have noticed that from time to time it has complained against him that, in fact, he is skinning the unfortunate railway stockholder; and will he deal with the point of interest rather than the principal?

Mr. Dalton

I was only anxious that the House should know, in forming its unbiased judgment on this matter, what was the expert opinion published in this newspaper 24 hours after the terms were announced: That the terms of compensation are fair, if not generous, seemed to be the most general view among Members of all parties. I hope they have not abandoned that view in the interim.

Mr. Bracken

It said a lot more which the right hon. Gentleman ought to quote.

Mr. Dalton

I will deal with the other things it said, but these were its first uninfluenced, unbiased views, before there had been a huddle somewhere or other outside. It is said that we have not gone to arbitration, and that we ought to have done so. We have gone to the independent arbitration of the Stock Exchange quotations, a perfectly proper procedure in this case, and I shall defend the Stock Exchange against the attacks that have been made upon it. Why should we cry down this ancient institution? Why should we say that these important quotations, which appear on the tape, and to which the newspapers, shrunken though they are in size, give many columns, mean so little? The "Financial Times" particularly gives columns of Stock Exchange quotations for every sort and kind of shares from day to day. Surely, this must have some fundamental importance in our economic life; otherwise, not so much space would be devoted to it. I am surprised at the modesty of the Stock Exchange Council, and I shall take occasion so to say to my good friend the chairman, whom I see from time to time. I am surprised at their modesty. What do they say? Much of what they say is, of course, in the nature of a truism; much of it is not to be disputed; but the general tone is most surprising. In their memorandum, they say: The Stock Exchange may be likened to a scientific recording instrument which registers, not indeed its own actions and opinions, but those of private and institutional investors all over the country, and indeed, all over the world. This is, surely, a good basis for arbitration, and a good basis on which to found a view as to what any particular share is worth.

Mr. Bracken

Read on.

Mr. Dalton

I have the following passage and I will read it, for I am not seeking to conceal it from the House. They go on to say: These actions are the result of hope, of fear, of guesswork, intelligent or otherwise, of good or bad investment policy, and many other considerations. All that is quite true.

Mr. Bracken

Read on.

Mr. Dalton

There is a limit. I shall not quote more from the right hon. Gentleman's newspaper; I have given it a good deal of advertisement.

Mr. Assheton (City of London)

Will the right hon. Gentleman read paragraph 2, which is very short?

Mr. Dalton

No, Sir. I shall not read the next paragraph. I intend to comment on the thing as a whole. I have quoted what I have because so far I entirely agree with what they say, but they should not say, in view of this, that really Stock Exchange quotations mean nothing, that they are all a kind of mumbo-jumbo, and that the Stock Exchange itself really is not a very useful institution—because that is the underlying idea. To say that sort of thing is to put very dangerous ideas into the heads of some of my hon. Friends, and it might mean that one of these days some new proposal for streamlining the City might be brought forward, and who knows what might happen next?

I prefer to treat the operations on the Stock Exchange, in a perfectly cold approach, as the operation of what we often used to hear in the past described as the law of supply and demand. It used often to be said that that was the tribunal to which we must go. Quantities of books have been written and speeches made saying that the higgling of the market was the thing that determined the price or this or that raw material or finished article. Indeed, to illustrate the principle, the higgling of the market gives one a value. which is just good enough both for buyer and seller. It is the point at which purchases and sales are equated. The higgling of the market gives a value just good enough for the two sides to the bargain to close and complete the bargain, the one to buy and the other to sell. It will be recalled that on one occasion an employer offered a barrel of beer to his workers; they drank it, and he asked them how they liked it. They replied, "Well, governor, it was just right." He asked them, "What do you mean, just right?" They said, "Well, if it had been a bit better, you would not have given it to us, and if it had been a bit worse, we could not have drunk it." That, briefly, is the philosophy of the Stock Exchange. It is to that philosophy that we have appealed in this Bill. These prices are just right; they are just right in terms of certain quotations taken on certain days, which I will particularise in a moment.

Mr. Henry Strauss (Combined English Universities)

The right hon. Gentleman is now putting forward the case that Stock Exchange prices reflect all the hopes and fears influencing buyers and sellers. Included in those hopes and fears is their anticipation of justice or injustice from a nationalising Government. Supposing that the market took an adverse view about the prospects of justice from this Government, is it not begging the whole question to assume that the terms are just, when the prices are based on their anticipation that the Government will be unjust?

Mr. Dalton

In such a case the prices would be much lower than, in fact, they are. I shall defend in a moment the prices selected. For a moment, may I look back into the past history of British railways, because it throws some light on the present position. During the war, the Government paid the four big railways a fixed annual rental of £38 million, and took the net earnings into the Exchequer; and on that basis the net revenue of the railways rose to £40 or £41 million. That, therefore, is about the size of what was thought possible in time of war—£38 million or £40 million—but it is clear that these wartime conditions will not continue. Indeed, already there is a rapid deterioration, because no longer is there the great quantity of uniformed personnel to be carried on the railways, or the same quantity of munitions of war being carried under conditions of high pressure. Therefore, both passenger revenue and freight revenue are falling off fast. This year it may be there will be a deficit, but I do not want to develop that point now. My point is that the wartime rental is too high for peace. That was right for the war years but was too high for peace time. It could not be counted upon now.

Moreover, what would happen if we did not nationalise the railways, and if we had in power a Government that really believed in decontrol, which not only spoke of it in general terms but were prepared to practise it and to open all the windows for the full blast of competition to play upon the sheltered railway system —sheltered for many years by legislative and administrative action—and let it really feel the full blast of competition from road transport? I venture to say that within a few years the whole railway system would be totally bankrupt. It could not stand up against conditions of free and unfettered competition. I use that phrase because my hon. Friend the Member for Rotherhithe said that it was exactly the phrase used by the Conservative candidate who forfeited his deposit at Rotherhithe. That candidate said, no doubt with the full authority of what is the equivalent of Transport House in the Conservative Party—[An HON. MEMBER: "The Central Office."]—the Central Office, Lord Woolton's office—that he stood for free and unfettered competition in regard to transport. It is a truism that if we had totally free and unfettered competition the railways would be bankrupt in a very short time and there would be nothing to pay.

Mr. Bracken


Mr. Dalton

Because under free and unfettered competition, the roads, operating without restriction of any kind, would take away from the railways increasingly, as they did during the interwar period until the Government intervened, all the most remunerative traffic, particularly in regard to—

Sir Arnold Gridley (Stockport)

What then becomes of the Government's policy of full employment and the great expansion of industry? Are the Government going to abandon that policy altogether? [HON. MEMBERS: "NO."] We are all anxious to promote an expansionist policy and on this side of the House we have done nothing to hinder the Government's bringing that about.

Mr. Dalton

I am afraid I have not made my argument clear to the hon. Member for Stockport (Sir A. Gridley). I was discussing what would happen to the railways if there were free and unfettered competition, as desired by this Conservative candidate. All prewar experience shows that before long the railways would be on the rocks. In any case, even if we assume, for example, and for the sake of argument, that conditions would not be quite so parlous as that, I say that the railways certainly could not hope to sustain an annual profit anything like that which was guaranteed to them by the Government in the war years and before the war. They certainly could not.

Sir Arthur Salter (Oxford University)

Is not the Chancellor assuming in his argument that we go back to the position before 1933, when the railways were grossly and unfairly handicapped by the fact that they had to maintain their permanent ways at their own cost while the community paid the cost of the roads? If conditions corresponding to those under which the railways are working were imposed on the roads, such as were imposed by the Act and revised taxation of that year, would the Chancellor still say that the railways would have no chance of maintaining their competitive position?

Mr. Dalton

I say that if we had a Government that really believed in decontrol, such a Government would repeal that Act. That is part of my case. It would be a very foolish thing to do, but a Government which really believed in what the Conservative candidate at Rotherhithe said, would certainly have to repeal that Act.

Apart altogether from that point, and coming down to more practical likelihoods, I say that even if there were the same degree of limitation imposed upon road transport in the interests of rail as was done before the war, still we could not hope that the railways would maintain those revenues. It is contrary to all reasonable expectations. Let us look at the railway system now. It is in very poor shape. Partly that is due to the strain of six years war; partly, but not wholly. Those dingy railway stations, those miserable, unprepossessing restaurants, all the out-of-date apparatus for sleeping and eating, make one ashamed as an Englishman when one is travelling abroad and sees how well the thing is done in Continental Europe, Western Europe, in Sweden and France. [An HON. MEMBER: "In Russia."] We must get our geography right. I said "Western Europe." Still more do we feel that if we go to America and Canada. One feels very much ashamed in Canada of this branch of private enterprise in the old country. That is one reason why the tourist traffic is not so easily attracted here. The railways are in very poor physical shape.

Sir John Mellor (Sutton Coldfield)


Mr. Dalton

I must go on. I am sure the hon. Member will realise that I must develop my argument. If he is still anxious to intervene later, I will give way. But I hope he will let me finish this section of what I am putting before the House. I am saying that this railway system of ours is a very poor bag of physical assets. The permanent way is badly worn. The rolling stock is in a state of great dilapidation. The railways are a disgrace to the country. The rail- ' way stations and their equipment are a, disgrace to the country. [Interruption.] We are talking about the values of these things and I am saying that they are a pretty poor bag of physical asserts. It cannot be supposed that the Stock Exchange is seriously undervaluing it, at present terms. Let us consider what it is proposed should be done. It is proposed to issue Transport Stock based upon the Stock Exchange valuation. In reply to the question put by the right hon. Member about redeemable stock, I say that, of course it will be a dated stock. That can be clearly stated now.

Mr. Bracken

On what terms?

Mr. Dalton

That I am not prepared to say now. It is not reasonable to divulge them, it being in the general interest that we should leave a certain amount for discussion. It certainly should not be an irredeemable stock. I accept the argument that it should not be an irredeemable stock but that it should be dated. The exact terms upon which it will be issued depend upon the conditions in the market when the time comes to make the issue.

Mr. Assheton

Will it be within the century?

Mr. Dalton

I would expect it to be within this century. For the purpose of calculation it is assumed that it will be a 2½ per cent, stock issued at par. On that basis, the right hon. Gentleman was completely correct. The stockholders of the big four railways—I will deal with the L.P.T.B. separately later—will have a total drop in income, upon certain assumptions which I will examine in a moment. The drop will be from £40 million to £22¾ million a year. This drop measures two things. It measures a very great advantage which the Minister will have when he is dealing with the balance sheet of the nationalised railway system. It means that he will have to pay out to the holders of the new stock £17¼ million a year less than is now being paid out to railway stockholders. That will be a valuable element in his balance sheet. It will enable him to make provision—[HON. MEMBERS: "Robbery."] I am going to argue that it is not robbery, but let us get the arithmetic right and go on to the morals afterwards. On the arithmetic, my right hon. Friend will record on this transaction a surplus of £17¼ million a year. That sum will be available for the improvement of the service to give us a better and more efficient transport system, and will be available, according to a number of possible decisions which my right hon. Friend might take.

Why will there be that drop? The answer is extraordinarily simple. It is because risk is being eliminated from the whole mass of this transport stock. It is because, as my right hon. Friend has said, the credit of the Government is being placed behind the whole of this thing. It is for that reason that a smaller income is derived from an equal capital holding. The capital investment will no longer be subject to the danger which, in many cases, has been very real, a drop not by so much per cent., but by 100 per cent, in what was being received by some of these unfortunate people who have invested in railway stocks. That danger is entirely removed. There is an estimated income of £22¾ million without risk, as com- pared with £40 million per annum for a collection of stocks, many of which are highly speculative and are full of risk. It is sometimes argued that all these railway securities are owned by trustees, most of whom are poor people. That does not correspond with a great deal of exactitude with the facts of the case. We have endeavoured to make calculations. It would mean a very elaborate piece of statistical research to get an exact answer to the question I have been asking my officials to investigate, namely, "What proportion of this total is held by trustees, as distinct from that which is held by ordinary private individuals, holding without the limitations of any trust?" But I can say that of the total stocks, some 29 per cent., by present values, are trustee securities in England and Wales. The Scots have rather a different trustee list, but I will not complicate the discussion by going into that, although I am a little surprised that their trustee list seems to be a little less "safety first" than ours.

As I say, I am advised that some 29 per cent. of the total stocks, at present value, are trustee stocks held in England and Wales. A great quantity of the railway stocks are very far from being trustee stocks. All these people are to get something under our proposals, even the unfortunate people who invested, in 1926, in the London and North-Eastern Railway Company, deferred ordinary stock 20 years ago, and who have never had a penny dividend from that day to this. These are among the railway stocks we are taking over. The L.N.E.R. preferred ordinary stocks have paid nothing since 1931. The company was so much upset at the defeat of the Labour Government in that year that they have paid no dividend since. The London Midland and Scottish ordinary shares passed their dividend for a number of years from 1932 to to 1935. They paid nothing in 1938 and, in between, they paid 1½ per cent. and 1¼ per cent., a very poor return to the widows who invested in them years ago. Let us take Southern deferred ordinary stock. The Southern have been a good deal better, but even they have missed their dividend several times, for the four years running from 1931 to 1935, and again in 1938, and they have never paid more than 2 per cent. since 1929. So one might go on.

A lot of these railway stocks are not trustee stocks at all; they are a highly speculative and unremunerative investment. The people who have these stocks will get something for them, first-class giltedged Government guaranteed stock, according to the value which the stock holds at the dates in question. This drop in income which I have been describing is inevitable once the principle is accepted that this new stock is to be Government guaranteed and, therefore, secure against failure of interest. The truth is that in the jargon of the City, it is much too good a stock for the taste of some of those who will receive it. It will bring in an assured minimum income, whereas some would prefer greater risk and prospect of something more. But they are not debarred from making their choice effective, because the stock will be freely negotiable. The special reason which, in the case of the coal mines stock, made it necessary to impose some limitation on negotiability does not apply here. The transport stock will be freely negotiable; it will be bought and sold. Trustees may buy and sell with complete freedom within the trustee list itself, and also within any further latitude of investment given to them by the particular trust under which they hold. As the House knows, a great number of trusts are not limited to the trustee lists. It is exceedingly common for greater latitude to be given.

May I say one further word in this context? Much is said about the hardships which may be caused to elderly people of small means. As I have said, the trustees have latitude to purchase within the trustee lists, plus any further legal allowance they may have outside that, but those whose funds are not within the trusts will be free to buy not only other securities, but a great variety of annuities which are now on sale. If that be the case elderly persons, or persons without dependants in whom they are not much interested, can assure themselves a substantial increase of income by transferring to some form of Government or other annuities. There is a great variety of possibilities open to those who initially received this transport stock.

Let me say a word or two about the London Passenger Transport Board's guaranteed stock. Much has been made of this case. It is said that in bringing this stock within the scheme, on the same basis as other transport stock, the Government have acted with special turpitude. I gave an answer the other day which was carefully considered, and about which I had taken the best legal advice open to me. Summarising that answer, it was that the guarantee of interest was a guarantee against default by the London Passenger Transport Board itself. Had the Board defaulted in respect of the interest on the stock, it would have been the plain duty of the Government to make good that default. Had the date been reached, without any such change as we are introducing now, at which the principal was due to be paid, then it would also have been the duty of the Government to make that good had the Board failed. But the Board is passing out of existence; its assets are being transferred to this new nationalised body. The answer I gave the other day went on to say that the guarantee is not applicable once the Board has passed out of existence.

Mr. Bracken

Who is putting the Board out of existence?

Mr. Dalton

His Majesty's Government, with the assent of the House of Commons.

Mr. Bracken

With the assent of a Socialist majority.

Mr. Dalton

I am quite satisfied with the answer I gave, as a matter of law. It is not disputed that it is correct from the point of view of law. All that can be done, whether by the Stock Exchange Council or others, is to use the epithet "legalistic." What is meant by a legalistic argument? It is a legal argument that you do not like but that you cannot refute. It cannot be refuted, because it is sound law.

I now pass to the second branch of my defence of this arrangement, which is that those who hold this 3 per cent. London Passenger Transport Board's stock are being well and justly treated under the terms of acquisition. It is not unnatural, taking these quotations, that that should be the result. The Government guarantee is naturally reflected in the Stock Exchange quotation Those familiar with the arithmetic of the Stock Exchange will be able to work out the yield to redemption which can be obtained from this new arrangement, and they will find—I have had the figures worked out with as much exactitude as I can command, and I will give the figures—that the holders of this stock are being well treated not only legally but equitably as well. The stock will be taken over at 107⅞, that being the market value on the basis of the Bill. Assuming that the market was valuing this guaranteed stock against a background of a 2½ per cent, rate on direct Government securities, the comparative yield to redemption of the two stocks will be as follows. When allowance has been made for the loss of capital that a holder of £100 of 3 per cent, guaranteed stock, bought at 107⅞ would suffer when the stock is redeemed in 1967, the yield to redemption on that will be £2 9S. 9d. On the other hand, the yield on 107⅞ of transport stock, assuming 2½ per cent, interest, is £2 13s. 11d. as against £2 9s. 9d. I do not know why the Stock Exchange Council did not work that out, and tell the people this in their pretentious manifesto. They had less excuse for missing the point because the "Economist" had worked it all out on 23rd November in their issue of that date, in which the figures were given, column after column. They worked it out I am sure, quite accurately and with great industry. It will be seen at the bottom of the page of the "Economist" of 23rd November that on the L.P.T.B. stock, except the "C" stock, they will get a bonus on yield to redemption varying in the amount I have given—

Mr. Assheton

The right hon. Gentleman asked why this had not been worked out. Without the date on which the Government propose to give this 2½ per cent. stock to the holder, it is impossible to work out that calculation.

Mr. Dalton

The "Economist" has it. It can be worked out. I think that the right hon. Gentleman is not making a good excuse for the Stock Exchange Council. The arithmetic can be gone over. It would take a long time, but I am satisfied that the combined arithmetical skill of the "Economist" and the arithmeticians of the Treasury has established this result. It can be worked out at leisure when these figures are quoted in HANSARD. On the 3 per cent, guaranteed stock, the difference of yield to redemption is £2 13s. 11d. as against £2 9s. 9d., and, therefore, these people are getting a bonus and far from having anything to complain about should pass a vote of thanks to His Majesty's Government.

Sir A. Salter

Surely the anwer is this. For the London Transport "C" stock, the Chancellor has recalculated the value of the holder's rights by allowing for the effect of redemption at a known date. He then compares the resulting figure, which is less than what the holder now actually receives, with the annual income that the holder will in future receive from the interest on the capital sum given him in compensation. In the latter case, he has not allowed for any change resulting from redemption, because there is, at present, no known redemption date.

Mr. Dalton

I do not think it would be reasonable to take more time on that now. People can write to the papers about it, and we can have a further discussion on that. The whole point that I am seeking to make is that holders of L.P.T.B. Stock have had quite a fair deal and have nothing to complain about. Behind the whole of this difficulty, as some see it, of reduced income from this guaranteed stock, lies the fact of the cheap money policy. The fact that national credit has improved since the last General Election, and the fact, of course, that the Government can now borrow more cheaply, both on long term and short term, has had a bearing on it. I want to be sure that the Opposition are not opposed to the cheap money policy. I do not know if they are, and if either of the right hon. Gentlemen opposite would care to get up and say they are opposed to the reduction of interest rates—

Mr. Bracken

In accepting that invitation, may I remind the Chancellor of the Exchequer that his cheap money policy is a direct invitation to President Peron of the Argentine and many other of our foreign debtors? Nearly £3,000 million is owed to Great Britain, and this cheap money policy from a cheap Chancellor of the Exchequer is setting the best possible example of default to our foreign debtors.

Mr. Dalton

I asked the right hon. Gentleman whether he opposed it. I understand, therefore, that he does oppose it. He thinks it is a mistake.

Mr. Bracken

I think it is rigged.

Mr. David Renton (Huntingdon)

As the right hon. Gentleman has given this challenge may I say—I think I am quot- ing "The Times" in doing so—that there comes a point when cheap money produces so little income that it becomes an encouragement to speculation, and it is at that point that he should be wary about any cheap money policy.

Mr. Drayson (Skipton)

Does the Chancellor not agree that there are other virtues, such as that of having money of good quality, and money which is convertible?

Mr. Dalton

I agree on that. I am anxious to get that, of course. Our money is both cheap and of good quality and everything in excess is bad. In reply to the hon. Member for Huntingdon (Mr. Renton), it will be a matter for debate how far, at any given time, it would be wise to press a policy of this kind. I maintain that we have not reached a point yet at which the disadvantages outweigh the advantages.I am anxious to insist that this cheap money policy is largely responsible for the levels of compensation adopted in this Bill, and to the extent to which shareholders will get less, it is because it is riskless income.

As to a cheap Chancellor of the Exchequer, the right hon. Gentleman will know that in 1920–21 we had a very dear Chancellor of the Exchequer, Sir Austen Chamberlain, and at that time the rate of interest on the National Debt was 4.8 per cent. It is now a fraction over 2 per cent., and I think it is very much in the national interest that we should have brought it down over this period. The right hon. Gentleman who preceded me in this office—I do not ask him to take responsibility for anything I have done —set me a good example in his day, and Sir Kingsley Wood before him, in pursuing this policy. I have merely carried through the good work they began. One after the other my predecessors succeeded in bringing down the rate of interest from 4.8 per cent, at the end of World War No. 1 to something a little over 2 per cent, at the end of World War No. 2. Had we not done so, the position would have been a charge for interest on the internal. National Debt alone of £1,100 million a year as against £500 million, or thereabouts, which it is now. That would have been equivalent to another 5s. in the £ on Income Tax. What would those poor fellows paying 19s. in the £ do then? This lowering of the interest rates has been of great benefit to all sections, including those whose taxation has been kept so modest and low as it is now. This cheap money policy has been in the background in the determination of these terms, and I make no apologies.

I want to justify, particularly, the date selected for taking the market prices. I think that I can reveal, without impropriety, to the House that when we considered this, our first inclination, having decided the principle of market value, was to choose the pre-Election period when a lot of people thought that there would not be a Labour Government, and some of us were not quite sure how big our majority would be. At any rate there was no reason to suppose that the taking over of the railway companies entered into anybody's mental picture. We thought at the beginning that it would be fair to all concerned to take the six months prior to the Election to establish what these prices were to be. When the Election was over, gradually the national credit improved and as prices rose and everything got better, we did not want to be unfair to these people. We said, "Let us see whether these poor people would do better if we took the period just before the King's Speech in which this Socialist Measure was announced and let us give them whichever is best." We wanted to give them the benefit of every doubt within the bounds of the prices laid down. So we said, "Let us see which is the highest quota of compensation and let us choose the one that is best for them."

That is just what the Bill says. It says that in making these lists we have to take whichever is the higher—six months before the Election or six days before the King's Speech. It was found that in most cases the latter was the higher, which is not surprising in view of the development of the cheap money policy in the interval. In fact, we have given as the basis of compensation a market value which gives a higher price than any comparable period which could have been chosen for a long time past. We have taken it at the peak. We have treated the stockholders extremely generously on the question of the selection of the dates of the market quotation.

Mr. Molson (The High Peak)

The Chancellor has made a most important statement. He said that he really did not want to be completely unfair, and that he did not want the fear of nationalisation to depress the basis of compensation. Does he remember a Labour Party Conference in December, 1944, when the executive was defeated on this question of nationalisation and there was an immediate fall in the price of railway stocks? In view of what the Chancellor has said, would he, without giving a definite answer now, consider whether it would be fair to go back to the period immediately before that resolution was carried in favour of general nationalisation, when the level of railway stocks dropped?

Mr. Dalton

We have had so many resolutions passed on this subject at Labour Party Conferences that I do not remember this particular one.

Mr. Molson

Will the right hon. Gentleman look at it?

Mr. Dalton

I will certainly look it up. I hope I did not state the case for the platform before it was defeated. If I did, I certainly would have remembered it. I think that that will be interesting history. Quite apart from that, we have treated the railway stockholders extremely fairly in the selection of dates. Indeed, I can imagine some hard doctrinal people thinking that we have treated them almost too well.

Alternative suggestions have been made, and I wish to dispose of two of these, or at any rate to put arguments against them. As contrasted with the market value, one is the maintenance of existing income, and the other is the net maintainable revenue multiplied by a number of years' purchase. The existing income basis was the method adopted in the case of the Bank of England, but I was as specific as words can be in moving the Second Reading of the Bank of England Bill on 29th October, 1945, when I said: I desire to emphasise that, though these terms of compensation are fair and appropriate in this particular case, they are not to be regarded as a precedent for any subsequent measure of nationalisation. The terms of compensation must vary from one, instance to another, according to the merits of each case. I went on to say: From the financial point of view"— and I invite particular attention to this— —the Bank of Engand is by far the best of all the propositions which we intend to nationalise in this Parliament. Some of the others are a bit depreciated; they show marks of private unenterprise."—[OFFICIAL REPORT, 29th October, 1945; Vol. 415, col. 47 and 48.] The Bank of England was a very well-kept concern and its stock was substantially a gilt-edged security. It was a very different kettle of fish from the railways. On the other hand, let us suppose for the sake of argument that the principle of the maintenance of income is accepted. I do not know whether the right hon. Member for Cirencester and Tewkesbury, who touched upon this matter in passing, would propose that we should compensate on the basis of sustaining income, as distinct from the market value of the capital of the shareholders. I do not know whether he considers that a reasonable proposition.

Mr. W. S. Morrison

I think a fair valuation for the purpose of compensation for the State acquisition of property, should have regard to the real value of the assets which are being purchased. There are several well-known methods of doing that, such as by the obtainable revenue, or the valuation of the actual cost of the property, and whichever is appropriate in the case of the railways should be followed. My real grievance is against compensating without having regard to these things, and without arbitration.

Mr. Dalton

I understood that, but I wanted the views of the right hon. Gentleman as to the proposal made in some quarters. It would mean that 76 per cent, more than the Stock Exchange prices in the Bill would have to be paid for sustaining the income of these railway shares. It would mean that £1,600 million would have to be paid instead of the £900 million that we propose, in round figures, to pay. This is for the "Big Four" railways alone, and that is substantially more than the total capital expenditure undertaken on the railways. The estimate of the "Economist" on 23rd November is just under £1,200 million. I do not think that any serious student of the actual figures could maintain that we should treat the railways as well as the Bank of England stockholders. The cases are too different.

A word now on the other alternative, namely, the net maintainable revenue. We have adopted this in the cases of coal, and of Cable and Wireless, but in practice it is almost impossible to apply it to the railways, having regard to the character of the assets and other considerations. I have already touched upon the difficulty of defining the word "maintainability" in railways. Assumptions would have to be made in regard to the policy which would be adopted other than nationalisation. How far are we going to open the window of competition with the roads? I have given reasons why we could not open the window completely. If we did, the railways would be completely blown away. If it were only opened a little way, they would be blown sideways. We have, therefore, to have a precise definition of what is the alternative to nationalisation, and if it is very free competition—well, maintainability descends rapidly towards zero. Seriously, I do not think that you can, without making artificial and unreal assumptions, as to what the alternatives to nationalisation would be—although this Government are not going to pursue any of them— get a basis for an estimate of the net maintainable revenue.

Mr. Bracken

The Chancellor of the Exchequer has said that it would be unfair to compensate the railway stockholders on the basis of the Bank of England compensation, but he knows perfectly well that, whereas the Bank of England has only got one big customer, and was, therefore very much at the mercy of the Government, there are, in fact, hundreds and thousands of customers of the railways. Therefore, I suggest to him that, as the Bank of England is very much dependent on the Government, he should extend the same terms to the railway shareholders, who are not.

Mr. Dalton

I will take note of that. I do not know whether the right hon. Gentleman is speaking officially for the Opposition. If he does not deny it, I will accept that he is speaking for the Front Opposition Bench, because a Front Bench is one and indivisible whether it is the Government's or the Opposition's.

Mr. Bracken

I hope the Government's Front Bench is.

Mr. Dalton

Yes, we are. I will take note of what the right hon. Gentleman says and I beg leave to publicise where it suits us the fact that a proposal is made from the Opposition Front Bench to pay the railways £1,600 million for property valued on the Stock Exchange at £900 million. With regard to the other methods of working out the net maintainable revenue, we must find some way of putting some sort of valuation on the physical assets which are going to contribute to the net maintainable revenue.

It is really exceedingly difficult when one comes down to such things as permanent ways, stations and so on, which have baffled all sorts of attempts at valuation, including those of local rating authorities, for many years. The railways do stand in a class apart, and by their very nature are not suitable either for the assessment of a net maintainable revenue, in default of nationalisation, or for a valuation of this great miscellany of assets. I would add the one further argument that in any case if this could be done it would take a long time and leave a lengthy period of uncertainty as to what was going to happen, which the stockholders would not want. In addition, it would require a very large number of professional and technical staffs; hordes of technicians would have to be taken over from other work to be employed on this rather artificial and speculative valuation, and very likely at the end of the day it would be put where we are putting it now without very much difference. The "Financial Times" of 20th November said: Undoubtedly the new method will cut out the long delays inseparable from procedure on Coal Act lines, and I agree, not for the first time, with that pink paper.

Let me try to console anybody who thinks that the railway stockholders are being ill-treated, by putting the compensation terms in another form. My right hon. Friend did touch upon this in his speech yesterday, but I think it is worth while referring to it again. Let us take the total compensation contemplated for the railways under this Bill—£908 million. If the net maintainable revenue were put at £40 million—although I think that is too high and could not be maintained anyway—that would represent 22.7 years' purchase. That would mean that the risk on all the railway's capital on this basis would be measured by an interest rate of about 4½ per cent., including all the speculative junior stocks, and if we were to break that up it means that—on the basis of 22.7 years' purchase—on the senior half of the capital we should put the yield at 3 per cent., which is not much above the Government gilt-edged level, and a risk of 6 per cent, on the junior half. Having regard to the very doubtful net revenue prospects in the future I think this is very generous. Let me quote one other figure. If we take the average net railway revenue of 1935–37 it will be found that the compensation we propose represents about 25 years' purchase, so really it cannot be said that they are being skinned alive, as the right hon. Gentleman so picturesquely put it. Many an eel would be happy if that were its fate.

I am anxious not to delay the House too long, but I should like to deal very briefly with the other forms of compensation. The terms of compensation for road haulage, I venture to say in reply to the right hon. Gentleman opposite, are really very equitable. It is true that they are on a different footing, but that is in view of the different nature of the assets which are to be taken into public ownership. Very few of these road hauliers are companies with shares quoted on the Stock Exchange. What is proposed for the road hauliers is that compensation shall consist of two parts: first, replacement value at the date of the transfer, less depreciation on a certain scale laid down in the Bill, plus between two and five times the annual net profit lost to the undertaking. That is really quite good, because many such a concern will have a depreciation fund set aside which will be invested and bringing in much more than 2½ per cent. What they get is replacement value less depreciation—which a worthwhile concern will have already provided for—plus between two and five times the actual net profit lost. This will be discussed in Committee at length, but I think that the terms are not outrageous.

Lieut.-Colonel Dower (Penrith and Cockermouth)

But is it not a fact that all they will actually receive in the average case, is half the replacement value, and one-tenth of the previous income?

Mr. Dalton

I should be very happy to discuss that at length later on, but if they have a large amount written off in a depreciation fund, good luck to them. They are well away, and it will be bringing in quite a lot from investments. I do not think, when one looks into this in the light of particular instances, that they are being unfairly treated With regard to the other classes, the local authority undertakings and privately owned wagons, I will not dwell on them at great length but will merely say that in each case regard is had to the particular circumstances. For the local authorities the basis is, if clause 27 be examined, that -the Transport Commission asumes liability for the interest and sinking fund charges for the net debt—whatever is left outstanding.

The simple justification for the net debt basis here is that we have one public authority taking over from another. This has nothing to do with private concerns but concerns a local authority whose assets are being transferred to another public authority. When that is so, the obvious basis, which is always subject to further discussion in committee, is for the transferee authority to make itself responsible for the liabilities of the transferor on the net debt basis and the transferor—that is the local authority— should not seek cash payments beyond the outstanding net liabilities. One of my hon. Friends raised that point yesterday and I am sure that my right hon. Friend the Minister of Transport will be ready to consider arguments on the subject later on. But so far, I am of the opinion that it is a fair scheme. With regard to privately owned wagons other than those owned by the railway companies, under Clause 32 the compensation for prewar wagons is to be the 1939 cost less depreciation as laid down in the Clause. Somewhat the same arguments apply there as to road haulage.

I have restricted my remarks to the compensation aspect of this Bill, and I would conclude by saying that from a wider point of view the Bill far transcends in importance any similar Measure that we have yet had in this Parliament. It is a very important Socialist Measure. We quite agree with the Opposition about that. In introducing it, we are carrying out the pledges we made to the electors, and we are carrying them out with speed and decision. This is a new thing in British political history—speed and decision. [An HON. MEMBER: "Streamlined legislation."] Yes, it is streamlined too. We are scrapping the old, miserable, out-of-date methods for the modern and streamlined article. [Interruption.] These are only automatic reactions such as can always be procured cheaply. We cannot do everything at once, but we are none the less proceeding with speed and decision to carry out our pledges.

We like to think of this aspect also. There have been many men—railwaymen and transport workers—who, through long years, have believed in this Measure and have made their contribution to prepare for carrying it out. Many friends of mine and of hon Members on this side of the House—and, I hope, of those on the other—members of the National Union of Railwaymen, the Railway Clerks Association, the A.S.L.E. and F. and others, including members of the Transport Workers Union and their wives, will be very happy when they see this Bill brought in. Just as last Session we sent a signal from Westminster to the miners, today we send a signal to the railway workers, and to many of the road transport workers that, as with the miners, so now, they will serve not private employers any more, but the nation This shall not be the last such message sent to a body of organised British workers from this House of Commons, and when we go to our electors at the end of our term we shall say to them, "We have fought the good fight, we have kept the faith, we have kept our word to you."

Mr. Bracken

May I ask the right hon. Gentleman this question? Has he considered carefully the signal he is sending to our debtors abroad? Does he agree, in fact, that it would be fair for the Argentine Government to compensate stockholders on the basis which he is proposing now—that is, Stock Exchange quotations?

Mr. Dalton

I do not know whether it is in Order for me to answer, but if you permit me, Mr. Speaker, I would say that one of the most fortunate and successful international commercial negotiations that has taken place for a long, long time is the recent Anglo-Argentine agreement. The negotiations were conducted with great skill and ability by a delegation, led by a high official of the Treasury, at Buenos Aires. They resulted in an agreement in which all these matters have been settled, including a rate of only ½ per cent.—cheap money—on the outstanding sterling balance of the Argentine, and under which this long, troubled railway negotiation, which has baffled all our predecessors, is at last well in train. I hope, for a satisfactory settlement. The right hon. Gentleman ought to be delighted at what we have done.

6.1 p.m.

Sir Ralph Glyn (Abingdon)

The House has listened with great interest to the Chancellor's reply to a very able speech by my right hon. Friend the Member for Cirencester (Mr. W. S. Morrison). There are one or two very small points upon which I hope that there may be an answer later in the Debate. In the first place, I hope the Chancellor will forgive me when I say, in reference to his remarks just now, the forgoing of dividends by the ordinary shareholders and some of the preference shareholders was in order that the direction of the railways could see that the tracks and the equipment generally were kept in proper condition. If the shareholders had not made that sacrifice—rather, it was made for them— it would not have been possible for the railways to play the part they did in helping to win the war.

There is another point. I ought at this juncture, for the sake of hon. Gentlemen who have not known me long, to say that I have been in this House a good many years. I think I am the only survivor of the 1921 negotiations in connection with the then Railways Bill. I am a director of a railway, and I am interested, and, therefore, I want to declare that interest so that every hon. Member will know exactly where I stand. I have always felt very proud to belong to the railway service of this country. It has rendered wonderful service. It is now coming, apparently, to the end of its existence as private enterprise, but I feel that no Chancellor ought lightly to scoff at those who preferred to put their money into organisations of national benefit rather than into greyhound racing or investments which are perhaps not so important. I inherited funds invested in the railways from my grandfather, who was the first collaborator with Stephenson in making the London and Birmingham Railway. They have never been offered on the Stock Exchange. They have been held intact, and naturally I have never bought or sold a share whilst a director. For all those who had faith in what were considered to be a gilt-edged investment. I beg the Government, in spite of the very clever speech the Chancellor has just made, to realise that it would give far more satisfaction it the matter could be referred to arbitration, as was done in the 1921 Act, quite simply and without any great delay to selected dates. There was a tribunal of three persons, and the business was put through without much delay, and it should be done in that way, as there is no doubt that the proposals of His Majesty's Government are not between a willing seller and a willing buyer. It is force majeure. It is seizing something. Whatever may be in the minds of the Chancellor and his colleagues in the Government—they may say to themselves that they are perfectly satisfied that it is a fair "do"—there are no stock holders in the railway who will ever believe it was a fair or just thing or in accordance with the practice of this House. Therefore, I beg the Government, apart from everything else, not to close their minds to the possibility of extending arbitration for these shares.

In regard to trustee securities, a great many of us are in the position today of wondering where we are going to find the money to maintain children at school and to pay what is necessary We have believed all along that the income derived from these funds was safe and sound and, therefore, we could make our plans accordingly. The Government's action in this matter will be a great blow to British credit, and I am sure it is not the wish of the Chancellor to eliminate the rentier altogether. The Chancellor must realise that action of this sort is like throwing a stone into a pond—the ripples go a long distance. This is not the moment to destroy confidence and credit in what has, I hope, always been a creditable investment.

There is one other matter in regard to the Stock Exchange about which I would like to say a word. It is absolutely clear that the Stock Exchange cannot be looked upon as the best means of assessing the assets and everything else of the railway, quite apart from what they say themselves, and having listened most carefully to what the right hon. Gentleman said. On the whole the railways, in the 22 years since the 1921 Act, have been able to manage their affairs well. They have put by reserves and are quite able now to carry out the programme that they want for new rolling stock, rails, sleepers and so on, but they cannot get the articles. The right hon. Gentleman and the Minister of Transport know well that it is not because the railways have not the funds with which to do it, but because we are short of labour and material and simply cannot get on with it. We have been twitted about dark stations, and the Minister of Transport specified Euston. The penalty of being a pioneer is that one has not got up-to-date things, but, surely, we ought to be proud of the fact that it was British engineers and British courage which made the railway systems of this country and of Europe—

Mr. Sparks (Acton)

What about the railwaymen? Did not they have anything to do with it?

Sir R. Glyn

I was coming to that. The hon. Member has not been very long in this House. If he had been longer, he would know that all the years during which I have had to do with railway negotiations, I have had the happiest relations with his hon. Friends. I would like to say publicly now that we are coming to the end of the system that we have known, that I have never yet known any railway union representative to go back on what he has said to me or to any of the officers—never. I do not believe any of them had any doubt about the officers of the railways, or about those of us who were in the House when negotiations took place, and I regret that the hon. Member for Acton (Mr. Sparks) should not be one of the first to stand up for what I believe to be the finest labour negotiating machinery that exists, which has been set up gradually between the unions and the management of the railways. I am sure the House will permit me to say that there is one officer of the British railways, Mr. Derbyshire, who has been one of the greatest friends that the trades union movement have had, and one in whom they have the utmost confidence. It is not a matter to go into now, but I hope that at some juncture the Minister may show that the railwaymen themselves are to have as good a system for negotiations as they have now when the State is their employer and when there is no appeal from the management; because it seems to me to be a very difficult position. It is no use talking about a conference, as is talked about in the Bill, unless that is something very real and effective.

I hope the Minister of Labour, who I see is sitting on the Front Bench, will forgive me for saying that one of the differences between nationalisation and private enterprise is the political pressure that is put on to increase overhead charges. That is why I am so fearful of this scheme. Any good railwayman knows that all the responsible leaders of the trades unions know what can be done and what cannot be done. Their greatest dangers are those people who split away from the union to form another one. No railway, no great industrial organisation, can function unless it recognises the great unions that belong to the industry and those associated with it. That is the view I have always had, all the years I have been in the House, but where the difficulty arises is that, through political pressure, more and more is squeezed out for the benefit of individuals who, in their heart of hearts, know that the industry cannot afford it. The future alone can tell how it will work out, but the railways exist for the benefit of the country, for the benefit of the traders and the people, and it is by the joint effort of management and labour that service has been rendered in the past. I pray it may be continued in the future, because there is too much at stake.

Nobody has mentioned the fact that during the war we were under Government control and that the Treasury netted something like £100 million over and above the rental that the railways obtained. That ought to be borne in mind, because that never went to the benefit of the shareholders but was put aside, and went back into the maw of the Treasury. Now the shareholders are having the cuts mentioned by my right hon. Friend the Member for Cirencester, and it seems to me that something ought to be given back to the shareholders over and above what they have had in the way of that rent.

My last point is this: The Stock Exchange prices merely represent the result of supply and demand at a particular time, and in the case of the railway shares the prices have for years been depressed by factors not connected at all with the management of the railways. I have been long enough in this House to know that the greatest menace we have had to good operating of the railways has been the fact that we have always had to come to Parliament whenever we had a private Bill, and on that Bill any conceivable thing could be talked about which dealt with the railways. It was because Parliament was so fearful of the danger of a railway monopoly that it hedged about the management of the railways with all these rules and conditions about coming to Parliament. That is to be swept away, and there is one thing I hope the Parliamentary Secretary will explain when he replies. During the Committee stage of the 1921 Act we had long discussions as to the form in which the accounts should be presented to Parliament. In Clause 98 of the present Bill all that is to be swept away. It has been stated that the accounts, which shows how much the different sections of the undertaking make, can all be put into one common pool. If that is done, it will be quite impossible for Parliament to have any check or understanding of how the transport system of the country is working unless the revenue from the various sections of the industry is quite clearly defined. I think it is a retrograde thing to go back on what was decided by the 1921 Act, and not allow Parliament to see in detail how each part of the revenue is obtained. That may be a Committee point perhaps, but I choose to think it is a point of principle.

Road transport, ships, hotels, all those ancillary services have to be discussed in Committee, and they all play a part so interrelated one with the other that it is very difficult to separate them now. The Minister of Transport said yesterday that he thought we had been backward in not providing hotels for third-class passengers. We have not been allowed to do so. Ten years ago we should not have called ourselves the London Midland and Scottish Railway Company or the London and North Eastern Railway Company, but transport companies, We have been transport undertakings. You cannot run a railway without road services, you have to deliver your parcels. It is a great transport undertaking, and all the arrangements made between the railways and the roads, and with shipping and hotels, are all linked together. I beg the House to realise that if we are to have a successful transport system, which we all want— unification, as it is called—there must not be political pressure. That must not happen because it has been the political pressure of this House which has held back the development of the railways, prevented them from cooperating with the roads and from having their vehicles, prevented the shutting down of unremunerative stations, prevented the delivery of parcels and goods, prevented adequate communication between the north and south over the Thames, as an hon. Gentleman opposite said. We must have freedom, and we could have had it, if the House of Commons had been more forward-looking in the way in which they allowed us to deal with our Bills when we came before the House.

I do not believe in nationalisation. I believe we shall not get the same results with the same success. If the Bill goes through as at present arranged, the undertakings pass to the Government on 1st January, 1948. There is plenty of time for an inquiry and there is ample time for arbitration about this great changeover of undertakings, which have played so great a part in the building up of our country, so that those who put their money into them, and risked their funds in them, do not go away with the feeling that they have had a raw deal. It is quite unnecessary. The scheme of the Government, plus arbitration, may make this transfer something that we can all believe is better than it might otherwise have been. I only hope that partisan political pressure will never be allowed to interfere with the future development of transport in this country.

6.20 p.m.

Mr. Champion (Derby, Southern)

It is a pleasure for me to have the opportunity of following an old and respected Member of this House. He was a railway director, and I was a railway signalman. I have had the privilege of being on the Executive Committee of the National Union of Railwaymen and of meeting the hon. Member for Abingdon (Sir R. Glyn) and his colleagues around the negotiating table. He said, quite rightly, that we are coming to the end of a phase. The railway directors were hard bargainers, but I would also say they were honourable men. They kept their word when they had given it, but I must say they never erred on the side of generosity. The hon. Member also said that the sacrifices of shareholders in the past had made it possible to keep a high standard of efficiency in the industry. That is not so. The railways have failed, because, in the past, they did not plough sufficient of the profits back into the industry and did not take sufficiently energetic measures to meet the growing road transport competition. My experience taught me that the only way the director thought of meeting growing road transport competition was that of cutting the wages of railwaymen. It was also my experience that the workers in road and railway undertakings were caught between the upper and nether millstones of road and rail competition.

The right hon. and learned Member for the West Derby Division of Liverpool (Sir D. Maxwell Fyfe) said yesterday that the road hauliers' industry had been built up on the pluck and courage of the men who had put their small capital into road haulage undertakings. The road haulage industry was built not so much on the pluck and courage of the people who put their money into it, as upon the shocking conditions the men who worked in the industry suffered during the growth of the industry. It was largely sweated labour of the worst possible kind. It was so bad, in fact, that even a Conservative Government had to do something about it eventually and we had an Act which did something about those shocking conditions. The railway undertakings did not take the energetic steps they might have taken, but rather engaged in agitations, first for "Fair play for the railways," then for "A square deal for the railways." They exploited every avenue open to them to further their agitations in that connection. If, instead, they had applied their minds rather to meeting the growing competition, it would have been very much better for the railways. We have never seen in the railways the exploitation of their best answer to the growing road competition, their advantage of speed.

Lord Monkswell, before the Royal Commission on Transport in 1931, pointed out that as long ago as 1848 the Great Western Railway ran a train from Paddington to Didcot, a distance of 53 miles, in 47½ minutes, or, in other words, at the rate of 67 miles per hour while the fastest booked train on any British railway today runs at 62 miles an hour, and the average of the best runs is not more than 55 miles an hour. From 1848 to 1946, nearly 100 years in railway progress, we have lost in speed rather than gained. The railways also failed to exploit the invention of automatic train control. That is a failure for which they will always have to answer. They should have exploited greater speed, coupled with automatic train control devices which were available to them. As a result of their failure to meet the growing road transport competition, they also failed to attract the new capital they so badly needed. I think today it can be said that the failure to attract new capital did, in fact, cause the railways to get into the position in which they now are. Sir Ralph Wedgwood said that during the period between the two wars railways were suffering from a creeping paralysis due to a lack of credit. He blamed high labour costs and not their failure to compete with road transport. He said that before a railway tribunal when the companies were trying to cut the wages of 100,000 men from 40s. a week to 38s. a week.

Road-rail competition was conducted, not on efficiency, but rather on the backs of the workers, The capital required for the reorganisation of the railways today is much too vast for these railway undertakings to raise, in spite of promises they have made to us. They have talked in terms of great expenditure they are proposing to make, but the simple fact is that between the wars they failed to raise the capital vitally necessary if they were to institute a large measure of technical reorganisation. Towards the end of that period, the only way in which they could raise the capital was by going to the State and they got £26 million as a result, at an interest rate of 2½ per cent. when others had to pay much more. That was virtually a subsidy by the State.

Much has been said in the course of the Debate about compensation. It is said that the stockholders are not getting fair play, and that the value of their stocks is not being properly met by these Stock Exchange value arrangements. I cannot help noticing that some of the stockholders who bought stocks just before the war will receive a considerable capital appreciation as a result of the wartime agreement. They will also be receiving rates of interest upon stocks upon which they never previously received anything. The Chancellor has already given some examples of that today. I see that Southern Deferred, for example, could have been bought at the beginning of 1939, before the war started, for £11 10s. The holders of that stock are now to be compensated by the country to the tune of £24. G.W.R. Ordinary, which could have been purchased in the beginning of 1939 for £25, will cost the nation £59 1s. 3d. L.M.S. Ordinary will have gone up from £11 7s. 6d. to £29 10s. L.N.E.R. Deferred Ordinary, which have not paid anything for years and years, have gone up from £2 8s. 9d. to £3 12s. 6d., and the State—the people— will have to pay those amounts for the stock.

The growth of railways undoubtedly was marred by some of the very worst features of an expanding capitalist system, and there went into railway capital much money which in fact is represented by no assets. Landowners received very much more than they should have received. Lawyers battened upon the rapid growth of the railway systems and partly as a result of that we have in this country the highest capitalisation per route mile in the world. The capitalisation figure per route mile in this country is £56,000, as against £31,000 in France, £24,000 in Germany and £14,000 in the United States of America.

We are today to compensate for some of the blunders made in this period, when railways were expanding. It is also noticeable that during the whole period no attempt has been made towards the redemption of the capital, no amortisation has, in fact, been provided for. In this connection it should be known that in the period since the coming into operation of the Railways Act, 1921, no less than £880 million has been paid in the form of interest and returns upon the shares, that is, virtually the whole of the capital has been repaid in the period since 1921.

Sir John Mellor (Sutton Coldfield)

When the hon. Member speaks about amortisation of capital, is he referring to the Debentures, because, if so, will he agree that nearly all the Debentures are irredeemable, and, therefore, no amortisation would apply?

Mr. Champion

I hold that an effort should have been made to pay off all this capital in the past, as could have been done had the same procedure been followed as has had to be followed in the case of municipal transport, etc.

Sir J. Mellor

To what part of the capital is the hon. Member referring?

Mr. Champion

I was referring to the whole of the capital. I believe that under a proper system of amortisation we could, in fact, have redeemed the capital, and the railways would have belonged to the nation long ago.

I believe that this industry will have to look more and more towards specialisation of function. The final Report of the Royal Commission on Transport said: No doubt, if a state of affairs could be reached whereby every passenger travelled and every ounce of goods was consigned by the most economical route and form of transport, many of our present transport difficulties would disappear. Overlapping and unnecessary services would be eliminated. That is perhaps a counsel of perfection, but I believe it is a state towards which we ought to strive. I do not think that the country can afford, in the circumstances of today, other than to strive towards that perfection. I believe that the case for nationalisation is really the case for a specialisation of function as between railway, road and waterway. The "Economist" said recently, quite rightly, that what was really needed was to severely prune the volume of physical capital that now has to be maintained in order to keep in being two complete competing and under-employed transport systems. In the difficult years that lie ahead, this country cannot afford to maintain two complete and under-used transport systems, we cannot afford to waste the manpower. The right hon. Gentleman the Member for Bromley (Mr. H. Macmillan) said recently that we had passed out of a period in which unemployment was the dominant factor in our national and economic thinking, into a period where production was the main thing to be thought of. I believe he was right. I believe we have reached a point where the importance of production makes it vitally necessary that we shall not waste manpower and capital equipment, that we shall not, in fact, devote manpower to two competing transport systems running side by side, and that we shall not divert manpower into the industry making two kinds of capital equipment which merely compete one with the other.

I believe that this specialisation of function is absolutely necessary. My experience is that one can find competing transport running wastefully side by side— branch railway lines, road haulage undertakings and passenger road transport. The loss in manpower is intolerable. Various suggestions have been made. The Road-Rail Agreement, the suggestion by the road and rail interests that they can, in fact, get over this difficulty of the non-coordination of road transport and rail services, seems to me to be something in the nature of a death-bed repentance, something like: When the devil was sick, the devil a saint would be. I am of the opinion that if the "devil" was permitted to get well he would certainly not be a saint, and we should have a reversion to the same sort of stupidity as we had between the two wars. The Agreement is very loosely worded, and is one with no sanctions in it and cannot possibly apply.

I support the plea of my hon. Friend the Member for Enfield (Mr. Ernest Davies) that Clause 67 should be looked at again, and possibly strengthened, because it does not seem to be sufficiently strong on the side of insuring that area schemes would, in fact, enforce public ownership of road transport. I believe that the Bill should be strengthened on the side of the coordinating provisions. Having said that, I welcome the Bill. I regard it as a great stride forward, and I am sure that the railwaymen I represent elsewhere—not here, where I represent a constituency—welcome this Bill, and wish the Minister well in his task of getting it through this House.

6.37 p.m.

Sir Hugh O'Neill (Antrim)

My hon. Friend the Member for Abingdon (Sir R. Glyn) addressed the House with the great authority of a railway director. He told the House quite frankly that he was a railway director. I will tell the House what my interest is in connection with this Bill. In several trusts I hold a number of railway securities, and for some years I have been a member of the Executive of a body called the Railway Stockholders' Union, which looks after the interests of those who hold railway securities. The able and clever speech of the Chancellor of the Exchequer will be remembered for one thing above all else, that is, his laudation of the Stock Exchange—all that he said about the Stock Exchange and Stock Exchange prices being so fair as a basis of compensation. I could not help thinking, when I heard the Chancellor of the Exchequer say, "Suppose the South African Government wanted to nationalise the South African gold mines," would they think it reasonable to pay compensation, on the basis of the present day prices of such holdings as "Ofsits," "Freddies" or "Western Holdings." which stand at immense premiums over their nominal values, and most of which have never yet paid any dividends, and the possibility of whose dividends in the future is somewhat remote? Stock Exchange prices, in cases of that sort, would be utterly unreasonable, and could never be adopted. Yet we are told that in the case of this great railway industry, the best criterion of compensation is the prices on the Stock Exchange.

Railway securities have been particularly liable to fluctuation in the last few years. Several hon. Members have referred to the fact, as did the Chancellor, that in the 'thirties, several of the junior stocks, and in some cases the ordinary stock, received reduced or no dividends. But why should such a short-term view be taken?

My hon. Friend the Member for Abingdon stated that he and his family had held certain railway securities for generations and that they had never come On the market. I think there are large numbers of people still in this country with regard to whom that could be said. Yet in every speech which has been made on this question of Stock Exchange values as the proper basis for compensation, we have been told about the prices during the last four, five or, at the most, ten years. People have forgotten to look back to what the prices were, say, ten years before the war. Why should we not take a long-term view instead of merely referring to prices in times of depression? In my view, what has kept railway securities grossly depressed—I am talking now about the junior securities—has been, first, the competition of road transport and, second, the fear of nationalisation.

As regards the competition of road transport, everybody knows that if the railways had been left to themselves, a solution would have been reached. Already they have made an agreement with the road transport interests and that severe competition obviously would have been much less in the future. I can see no reason why, if the railways had been left to themselves, and had not been nationalised, and bearing in mind the road-rail agreement, they should not have earned enough revenue to pay a reasonable dividend even on some of their most junior securities. It has already been stated in this Debate that there are close on a million stockholders in the four main line railways. The average holding is about £800 at actual Stock Exchange value, or £1,200 in nominal capital. Despite what some hon Members opposite seem to think, the vast majority of holdings are under £500 and it is the case that a large number of those holdings belong to comparatively poor people.

Reference has been made to the enormous reductions in income on some of these stocks as a result of the Government system of compensation. For example, if we take a security like Southern Railway preferred ordinary stock, that is not a speculative ordinary stock. Except for one year during the depression in the early thirties, that stock has always paid its full 5 per cent. Today, because of the fear of nationalisation and the special circumstances which have depressed railway stocks, that 5 per cent. stock stands only at somewhere about 75. Taking £100 of that stock and the income that it received in 1945 at £5 per cent., under the new proposals of compensation it will receive only £1 18s. 9d. per cent. These matters were brought out very clearly in the admirable and closely reasoned speech of my right hon. Friend the Member for Cirencester and Tewkesbury (Mr. W. S. Morrison).

There are two arguments put forward by those who favour the present compensation proposals. It is said that if a fair price in cash is paid, one is not concerned with the subsequent income of the recipients. That was said yesterday by the hon. Member for Enfield (Mr. Ernest Davies). That might be all right, provided that the Government were to pay cash, which is not the fact in this case, and provided either that the stockholder was a willing seller, or that there had been an independent valuation. My answer to that argument is that there is no provision in this Bill for payment in cash. The price, in my view, is not fair. We have been told by the Chancellor of the Exchequer today that the Government stock which is to be issued is to be redeemable stock. That brings a small grain of comfort, but the Chancellor did not say what the terms of redemption were to be, or for how long that stock was to run before redemption. Suppose it is a long-dated stock, obviously there is any amount of time for it to fall far below its par value between the date of issue and the date of redemption.

Again, it is said that one cannot burden the new nationalised railways with interest charges which they will not be able to earn. Why will they not be able to earn roughly the rental that is now being paid under the control agreement? Surely, the whole argument for nationalisation is that it will bring much greater efficiency. As far as I can see, there is no other argument for nationalisation. It has been used over and over again by hon. Members opposite. We are told, in the words of the Chancellor of the Exchequer, that the railways are a disgrace. I was sorry to hear him use that term. We were told about the inefficiency of railway men. Obviously the argument is that if the railways are nationalised they will be more efficiently run. [HON. MEMBERS: "Hear, Hear."] If they are to be much more efficiently run, surely that will mean a greater earning power. Otherwise, the railways will not be more efficient. If they have a greater earning power, they will be able to pay, at least roughly, what is now the rental under the Control Agreement.

Major C. Poole

Is the right hon. Gentleman not aware that, under the control agreement which operated during the war, the rates which the Government paid for the conveyance of Government traffic bore no relation at all to the actual rates which would have been chargeable if those goods had been carried for an ordinary private consumer? In many cases they were approximately 75 per cent. higher than would have been the case for goods conveyed between a civilian customer and a civilian consumer.

Sir H. O'Neill

As a result of that, among other things, the railways made just under £200 million profit during the war, over and above the written agreement, every penny of which was taken by the Government and not one penny of which went to the stockholders. Of course, if the railways are to earn under nationalisation, a reasonable revenue then, no doubt, rates and fares will have to be adjusted. After all, we live in a time of inflation. Costs are going up on all sides and wages are rising. Is transport to be the only commodity which is not to charge higher rates? Of course, there will have to be higher rates unless the new nationalised railways are to go bankrupt and be unable to pay their way. If we have a proper system of rates and fares adjustment, and proper arrangements between road and rail, the nationalised railways certainly ought to be able to earn an income sufficient to pay out of revenue, which would enable far more equitable compensation to be paid to the stockholders than is contemplated under the present arrangement.

It may be said that it is very easy to criticise, but what should we have as the alternative to the present proposed system of compensation? The alternative methods of compensation which have been discussed have been three, as far as I am aware—first, methods based on the standard revenue under the Act of 1921; secondly, to replace the cost of railway property and equipment, and, thirdly, the capitalisation of net maintainable revenue. I imagine that the Government have probably considered all these possible methods of compensation. They appear to have discarded them all. They have decided upon a method based on the Stock Exchange values, which the Railway Clerks Association, in their publication, declared to be quite unsuitable.

I suggest to the House and the Government that there is a fourth method of compensation which I have not yet seen discussed anywhere, at any rate, in detail. That is a method of compensation by means of a terminable annuity. It has been calculated that, with an annual payment spread over 40 years, of an amount roughly equivalent to the rental now being paid to the railways, under the control agreement, a reduced, but nevertheless reasonable, income would be available to the stockholders, and, at the end of the 40-year period, by means of the sinking fund included in the annunity, the stock created would be redeemed and the railways would belong to the State, free from all obligations and free of all charges, except those incurred for future development. That, I maintain, is a possible basis of compensation which is worthy of consideration by the Government, and such a basis would have sound precedent behind it. That is a basis which was adopted by the Government in financing the Irish land purchase scheme which was carried through towards the last years of the 1800's and the early years of the 1900's. Under that scheme, the landowners were paid out in Government stock, the interest on and redemption of which was covered by a terminable annuity collected from the former tenant farmers, who are now in process of themselves becoming the owners of their land, free of all rent, at the end of the annuity period. That, I suggest, would have been a system which might have been well worth consideration by the Government, and I hope that, even now, it will have some kind of consideration from those in authority, because, speaking as a holder of railway stocks, on behalf of several trusts, I most strongly feel that the loss of income which innocent people are going to suffer is a thing that really cannot be justified.

Of course, I agree that, in the case of the junior stockholders, when they are going to get Government security, they will obviously have to face some loss of income. But the loss of income which is proposed under this scheme is quite unwarranted. In my view, it is most drastic, most harsh and quite indefensible. The present Prime Minister addressed a meeting of the Railway Stockholders Union in January, 1937. He was then, of course, leader of the Labour Party and in a responsible position. I happened to be at that gathering, and I have before me a report of the words which he used in speaking to the railway stockholders. The right hon. Gentleman was, of course, advocating nationalisation, and he used these words: And so I believe you will find when, in due course, you cease to be railway stockholders, that the community will make a very fair bargain with you, and it is all to your interest that that should happen. A little further on, the right hon. Gentleman said: I think you will find that a Labour Government will give you proper compensation. Well, I think that it is manifest that, at any rate, a very large proportion of the people of this country do not consider that proper compensation is being paid. I leave it to any fair-minded person, either in this House or elsewhere, to decide in his conscience whether or not that pledge, given by the present Prime Minister in 1937, has or has not been redeemed.

6.58 p.m.

Mr. Douglas Jay (Battersea, North)

Listening to the speeches from the Front Bench opposite in this Debate, I have had a feeling that the right hon. Gentlemen on that bench may be divided into two classes. On the one hand, there are those who advocated railway nationalisation in the past, and, on the other, those who are today directors of the railway companies. The right hon. Gentleman the Member for Bromley (Mr. Macmillan) has the distinction of falling into both classes at once. The right hon. and learned Gentleman the Member for West Derby (Sir D. Maxwell Fyfe) falls, I think, into neither class, and, perhaps, that is why he was selected to speak in this Debate. I must say that I found rather unconvincing the synthetic ferocity with which he attacked the Government's Bill. I was surprised that the right hon. and learned Gentleman did not refer at all to the great constitutional principle and the great attack upon British liberty about which the right hon. Gentleman the Leader of the Opposition spoke in one of his weekly interventions last week. I thought we were going to hear about this great constitutional principle which weighed so heavily on the mind of the Leader of the Opposition, but, apparently, the right hon. and learned Member for West Derby does not agree with him on that point, because he did not mention it at all.

The right hon. and learned Gentleman also seemed to think that, in nationalising the railways, the present Government were pursuing some novel and doctrinaire idea of the Labour Party which is not accepted by authorities on this subject generally. The evidence is against him on that point. As we all know, the right hon. Gentleman the Member for Bromley signed a manifesto some years ago called "The Next Five Years," which recommended the nationalisation of transport. The right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden), who was in his place earlier today, told us recently that in the changed economic conditions of the day, the Government must play an ever-increasing part in the economic life of the nation; and, of course, as we all know, the right hon. Gentleman the Member for Woodford (Mr. Churchill) advocated railway nationalisation in 1918. It is true that he was then, I believe, speaking as a Liberal. But the House may be interested to know that Mr. Gladstone was speaking as a Tory when he moved the Second Reading of a Bill for Government purchase of the railways on 8th July, 1844. That Bill was passed and it gave the Government a power to purchase the railways which, I believe, it still legally possesses today.

The next eminent authority I would like to quote is the chairman of the London and North Eastern Railway Company, in 1937. Mr. William Whitelaw. He said in the "News Chronicle" on 29th December, 1937, that he advocated nationalisation of the railways. He went on: After purchasing the railways, the Government should set up a body to control both road and rail transport. This public body might be ran something like the London Passenger Transport Board or the Port of London authority. Then he added: One of the principal obstacles to overcome is the deep-rooted political prejudice against the word 'nationalisation.' But this is not a political problem. There is no doubt in my mind that State ownership would result in rationalisation and improvement which would reduce the costs of both passenger and industrial transport. The right hon. Gentleman the Member for Woodford told us that he had changed his views because of the advent of road transport. I thought that was a very thin explanation, particularly because, as I hope to show briefly, road transport has come steadily into a virtual private monopoly with the railways during the last 15 years.

Before showing that, I would like to say that we on these benches hold the basic conviction that great public services and great concentrations of economic power like the transport services of this country should be not in private hands, but in the hands of an authority responsible to a Minister who, in turn, is responsible to Parliament. We hold that is the only democratic system. When hon. Members opposite talk about political interference and so forth, I think that is a very dangerous argument. It neglects the essential principle of the Constitution of this country, which is that power should be in the hands of an authority responsible to a Minister and so to Parliament. If hon. Members opposite do not understand that, I can only say that they have not yet understood why they lost the last General Election.

Viscount Hinchingbrooke (Dorset, Southern)

Would the hon. Gentleman tell us precisely how he thinks Parliament can democratise the Railway Transport Executive?

Mr. Jay

The essential principle is that railways should be in the hands of an authority responsible to a Minister in the same way as the Armed Forces of the Crown, or the Post Office, or the Treasury or any other great public service. If the noble Lord does not understand how that works, he does not understand either the constitution of the country or why his party lost the last General Election. I would add that, like my hon. Friend the Member for Rotherhithe (Mr. Mellish), I fought a by-election, not quite so recently as he did, but fairly recently, on this issue. In my constituency there is a very large number of transport workers, and there are few subjects about which they feel so keenly as this. They are extremely keen on this Bill, and although I hate to expose hon. Members opposite to the icy blasts of public opinion, the only question I was asked during the election in regard to compensation, was why we were proposing to give any compensation at all.

Mr. Orr-Ewing (Weston-super-Mare)

What was the answer?

Mr. Jay

The answer was that the Labour Party has always believed in full and fair compensation. That was one of the simpler answers I had to give during the election campaign. Hon. Members may say that is rather an academic sentiment, and may ask what this question of private ownership has to do with transport. I will mention one concrete example of why it matters, and that is the story of the Severn Bridge scheme. I think we all agree that that scheme will prove of great benefit to millions of people living in South Wales and elsewhere. What happened before the war? When the scheme came forward, it was opposed by the Great Western Railway Company on the definite and explicit grounds that it would injure the profits of private stockholders in that company. That is the fact, and if the hon. Member for Abingdon (Sir R. Glyn) were here, I do not think he would deny it. That was an inevitable effect of the system; and, it is that system which we mean to change.

The basic case for nationalisation of transport is, as many hon. Members have said, that we shall never get real efficiency, coordination and cheapness without unification. I use the word "unification," long as it is, because it is the word used in the Report of the Royal Commission on Transport in 1930. If hon. Members opposite wish to press their demand for an inquiry into reasons for nationalisation, I hope they will read this excellent and voluminous blue book right through from beginning to end, and then see whether they want another inquiry into the whole subject of transport. That Report said at the end: In any case, it is clear that any plan (for unification) would necessitate a large amount of Government control, since otherwise the whole of the essential services of transport would be in the hands of a huge uncontrolled monopoly. That is the essential principle behind this Measure. The experience of the last 15 years has shown over and over again that competition is basically wasteful and uneconomic because it leaves us with two systems of transport with high overhead charges, wasting manpower and so on; and it has also shown, as the Chancellor of the Exchequer said, that that competition drives down the value of railway property and of the railway ordinary stocks to levels far below what will be received in compensation under this Bill. Parliament decided, and in my opinion rightly, that that wasteful competition could not go on, and the story of those ten years is the story of limitations by Parliament of the ability of the roads to compete with the railways. By that means, we protected the value of railway stocks and limited this competition; but at the same time we allowed the country to drift into a most indefensible position of virtual private monopoly without Government control.

I would like to mention briefly two aspects of how the road transport system came into a private monopoly jointly with the railways. The first is the Tilling combine, which I am glad has been mentioned in this Debate, because it is not so widely known as it ought to be. By the Railways Road Transport Act, 1928, the railways were given power to run road vehicles. They made very little use of that power, but what they did was to buy up controlling shares in practically all the private bus companies in the country. At the same time, two great private holding companies Thomas Tilling and British Electric Traction, joined in that process and bought controlling shares in the same companies. By about 1938, we had a system whereby, as far as I have been able to discover, private companies owning over 90 per cent. of all the private buses in the country were as to more than 50 per cent. owned ultimately by Thomas Tilling, B.E.T. and Scottish Motor Traction in Scotland, and as to over 40 per cent. by the railways. That combine owned nearly 100 private bus companies, and employed something between 60,000 and 100,000 men. I would like to quote from a journal which has already been mentioned on this side of the House today, namely, the "Financial News."

Mr. Dalton

The "Financial Times."

Mr. Jay

The Chancellor says it is the "Financial Times." Actually, I was correct; it was the "Financial News."

Sir William Darling (Edinburgh South)

A long time ago.

Mr. Jay

On 14th October, 1944, when it was still in competition and had not been absorbed into the monopoly concern, over which the right hon. Gentleman the Member for Bournemouth (Mr. Bracken) now presides, the "Financial News" said: A large part of the industry has in fact come under the sway of Thomas Tilling and British Electric Traction, both of which had established their pre-eminence—with Scottish Motor Traction they were far and away the largest units—not by starting up competitive enterprises of their own, but by absorbing and developing individual businesses. The railways agreed to share their holdings with these two companies, whose interests in such undertakings were vested in the jointly owned Tilling and BET. The "Financial News" then added, rather uneasily, that this arrangement was of course open to the criticism that it converted passenger and road transport very largely into a closed ' industry,' leaving newcomers only limited scope in the running of coach trips and the like. That "closed" shop—to use the expression of the newspaper of the right hon. Gentleman the Member for Bournemouth —or closed industry, is virtually in that condition today. Today these two holding main companies hold controlling shares in companies with a capital of over £30 million; they own 100 bus companies, with far too many names for me to read to the House tonight, although I have them with me; and they employ something like 100,000 persons. I would add that this has proved an extremely profitable monopoly. It is a most notable example of a private monopoly combine, which is earning very high and steadily increasing monopoly profits, and which is at once, in my opinion, overcharging the public and underpaying the workers. That, very briefly, is the history of the Tilling combine.

I would have liked to tell the story by which road goods traffic has also come virtually into a monopoly of the same kind, but there is not time to do that tonight. I would just recall the fact that it was not merely the Labour Government of 1930, but the Conservative Government of 1933 which deliberately introduced a system of licensing, which brought to an end free competition in road goods transport. I thought perhaps the right hon. and learned Member for West Derby was going to tell us that was the great constitutional principle which was so much worrying the Leader of the Opposition, but he did not do so. None the less, I think I might point out to the House that the very first sentence—a very streamlined sentence—of the Road and Rail Traffic Act, 1933, passed by a Conservative Government, says: …no person shall use a goods vehicle on a road for the carriage of goods—

  1. (a) for hire or reward; or
  2. (b) for or in connection with any trade or business carried on by him,
except under a licence. That principle was adopted by the Conservative Government of 1933, so hon. Members opposite cannot argue that their party has advocated anything like competition in this matter.

Sir A. Salter

It is true, is it not, that it is specifically provided that, apart from certain offences which are not now relevant, transport carriers should be given their licences automatically, without any power on the part of the licensing authority to refuse a licence, either because they thought there were too many vehicles, or because of the radius of action?

Mr. Jay

What I was arguing was that the principle of licensing and of limiting road competition was introduced by a Tory Government. [HON. MEMBERS: "Answer."] I am answering. It is equally true that licences will be granted under the system we are proposing today.

Major Sir David Maxwell Fyfe (Liverpool, West Derby)

May be granted.

Mr. Jay

Will be or may be, I think, in either case. I would add that the "square deal" campaign, which is the next step in the story, was largely, as I think the right hon. Gentleman the senior Burgess for Oxford University (Sir A. Salter) will agree, intended by the railway companies as a prelude to an agreement on rates between the road interests and the railways. I have a pamphlet with me, published by the railway companies this summer, called "British Railways and the Future," which tells us that quite plainly. That was the situation immediately before the war. A further pamphlet issued this summer by the Road Hauliers Association and the railways on the "Co-ordination of Road and Rail Transport" also speaks plainly of their intention, under this private monopoly scheme which they put forward, of reaching agreed rates, or what they call a "correlated rate structure," between the roads and rail interests. The point I am making is that, in road goods traffic as well as road passenger traffic, we have had a steady progress towards a private monopoly arrangement between the roads and the railways. That system was obviously contemplated in the proposals made by the two interests this summer, and I think it is perfectly clear that the whole history of this story shows there are only those alternatives. If we are to have the essential unification, the only real alternatives are between a more or less tight private monopoly on the one hand and a public monopoly on the other.

I will say very little on the subject of compensation, because I think the Chancellor has said everything there is to say. I would add only this to what he said. If the Government were in any way to pay higher prices than those which they are now proposing to pay for the railway interests, they would lose my support for this Bill. The essential principle behind this method of compensation is to use Stock Exchange prices. The defence of that is that the Stock Exchange price in this case is the only system of valuation which is at once independent and practical. It is both of those, and if we argued for a long time, that is the conclusion we should reach. The second point is that had it not been for this system of limitation of road competition introduced by Parliament these stocks would have been worth very much less than they are worth today. The third point, which has not yet been entirely brought out in the Debate, is that the stocks at the compensation date stood higher than they had stood at almost any time for 15 years. An hon. Member opposite invited us to go a little farther back in the story. I would like to accept that challenge, in the case of just two stocks, Great Western ordinary and L.M.S. ordinary. In the case of Great Western ordinary the compensation price is 50 1/16 In January, 1939—and I took the first working day of each year so as to be perfectly fair—the price was not 59 but 28; in January, 1935, it was 51; if the highest level it touched in 1932 is taken, because it was a depression year, the price was only 48¾. Thus the compensation price is a far higher price than that of 1939, 1935, or 1932 Take the L.M.S. ordinary. The compensation price is 29½. In January, 1939, that stock stood at 13½ in January, 1935, at 21; and the highest point it touched in 1932 was 20].

Mr. Molson

The hon. Member is selecting individual shares. I am sure they suit his purpose. I am sure he chose them quite fairly. What I was going on was the grant value of the railways.

Mr. Jay

If one takes almost any stock one finds that from year to year the result is almost exactly the same. I have taken, perhaps, the two most characteristic stocks in the whole list.

Colonel Wheatley (Dorset, Eastern)

The hon. Member is taking the sale value of the shares. Will he touch on the question of the income of the shares, which is so important?

Mr. Jay

That is what I was coming to next. It may be said that, although the market price is perfectly fair, the income is reduced. Well, of course, as the Chancellor of the Exchequer has pointed out, one cannot expect—and nobody on the Stock Exchange does expect—to get the same interest on a Government guaranteed stock as one gets on a very risky ordinary share. The obvious solution for anybody not prepared to accept a reduction in income is to sell the new securities and to reinvest in a security which gives a comparable yield, and, perhaps, rather less risk, than the original railway stock. We are being told that that is not practicable at present, but I must say that this argument is very much exaggerated. In the first place—and I think this is the answer to what the hon. Member opposite said about terminable annuities—it is perfectly open to an individual stockholder to sell that compensation stock, and to buy a life annuity which almost certainly will give as high, and, probably, a higher income than he was getting before.

Mr. Dalton

And no Income Tax on the capital.

Mr. Jay

That is true. If the stockholder prefers not to do that, he can still buy a large number of British Ordinary shares which give a yield of 4 or 5 or 6 per cent. today.

Sir H. O'Neill

My point was that the holder of terminable annuities would get his stock completely redeemed, and get the whole of it back.

Sir Stanley Reed (Aylesbury)

Would the hon. Member be good enough to tell us what are the industrial shares on which he can get 4 or 5 or 6 per cent.?

Mr. Jay

John Brown's, Hawker-Siddeley, or Austin Motors, to mention three. But I think that this is not the proper place for Stock Exchange tips, although I should be very pleased to renew the conversation outside. My essential point is that it is perfectly possible to use discretion to reinvest this stock. It is possible for those people who hold railway debentures to reinvest in other industrial debentures of not much lower yield, and only about half the railway debenture stocks are any longer trustee securities.

I do think, however, that, in the final case of the railway debentures which are still trustee securities, there is some element of difficulty and hardship because of the very narrow range of stocks in which one can reinvest. But there the solution lies not in any alteration of the compensation price, but, in my opinion, in some widening of the range of trustee stock, and I was very glad to hear the Chancellor of the Exchequer say in the House a few days ago that he was prepared to consider some widening of that kind. If that were done, it would go far to remove the only element of legitimate grievance in the field of compensation.

Finally, I may mention briefly three points in which I should like to see some slight revision of this Bill. The first is that this Bill immediately, in its first effects, leaves the Tilling holding company, so far as I can see, still in private hands. I would ask the Minister whether he might not like to go a little further, and ensure that, when this Bill becomes law, this monstrous private monopoly no longer remains in private hands Secondly, I rather regret myself that the compensation stock is going to take the form of British Transport Stock and not of British Government stock outright, because I should like to see every vestige of private ownership, and every vestige of interest payments as a first charge on revenues, removed from this industry. Thirdly, I think the Minister has been wise in leaving considerable elasticity—and this is my answer to the right hon. Gentleman the senior Burgess for Oxford University—for the authority which is going to draw up permits for the "C" licences to go outside the 40-mile limit. I think hon. Members opposite who have spoken on this, cannot have examined the Bill very carefully, because the Bill lays down various classes of vehicles to be allowed permits; in particular, firms with production units widely dispersed about the country, including those in development areas. The Minister said the intention was that any bona fide trader could receive a permit to go beyond that range. I interpret that to mean that any bona fide "C" licensee, normally carrying on business in a vehicle of this kind would be allowed to continue, and that the limitation would apply only to those who are seeking to upset the other terms of the Bill by some subterfuge depending on "C" licences. I think that if that is what the Minister intends, any legitimate grievance under that head will be met.

That is the case, as I see it, for this Bill. The fact is that there are only three systems under which one can run transport in this country. The first is by open competition without quarter.

Mr. Dalton

Free and unfettered.

Mr. Jay

Yes, free and unfettered. I understand that hon. Members opposite are not advocating that. Certainly, it would drive the prices of railway stocks, not merely far below the compensation price, but would bring ordinary stocks somewhere near to zero. The Second possible system is some sort of private monopoly. That is what hon. Members opposite and the vested interests are really advocating, though they are ashamed to say so. The third system, which this Royal Commission led up to, and which we advocate, is the system of control by an authority responsible to a Minister who is responsible, in turn, to Parliament. That, in our opinion, is the only democratic and only efficient system. I must say that it seems to me that the inability of hon. Members opposite in this case to choose between the only two workable systems of private or public monopoly, is only one example of the dilemma which they face over the whole field of economic policy, and which is forcing them into such obvious and protracted political frustration.

7.29 p.m.

Mr. David Renton (Huntingdon)

I am sure the House has enjoyed the by-election reminiscences of the hon. Member for North Battersea (Mr. Jay) as much as I hope we shall profit from the Stock Exchange tips he was good enough to give us; but the Government should not set too much store by their by-election results, because, just as they have managed to retain a number of seats with reduced minorities, so we have managed to retain a large number of seats by greatly increased majorities.

Mr. James Callaghan (Cardiff, South)

Kilmarnock and Paddington.

Mr. Renton

The Chancellor of the Exchequer has, perhaps, chosen the right moment to depart from the House and stop muttering sweet nothings about the Stock Exchange, because I am not going to speak about the compensation. But I am very glad to see the Minister of Transport is here, because I wish to speak about the lower organisation of his transport scheme. The hon. Member for North Battersea asserted that road transport had grown into a virtual private monopoly, combined with the railways. So far as passenger transport is concerned, I agree readily that he is very nearly right; but he is not quite right, because apparently he has never spent nights of doubt and sorrow wondering whether he will go to Scotland by the L.M.S. or the L.N.E.R. There is still an element of competition in passenger transport. So far as goods transport is concerned—and he said that he had not time to develop his argument on that—I would remind him that any tendency towards monopoly that there might be is very practically counteracted under the present system by the fact that the "C" licence holder is free to carry his own goods in his own vehicle; and that, by the way, is as near a constitutional issue as one might expect to find. The hon. Member was complaining that we had not raised the constitutional issue. Surely, the Englishman's immemorial right to carry his own goods in his own vehicle in connection with his own business on the King's highway, is a fundamental liberty; and that is what is being undermined by this Bill.

Mr. Jay

As I understand the system which the Minister proposes, the "C" licensee is to be permitted, in the great majority of legitimate cases, to run his own vehicles.

Mr. Renton

He will be permitted as of right to go up to 40 miles by road; but over and above 40 miles, which may cover a large proportion of his business, he will be compelled to go to the licensing authority, and will have all the trouble and expense to justify, against the power of the State, whether he shall go on doing what he has always done. That is what he will have to do, and I suggest that it is putting too much upon him. There is a constitutional issue here.

Mr. Sparks rose

Mr. Renton

I have already spent a good deal of time answering the hon. Member for North Battersea, which I had hoped might be considered a matter of courtesy, so now may I make the speech I have been waiting nearly two days to make? The Minister said yesterday that the issue before the House was whether his scheme was workable or not I agree with him that that is a principal issue, but it is not the only one. Surely, even the right hon. Gentleman is capable of evolving a scheme which would be workable for the railways and for passenger transport, but workability is not the only issue. It is equally important that we should decide whether the scheme which is proposed will work better than anything existing up to the moment and not only that, but better than any scheme which would normally be evolved in the ordinary course of national progress, whereby year after year the nation, with the aid of Parliament and the Government makes such improvements and changes as may be necessary, just as in normal times the motor car manufacturer produces each year a new model which is in improvement on what he made the yeas before.

Before the Minister's scheme is accepted, I think we have to decide also whether it will be executed fairly and justly, with justice to those concerned, and with the minimum of interference in the economic and industrial life of the country. The burden of satisfying the House as to these issues, workability, fairness and so on, lies upon the Minister; and it is because we feel that he has not discharged that burden that my hon. Friends and I intend to vote against this Bill. Now I will accept the Minister's invitation to consider whether his scheme is workable. With regard to railway and road passenger transport, I agree that his scheme may quite well be workable; but I suggest that it. would be a pretty poor thing if the Minister were unable to evolve a workable scheme for those forms of transport. However, I say without hesitation, and after careful consideration of what is in the Bill, in the right hon. Gentleman's speech and in the pamphlet which he quoted yesterday as containing his Party's transport policy, that the proposals for the State operation of the road haulage of goods will not work without confusion and great expense, and will certainly not work nearly so well as the road haulage of goods has worked since the 1933 Act came into force. I hope I may be forgiven for saying that from 1931 to 1939 I was in very close and intimate touch with the transport industry, albeit as a lawyer—but sometimes a lawyer does get a very close view.

In the earlier stages of this Debate we have had much discussion of the higher organisation of the proposed scheme; but we are still in the dark as to the form which the organisation for the road haulage of goods is to take at the lowest level —at the operating level, at which the scheme will be in touch with the consumer. We have to try to draw a mental picture and, when we do so, one thing becomes absolutely clear, and that is, that the organisation will be vast and very complicated. We have a right to know from the Minister whether he has worked out his scheme in practice and down to these lowest levels in fair detail; and we hope we may be given in broad outline what the scheme is to be at the lowest level.

At the present moment there are no less than 450,000 "A," "B" and "C" vehicles; and they are based in towns, in villages, in factories, on farms, in small yards and in the larger depots of the larger hauliers. They are distributed over the country fairly evenly, ready at hand to do the infinite number and variety of jobs which they are called upon to do. The right hon. Gentleman has told us that up to 35,000 of those vehicles will come under State ownership. I think that is an under-estimate, because although the Minister is not taking over any of the "C" licence vehicles, he is taking over a great deal of the work which they now have to do. Perhaps this means of course that he will direct that work to the railways; if he does so, the question will be whether they can do the job better or not. I hope that is not so, but it seems a little bit ominous.

Let us assume, however, that the Minister's estimate of taking over 35,000 vehicles, which are now spread over the country, is a fair estimate of what will become State property. I should like to ask the right hon. Gentleman, and I hope for a reply from one of his colleagues at the end of the Debate, where and how he intends to base these 35,000 vehicles. Presumably he will bring them into large depots; and, if so, how far apart are those depots to be? I suggest that there will have to be one at least every 50 miles, but in many areas they will obviously have to be very much more frequently spaced. Fifty miles will be the limit only in the most sparsely populated parts of the country. I will not go into that, but it will not require a second's imagination on the part of hon. Members to imagine that they may be 50 miles apart in the sparsely populated areas, and perhaps very much shorter distances elsewhere. He will have to purchase land to accommodate these vehicles and, as most of the depots will be in or near large towns, the land which he will have to purchase will be valuable land and will be expensive to buy.

There is the further point that the depots will require money, labour and materials to equip them with garages, repair and maintenance shops, offices for the organisation, canteens and, we hope, sleeping quarters for the drivers. When will this work start? Will it take precedence over housing, because if so, there are some people who will have something to say on the matter? The cost of buying the land and building and equipping these depots will be enormous, and this very great cost will add to the overhead charges for the carriage of goods. Who is to pay for this? Is the consumer to pay by increased charges?—because there is no doubt that this will impose an increase upon present costs. Will the taxpayer pay by means of subsidies? Either way, it seems to me that this road haulage of goods scheme will start off with a heavy financial handicap, which it is unreasonable to ask the people to bear at this stage of postwar reconstruction.

Before the Minister goes much further with this Bill, I should like to ask him to tot up a balance-sheet showing the adults in this country who want the Measure, and those who do not want it. May I attempt to show how that balance-sheet would work out? Let us consider first those who may want this Bill. In the first place, 42 per cent. of the people voted for the Government at the General Election. Not all of them, by the way, voted Labour to support Socialism; many of them voted Labour without any serious consideration of the issues involved, although I agree it is their fault that they did so. I have come across some of these people who say that they voted Labour but were against Socialism; in fact, one lady thought I was being very abusive to her when I suggested she was absolutely right to vote for the Labour candidate if she believed in Socialism, and said I Don't call me a Socialist, I'm Labour!"

Mr. Kirkwood

What did those who supported the hon. Member vote for?

Mr. Renton

That is a very pertinent question, and the simple answer is that they voted for progress on the basis of a free society. We can assume also that the majority of trade unionists wanted this Measure, but by no means all of them; and in any case it can be assumed, quite fairly, that those in favour were included in the 42 per cent. who voted for the Government. Another class of people who would like this Bill are the lawyers. It is going to be a goldmine for them, with an unending vista of lucrative work before the Transport Tribunal, the licensing authorities and the Transport Arbitration Tribunals—and then, of course, there will be all the increased number of prosecutions for breaches of conditions for "A," "B" and "C" licences. Previously the vehicle examiners were concerned with 54,000 "B" vehicles; but now they will be concerned with conditions to be attached to something like 300,000 "A," "B" and "C" vehicles.

Apart from these categories of people, I suggest that everyone in the country is against the Bill. In the first place, the executives and operators of both the railway and road haulage industries have declared themselves to be against it. Then quite a number of the one million railway shareholders will toe against it; and almost all people engaged in trade and industry, retail distribution, and farming. Through their various organisations, they have expressed grave doubts about this Bill, especially with that part which I have mentioned, the road-haulage of goods. Finally, there is that not despicable class of 48 per cent. who did not vote for the Government at the General Election. They may be presumed to be against the Bill; and who knows that their number has not risen, by now, above that figure? For these reasons, I ask the right hon. Gentleman, for whom, personally, we have great regard, not to be in any indecent haste to paint this country red. Red may not be the most attractive or popular colour in the long run. We do not mind a little of the red coming off his amiable lips; but let him show some consideration for the feelings, opinions and interests of his fellow-countrymen.

7.47 p.m.

Mr. Harrison (Nottingham, East)

I am very pleased to have had this opportunity to speak at this juncture. I should like to say, at the outset, that I have spent 32 years of my life in the transport industry as an employee of the L.M.S. Over those 32 years I have seen the most efficient railway managements struggling regularly to try and obtain the necessary capital with which to bring our industry into line with modern requirements, and on each occasion the urgent necessity to replace some of our old-fashioned stock and equipment was baulked, in the main, by the absence of capital I suggest that in their plans for economic rehabilitation and expansion the Government have no option but to take this step of nationalisation. Speaking of compensation, it is my privilege to be able to look at something other than the financial symbols which are very often discussed in this House. I can visualise, quite vividly, the present condition of some of the fixed assets of the railway companies. I can see the locomotive sheds without roofs, some of the old-fashioned engines which are running about the railways in this country, and some of the old-fashioned goods depots which have Victorian methods of loading and unloading wagons.

We have put Questions to the Minister of Transport about the present congestion on the railways, particularly in the case of goods traffic. In some of the Midland coalfields we have recently had pits waiting for empty wagons, and we have had suggestions for the solution of these difficulties. More engines and wagons would contribute to the solution of this stoppage in the Midlands, but I seriously suggest that the chief reason for the congestion on the railways at present is the fact that many of the terminal goods sidings for the reception of these trains were built in the 19th century. They were built to contain and deal with trains consisting of 25 eight-ton wagons. That is the capacity of a good many of the terminal goods sidings. At the present time it is quite a normal load to have 90 wagons of from 12 to 15 tons to be dealt with. The position is that the railway managements of the country, owing to lack of capital over the years, are completely unable to deal with the present traffic. Therefore, it is fair to say that the Government, with their present policy of expanding industrial activity and full employment, had no alternative but to look at the railways and decide to do something about them very quickly.

What do we find with regard to road haulage? The congestion on the roads is a most urgent and dangerous problem, and in tackling it we must remember that in this country we have the greatest density of motor vehicles of any country in the world. During the interwar years, the increase in the number of motor vehicles resulted in there being, in 1939, 69.6 vehicles per flat mile on our classified roads. In addition to that tremendous volume of motor traffic, there is the very unsatisfactory state of most of our main roads. The devastation of the war years and the lack of repairs have brought these roads into a very bad state. It must also be remembered that in prewar years there was only a 9.5 per cent. increase in classified road surfaces, and, at the same time, there was an increase in the number of private commercial vehicles of 55.6 per cent. Speaking some time ago, the Parliamentary Secretary to the Ministry of Transport said that in a very few years' time, with the discontinuance of restrictions on petroleum and the provision of motor vehicles, it would be possible to predict that on our roads, reduced in quality by lack of repairs during the war years, there would be at least 12 million vehicles. I suggest that the millions of pounds needed for the repair of roads and the provision of new roads could never be found by the present organisation of the road haulage industry. If we are to provide these necessary roads and conveniences in the future, there must be a different organisation from that which there is at present.

Mr. Osborne (Louth)

Surely, the hon. Member is not suggesting that it is necessary to take over the transport of the country in order to provide adequate roads? Those roads could be provided, and transport could be left as it is.

Mr. Harrison

When we are considering road haulage and the utilisation of roads, the factor of road costs comes into the picture. We know from past events that only a very small portion of the necessary finance for the upkeep of roads has come from the commercial users. The future development of road traffic would be impossible if there were not bigger inroads into the national Exchequer. We on this side feel that if commercial road users, whose basis of profit is the utilisation of the roads, are to continue on an ever-increasing scale, it is fair and just that the Government, who provide the roads, should have some say in the running of the vehicles on those roads.

Mr. Osborne

That does not justify the nationalisation of the road haulage industry.

Mr. Harrison

I am speaking now about the commercial usage of the roads. It seems to me legitimate and justifiable to expect that if the most expensive factor in road haulage, the roads, have to be kept up out of public funds, then of necessity the commercial activities of those vehicles should come under a nationalisation project. I suggest that the greatest indictment of road haulage in the interwar years was the tremendous growth of the "C" licence people. Road haulage started in the form of "A" and "B" traffic. Road haulage was an industry distinct and separate from the big industrial firms of this country. The strongest indictment anyone can make of the road haulage industry is to quote the fact that the "C" licence people have already nearly swept the "A" and "B" licences from the road. In 1939, there were 365,000 "C" licences, and other commercial licences numbered 148,000. I suggest that, as far as road haulage is concerned, it has failed to a considerable extent to do its job, and the introduction of the innumerable "C" licences is an indictment of that particular body and their failure to do the job they set out to do

Now a few words about water transport. I represent a city situated in the Trent Valley. There, we have, according to the Chamberlain Report, one of the most useful waterways in this country. On a number of occasions Royal Com-missions and other influential and authoritative bodies have examined the possibilities of this waterway, which serves the biggest inland conglomeration of people and industries in this country. On every occasion the chief stumbling block has been that the waterway was under so many diverse and different authorities.

The Bill unifies the authority of this waterway. I would remind the House that just as the internal combustion engine has revolutionised road traffic, so it will revolutionise river traffic. On no occasion in the past has this valuable method of transport been given a chance, until now. Here in the Bill, for the first time, is an opportunity of returning to the river, with the assistance of the internal combustion engine, which will provide some of the cheapest forms of traffic that this country has ever known.

8.2 p.m.

Major Haughton (Antrim)

In opening the Debate, the Minister of Transport said that he welcomed constructive criticisms and suggestions. I, being a simple- minded sort of person, take him at his word. I will try to make some suggestions. Every right-minded person should endeavour to contribute something to the production drive which we are all invited to urge forward. Transport is a vital factor in efficient production and distribution.

In the course of the Debate, I have noticed hon. Members on both sides of the House going back to what Mr. Gladstone said in the 1800's. It is often said that an Irishman never gets wanned up to his subject unless he goes back to Strongbow. I will refrain from going back further than 1935, when I became a member of the North of Ireland Road Transport Board, which has already been mentioned in the Debate. I would offer some suggestions and criticisms resulting from my experience of service with that board.

I served on the board from 1935 to the outbreak of war. The board was good enough to keep my place for me, so that I had an opportunity of seeing the conditions unfolding themselves after the war. With great reluctance I found myself compelled to give up that position because of my Membership of this great House. I understand that otherwise I should have been in the position in which other M.Ps. have been if I had remained on that board. There are some comparisons I want to draw. The Northern Ireland Road and Railway Act of 1935, and the present Transport Bill, differ in many fundamentals. I suppose that the greatest and most fundamental difference of all is the complete and absolute freedom for the "C" licence holder. Railway ownership was untouched, municipal transport undertakings were entirely left out of the scheme, and the compensation which has been discussed at such length in this House was, however, under the terms of the Act, given in cash or its equivalent. The values were not settled at the will, or by the decision of, the Government, but were decided by the High Court, which went into the various cases, a comparison which is not without significance.

A point was raised by my hon. Friend the Member for Thirsk and Malton (Mr. Turton). He cited a rate which, he said, had advanced after the passing of that Act, by 266 per cent. I do not know the basis on which that price was built, but I noted the point particularly, because there is a great lesson to be learned from it. The figure was, however, based on a definite costing. Incidentally, the road board over there made an operating profit of £211,000 last year. That rate was based upon a costing. A firm such as mine, which has a fleet of its own lorries and which, I am glad to say, works in the closest collaboration and co-operation with the road board, is in a position to compare costs. I want to stress the very great importance of this question of costs.

The hon. Member for East Nottingham (Mr. Harrison) described the "C" licence holder as if he were a vampire or a leach, sucking the very blood from transport. My regard for the "C" licence holder lies in the direction of the great contribution which he is making to agriculture and to industry. This is a matter which does not concern the Minister of Transport alone, but the Chancellor of the Exchequer, and the President of the Board of Trade, who is trying to increase our exports abroad. Transport cost is a very vital part of the total cost of any article we produce.

The comparison between public and private transport is very marked. A private firm, running its own fleet of lorries, has a cost which consists of the drivers' wages, petrol and oil, tyres, maintenance, insurance and depreciation, but no overhead. Overheads are absent, because a business with a fleet of, say, 10, 15 or 20 lorries is more or less self-organised. The tremendous difference between that kind of transport and public transport is the question of overheads. The more efficient an organisation one tries to make public transport, with its depots all over the countryside, its innumerable telephone messages, its inspectors and so on, the more the factor of overheads becomes of overwhelming importance. As it is laid down in the Bill—Members of the Opposition have been accused by supporters of the Government of not having read the Bill— that there will be a restriction on the private lorry owner beyond a journey of so many miles, I would ask the Minister of Transport a very straight question. Is that restriction put there with the abject ultimately of bolstering up public transport? If it is, it will put a tremendous brake on industry and an unjustifiable restraint upon the energy and initiative of "C" licence holders. That is an important point, and this is the suggestion that I want to make.

I think it is possible for the "C" licence holder, with absolute freedom, to work with great benefit for the commercial and agricultural community. I suggest with the greatest possible conviction that the "C" licence holder is a stimulating factor of competition in public transport. I hope the Minister will not evade that; I do not think he is the type of man to be scared of that kind of thing, and I think the acid test will be whether or not he gives freedom to the private lorry owner.

My mind goes back to the time, early in this Parliament, when the Lord President of the Council used to chide us on this side of the House for not providing active enough opposition. He used to say that we did not set a fast enough gallop to enable the Government to show its good paces. I have found, in my experience of life, that a wise man who is prepared to give advice is generally prepared to take it, and I should like to say this, not only to the Lord President of the Council, but to the Minister of Transport: The one thing that saved the Northern Ireland Transport Board was that aspect of freedom for the "C" licence holder. Unless this aspect is considered with-sympathy, this Government will suffer. No Act of Parliament in Northern Ireland has caused so much resentment, despite everything done to allay it. as that Act, because it was found, to a degree never known before, and never anticipated, that transport is one of those things which affect every aspect of life, from that in the small cottage on the bogside to the great mill beside the river. Although that Act is now meeting with a measure of success, it is still a most unpopular Measure indeed. Men of good will should hope that transport can be made a great success, and the Government must give further thought to the condition of the "C" licence holder. If they are genuine in their contention that he can have his licence when he wants it they should be willing, from the start, to clear this Measure of these unnecessary restrictions.

8.13 p.m.

Mr. Charles White (Derby, Western)

I have listened to most of this Debate during the last two days and I must say that I am rather amazed that the range of the discussion from the other side of the House has been largely limited to a small minority of people. We have heard little argument from the Opposition, apart from the alleged injustice to stockholders and a very small number of tradespeople. I do not think that any of us can reach a true decision about this Bill without first looking at the history of transport between the wars, and since the outbreak of the last war. We remember the early years following 1918, when there was a good deal of money about, and men were returning from the 1914–18 war with sufficient money to pay a first instalment on a bus or a lorry. Today, just as in those days, there are financial interests always ready to lend money, whether it leads small people into disaster or not. We remember that many ex-soldiers and other people invested their limited savings in financial corporations, in order to buy a bus. The instalments which they had to pay to those finance corporations— their buses were running night and day for the conveyance of passengers—were anywhere and everywhere so as to ensure the payment of their instalments at the end of the month. The position got worse and worse until the introduction of the Act which has operated since 1931. That Act was passed through this House for the purpose of removing the chaotic conditions and getting passenger transport into some reasonable form. What do we find after that? We find the process of the combines in the passenger industry squeezing out the small man and giving him no alternative but to take a miserable price for his business, with the result that, in many parts of the country today, these combines have absolute control of passenger traffic. I smile when I see buses plying in parts of my county today with the slogan "Hands off Road Transport," and I often wonder for whom that direction is intended. For many years I have gained a living in the traffic courts of this country. I am amazed in every court to see the great defenders of free competition and free enterprise objecting on every conceivable occasion to their competitor in business, and the railway companies objecting to every application. I say quite frankly that if that is the kind of free enterprise and free competition which we recommend to the electors of this country, it is hypocrisy of the first order.

Let us go a little further. In 1934, the same Measure was applied to road transport. The haulier had to appear in the traffic courts for his licence because at that time the industry was in such a chaotic condition. There were no agreed rates, no stabilised rates, and wicked wages were paid to the drivers engaged in the industry. I have appeared in many cases in the traffic courts. Free enterprise and free competition are the very last words one would think about if one heard the arguments in those courts. What is more, I can say without fear of contradiction that two of the worst monopolies in this country today are the passenger transport monopoly and the goods transport monopoly. Let us see what has happened. I was interested to hear the right hon. and learned Member for the West Derby Division of Liverpool (Sir D. Maxwell Fyfe)—I am very careful to say "of Liverpool" because I am proud to represent the other West Derby—in his speech from the Front Opposition Bench, appeal to the Minister for some elasticity for entry into the haulage industry. That is a remarkable thing to come from the advocate of the road transport organisation.

Let me give two instances of what happened in a traffic court. About a week or a fortnight ago I appeared for a haulier whose licence limited him to carrying lime for the Clay Cross Company from the works to the farms in the neighbourhood. He had done that work for four years, during a difficult tame in the history of this country. There was no competition—no other hauliers carrying lime from those limeworks—and yet four hauliers of the railway company believed in free enterprise to such an extent as to try to prevent this small man, with one lorry, earning his living. I was interested in another case at Sheffield a month ago. We hear much lip service to the cause of our returned men, but here was the case of a man who had had 6½ years in the Air Force and who was objected to by four people, only one of whom had served even for a second in this war. The opposition was the Road Haulage Association and the railway company, and they successfully resisted that man's application. These are the people who talk about free enterprise.

I do not think that anybody will argue that passenger or freight transport is up to the standard required to meet the needs of the people of this country. I happen to be chairman of a county council, and our biggest problem at the moment is to apply the Education Act of 1944. My constituency is one-third of the county, with less than 20 railway stations, and hardly any bus services off the main road. There are 128 villages. We have to send children over ten to a central school. In many instances these children will have to travel four miles in the morning and four miles at night. We are compelled by law to arrange transport for distances over two miles. The bus company which has a monopoly in that respect has been requested, times without number, to arrange for transport, so that we can implement our obligations as from 1st January under the Education Act. That is in danger because of the shortage of bus facilities in my part of the country. I would like to give the House another illustration as to how the countryside is served at the present time There is the village of Parwich in the Western part of my constituency. It is five miles from the nearest town. There is not a bus service anywhere near that village. When these people desire to participate in social enjoyments of one kind or another they have to walk those five miles, and what intensifies the difficulty is that the only shop in that village is a small dealer's shop where they do not get a large choice of goods. Efforts have been made for a long time to get a bus company to operate a bus from that village to the town of Ashbourne, without any success. Hon. Members opposite say to us that private enterprise is carrying out its duty to the nation and yet such difficulties as these are obtaining in that part of Derbyshire which I represent this very night.

I am not worried very much about the compensation Clauses of this Bill. I have been a political campaigner since I first engaged in politics when I was 18, and I have never known any measure of progress ever advocated by any progressive party which had not to face from the other side of the House the cry of the "poor old widow" or the "poor old mother" I remember it as far back as the Old Age Pensions Act prior to the last war. Let us examine the position from the viewpoint of each individual. I have known of the sale of many haulage businesses since 1934 The method of ascertaining the compensation to be paid to the vehicle-owners is on the same basis as that on which the haulier has been assessed for Income Tax. If it is right on one side, then it is right on the other. Figures were submitted by the right hon. Gentleman the Member for Cirencester and Tewkesbury (Mr. Morrison) in opening the Debate this afternoon about the value of the hauliers' goodwill. I am not in a theoretical way impressed by what comes from the other side. I am impressed only by what has been the practice in this industry when a business has been sold. The practice has been to assess the value of the goodwill in respect of the vehicles which, if they were operated under an "A" licence, was equivalent to £50 per ton of unladen weight. Compared with that basis, the terms of compensation under this Bill are, to my mind, more than generous.

I realise that there are others who wish to speak in this Debate, but I would just say this in conclusion. At the time of the General Election of last year every home, as far as was humanly possible, had a copy of the programme of the Labour Party. In "Let us Face the Future" there was no ambiguity and no uncertainty as to what we intended to do with road and rail transport. When an inquiry is asked for from the other side of the House I would reply that the greatest possible inquiry that could be instituted was carried out at the General Election, and we cannot be diverted from our duly to the people who sent us here by accepting any means of delay or trimming from the Opposition.

Mr. Osborne

But you promised houses and food as well.

Mr. White

Interruptions from the other side will not prevent my making my final point that we have had millions of men engaged, if not directly with transport, at least with industries dependent upon transport, and while I would not be unfair so far as compensation is concerned—although we could enter into an argument as to the rights of some stockholders—equally I would not be unfair to the rest of the people of this country by paying unreasonable compensation to satisfy a few people who have an inflated idea as to the value of their stock. No Bill has ever been presented to this House that could be accepted by everybody in its entirety, and I am not saying that the present Bill is perfect. Certain suggestions will be made to the Minister, probably in Committee, for the removal of what appear to some of us to be minor anomalies, but there is nothing wrong with the fundamentals of the Bill so far as I am concerned, and I am trying to interpret the wishes of my constituents in advocating what is for their good. I think the Minister is to be congratulated on such a comprehensive Bill, and on the able way he placed it before the House.

8.29 p.m.

Mr. Cooper-Key (Hastings)

I venture to suggest that the country at large is heartily sick of the word "nationalisation." What we want to see is some demonstration of how the thing works. I believe the country will examine any scheme, whether for private enterprise or State control, provided it indicates some advantage to the consumer and some positive proof of efficiency. The Bill before the House today shows nothing except a declaration of intention. It shows no concrete advantages to the consumer or to the country as a whole. It is not a plan. The Minister did not dispel suspicion that this is a further case of improvisation. The only clear interpretation that we have received so far, is the wholehearted alarm and opposition to the Bill in the country. It comes from 60,000 hauliers, 120,000 "C" licence holders, over one million shareholders, a very vast number of traders, and many thousands of workers. The hon. Member for Rotherhithe (Mr. Mellish) in a most admirable speech yesterday referred to the number of the workers in his constituency who are supporting this Bill, but in my post I have received many objections to the Bill from workers in my constituency. Against this, we have the only positive advantages so far to be found and they are a certainty of 50 nice fat jobs for newly-appointed executives, and a further army of bureaucrats, Gauleiters and officials controlling the workings of the Bill. There will be more administrative obstruction and certainly more, and a general, tendency towards black market operations— [HON MEMBERS: "Oh "] Surely, with the experience and knowledge which the Minister has behind him in his Ministry, he might have evolved a better system, or something of a compromise between the law of the jungle, and the artificial restrictions of the zoo?

It is particularly to the terms of compensation to the railway stockholders that I wish to address myself. The Minister said that his system was simple, easy and fair in establishing a compensation basis. I suggest that simplicity and ease are not the criterion in arriving at the rights of property-owners. Fairness is the only consideration. In general figures, £22,700,000 of income is replacing an average net revenue over 23 years of £40 million, a confiscation figure of something like £17 million. I would emphasise that the whole of this class of investor is mainly concerned with income and purchasing power. This brings me to the class of person who is most directly concerned over this—I was going to say, robbery—[Laughter].

Mr. Kirkwood

The hon. Member should not use those words if he does not want to be laughed at.

Mr. Cooper-Key

Yes, robbery—on a par with the robbery of the Horatio Nelson annuity. The average holding is £12,000. I am sorry that the hon. Member for Western Derby (Mr. C. White) somewhat sneered at poorer people and widows— [HON. MEMBERS: "NO."]—and unfortunate people of that kind, but ii so happens that this Bill cynically penalises that particular class of individual—[HON. MEMBERS: "HOW?"]. Twenty-seven and a half per cent. of the whole stocks involved in this confiscation are trustee stocks.

The only offence these holders and their ancestors have committed is that they obeyed successive exhortations from various Chancellors to save their money and have placed explicit belief in the return on trustee funds. I would like to read to the House one or two examples of how individuals are being penalised by this Measure. There is a spinster who inherited £1,000 in railway stock from her father. In 1945 the interest was £40. Under the compensation proposals her income will be £7 10s.; less than one-fifth. There is a husband and wife, who have brought up four children, who have invested £3,500 in railway stocks which brought them in an income of £250 less tax. They are now expected to be content with £88 If that is fairness, hon. Members opposite take a different view from myself of what is fair, and I suggest it is a very poor result to come from what the Minister has referred to as a simple and easy scheme of compensation. The people to whom I am referring are citizens of a victorious nation, and have contributed no less than many other people towards victory They suffer the highest direct taxation in Europe, the highest indirect taxation in Europe and the highest rates. Moreover, they have seen their £ depreciate in value in recent years, and this compensation will deal a tremendous blow to the particular class of individual to whom I am referring. The question of compensation is apparently far too difficult for the Minister himself to solve equitably, and I think, therefore that it should be turned over to independent tribunals to arrive at a fair answer.

Finally, it seems wrong that, at this time, politically irresponsible, complicated and gigantic schemes of this nature should be introduced when the good will of all classes, the finest brains and enterprise, and the smooth running of business life should be least disturbed and most closely co-ordinated if the standard of life of the country is to be maintained. I think the Government are jeopardising the welfare of the country for doctrinaire ends, and I see no reason at all for this Bill.

8.37 p.m.

Mr. Percy Morris (Swansea, West)

My intervention is by way of an inquiry to the right hon. Gentleman in respect of one or two rather important Clauses in this Bill, the general structure of which we fully approve. Clause 12 seeks authority to acquire railway and canal undertakings. As I understand it, the vesting date is 1st January, 1948. Clause 39 calls upon the Commission to prepare a scheme as to the property, right, powers and obligations of the Railway Clearing House, and, if the scheme meets with the approval of the Minister, he will draft an Order embodying the scheme and will give notice that he intends to proceed with the matter. What is the position of the Railway Clearing House between the vesting date and the implementation of any scheme prepared under Clause 39? The ambiguity is emphasised by the provision of Clause 102, under which the Minister proposes to introduce a superannuation scheme for the staff of the Railway Clearing House. I cannot quite follow that, because the Railway Clearing House staff are already members of a fund known as the Railway Clearing System Superannuation Scheme, to which several of the railway companies are also parties. If the Parliamentary Secretary, or the right hon. Gentleman, can clarify that point, I shall be much obliged.

Then there is the Northern Counties Committee's railway in Northern Ireland, which is part of the L.M.S. undertaking. I assume from the Bill that it will be vested in the Commission. I have a cutting from the "Belfast Telegraph" of 12th December, which reports a meeting which was attended by the Ulster Members. It says that a full discussion took place on the proposed change in ownership of the Northern Counties Committee's railway system in Northern Ireland under which the British Transport Commission will sell the lines to the Northern Ireland authorities. Is that correct? If so, what protection is being afforded the staff concerned in respect of superannuation, and against any worsening of conditions that may arise as a result of the selling of the railway to the Northern Ireland Government?

I am obliged to the right hon. Gentleman who opened the Debate on the part of the Opposition this afternoon. He was good enough to pay the Railway Clerks' Association a compliment for the pamphlet it issued on the question of nationalisation. I want to acknowledge that the quotation he made was quite correct, but, like all selected quotations, it was only a part of the quotation he might have made. If he had read one paragraph further on he would have discovered that the Railway Clerks' Association expressed the view that the net maintainable reasonable revenue would be the least satisfactory scheme, but we were careful to add that His Majesty's Government, with the expert advice at their disposal, and with much more information in their files, would be the best authority to decide that matter, and we would be prepared to accept their judgment in that very important issue. The Railway Clerks Association having made what I hope can be regarded as a constructive contribution in respect of this important Bill, readily acknowledge that they underestimated the business acumen, the foresight and courage of the Front Bench. The proposal that they made in respect of the compensation Clauses meets with our hearty approval, and we offer our congratulations to the right hon. Gentleman.

Another matter with which we are seriously concerned is that there does not appear to be adequate protection in the Bill for the 100,000 members contribut- ing to existing railway superannuation funds. Hon. Members will know that the present arrangement is for members of the staff, who represent their colleagues, and members of the railway companies who represent the railways to administer the funds jointly. They are contributory funds, and because of that, we hope that this authority will be maintained. I would be bold enough to invite the right hon. Gentleman to accept an Amendment in such terms as would have the effect of maintaining the present constitution, rules, management and administration of the railway superannuation funds until they may be altered as a result of agreement between the National Transport Commission and the members of the funds, and representatives of those members. The Railways Act of 1921 contained a Section maintaining the management of railway superannuation funds unaltered until other provision was made, and we hope that the Government will do at least as well as was done in the 1921 Act.

Mr. Osborne

It was a Conservative Government.

Mr. Erroll (Altrincham and Sale)

Will the hon. Member be good enough to put an Amendment on the Order Paper, so that we can consider whether we should put our names to it?

Mr. Morris

I should be very happy to do so, but I cannot anticipate with any degree of certainty that I shall be a Member of the Committee. I hope I shall be and if I am, I shall be very happy to put this Amendment on the Order Paper, and a number of others—

Mr. Erroll

May I point out that it is not necessary for the hon. Member to be a Member of the Committee in order to put down an Amendment? He ought to find out what can be done.

Mr. Morris

I am always willing to learn, and I am much obliged to the hon. Member for any contribution he can make to my development. I do not mind how I do it, provided that I achieve my purpose.

I come to another matter which is important to us I refer to the constitution of the Commission. My right hon. Friend suggests five as an appropriate number. That seems to me to be a very small body. If my right hon. Friend is still satisfied that five will be sufficient I should like him to keep open the door, in case it might prove helpful, if not desirable, to make the number eight, because the Commission will be faced with a tremendous task. We approve, in fact, of the various Executives, and we beg my right hon. Friend to make a careful selection of the personnel in respect of both matters. I have heard the taunt from hon. Members opposite, "jobs for the party." If there is anything in that suggestion, I confess that we are innocents abroad in that matter. In the many years I served on the railway, we had to spend a good deal of our time breaking down what was called the genealogical tree—the handing down of appointments from father to son, from son to brother, extending to cousins, and eventually to nomination by a friend. I am happy to say that that unfortunate characteristic has almost completely disappeared, but there is room for a better and wider selection of competent people to administer this great undertaking.

Major Legge-Bourke (Isle of Ely)

With regard to the hon. Member's remark about "innocents abroad," will he say which half of the party that represents— the part which rebelled against the official foreign policy, or some other part?

Mr. Morris

The Railway Executive Board, too, will have an important task. I would like to see membership being made a full-time appointment. Hon. Members who are outside the industry must find it difficult to appreciate the tremendous amount of work ahead. The Minister, in his opening speech, mentioned that there were no fewer than 40 million or 50 million different rates in operation. Millions of those rates would never have existed but for the evils of the competitive system. I hope that some time during the Debate, and in Committee, the Minister will be able to indicate how the rates tribunal will work to simplify matters, to the greater satisfaction of the public, and protect the interests of the trade of the country.

We hope in subsequent weeks to help the Minister to get the Bill through the House. We feel that it is a good Bill. It has a splendid objective; it is necessary in the national interest, and it will have the ready support of the public, who will study and appreciate what is involved. It has the unanimous support of thousands of railway workers, who will feel that they have a much greater incentive to work if there is a better prospect of improved efficiency, and if there is a conviction in their minds that whatever profit is derived from the industry, will be used for the public good. We recognise that it is a long-term policy. We do not imagine for a moment, and neither do the people we represent, that if the Bill goes through all its stages by Easter, all will be well in the autumn. We recognise the work that has to be done and we are prepared to make our contribution. We feel that the right hon. Gentleman is anxious to get the best, in the interests of the country, for this very important undertaking. We subscribe to the Bill. I sincerely hope that the Minister will be able to meet the points I have mentioned and, that the Measure will have abundant success.

8.51 p.m.

Mr. Digby (Dorset, Western)

The hon. Gentleman the Member for West Swansea (Mr. P. Morris) referred to the satisfaction which some of his friends in the transport industry will feel in the knowledge that this industry has been nationalised. In the few remarks which I wish to make, I want to look at the matter, not from the point of view of the satisfaction of those who are actually providing the transport and engaged in the working of it, but from the point of view of the people who will use the transport. There has been a certain amount of talk about co-ordination. The Minister when he spoke was at pains to talk about coordination—later it was called unification. Those of us who were in the Army know quite well that if anyone was trying to make out a job to include another officer on the staff, the first thing they always put down was "co-ordination." That was the stock excuse, and it meant exactly nothing.

Major C. Poole

It might not have meant anything in the hon. Gentleman's Army; it did in mine.

Mr. Digby

The right hon. Gentleman, who introduced this Measure in a very long speech, started by saying that it was the most important socialisation Measure of all time. He then, I thought, quite failed to make out a really serious case for the Bill. There were many omissions from his speech and I would not attempt to try to list all of them. There was one which rather surprised me. He did not make any reference to Magna Charta. I would like to know whether or not hon. Gentlemen opposite subscribe to that document—or is it a mere piece of Tory propaganda? If any of them have not read it recently, I hope they will refer to Chapter 30. There I think they will find these words: No sheriff or bailiff of ours or any other person shall take up the horses or carts of any freeman for transport duty against the will of the said freeman. I take it that the party opposite have now renounced Magna Charta.

Mr. H. Hynd (Hackney, Central)

Has the hon. Gentleman realised that steam and electricity have been invented since Magna Charta?

Mr. Digby

Yes, but liberty is still the same.

Mr. Mitehison (Kettering)rose

Mr. Digby

I cannot continue to give way. It goes without saying that if this transport nationalisation scheme is to be a success, as no doubt hon. Members opposite genuinely believe it will be, it will greatly benefit this country. If it is the wrong idea, or if the organisation which has been devised to put it into practice is bad, the whole industry of this country is threatened. This is a country which lives on its industry, and it can ill afford a calamity of that kind.

In the short time at my disposal, it is impossible to use all the arguments which I had intended. We know quite well that the railways of this country were the first in the world and that they were built to link up with a horse-drawn traffic system. Nevertheless, this system, operated by private individuals, was subjected, when it was set up by Parliament, to the very greatest safeguards for those who were going to use the railways—just the kind of safeguards which are so lacking in the Bill before us today. Again, regarding the roads, we know that they are also an inheritance from the past, a development of the old bridle paths. Of course, we need better roads, and I wish that the Minister of Transport, in the year and a half in which he has been in office, had done a little more in pushing on with these roads which we need, because if we had a little more evidence of initiative in that direction, we might have more confidence in the way in which he is going to tackle this question of co-ordinating the whole transport industry successfully.

There is no doubt that, in theory, coordination can produce certain advantages, and that, by it, the overheads can be cut down. That is all very well, but we have to remember that there are disadvantages as well, and that everything may not work out quite smoothly. There will be, in this kind of scheme, a serious lack of competition and that is almost certain to lead to slackness and high fares, unless the greatest possible protection is given to the users of transport. Again, there is a grave danger that consumers' wishes will be treated with indifference, and the fact that there are to be the consultative bodies of consumers does not reassure us very much. Even such a staid organ as the "Economist" described these bodies as "eyewash". It must be fully realised that to achieve co-ordination this Bill depends upon co-ordination in Whitehall. In all fairness, we car say nothing else. Of the Executives which are to work under the Commission, we may say that they are to be divided up, not on a basis of areas, but on a basis of functions—railways and roads and so on—and that any co-ordination which there is, will be at the top. Frankly, I do not believe that it will work. So far as I see, the problem of each district regarding transport is a separate one. I know well that, in my own constituency, we have a very real problem. I know that from Dorchester to Bristol is not a very long distance, yet it is frightfully hard to get there by road, rail or any means of transport. This is the kind of transport problem in Dorset which might be fully appreciated by an Executive in the West Country, but which I do not believe will be appreciated by the co-ordinators in Whitehall.

We should look a little closely at the results which this co-ordination will produce. We see that it is, essentially, going to be done by the Minister, who has enormous overriding powers and is in a position to appoint the members of the Executives, although the Executives are supposed to work under the Commission. We also know quite well that Ministers are only human beings, and that a great deal of this work has to be left to the civil servants in Whitehall, so that there is absolutely no reason to suppose that this co-ordination, which is talked about so airily, is really going to produce the results we want. A high price is to be paid for this co-ordination, besides this dictatorship of civil servants far removed from places where the transport is required, many of them probably having very little practical experience of transport.

There is another grave matter in the Bill which has already been referred to, and that is the fact that holders of "C" licences, which, under the old road haulage scheme, assured adequate competition, may not go more than 40 miles without a special licence. My Division is more than 40 miles from every big city to which one is likely to want to go, so that "C" licence holders obviously will have to apply for a very large number of licences. From the agricultural point of view, which was ably stated yesterday, and from many other points of view it is a serious matter to refuse people the right to take their own goods in their own vehicles for more than 40 miles. There have been other restrictions of this kind in the past. When I read the Bill I could not help thinking of a system of society which existed many hundreds of years ago, which, no doubt, hon. Members opposite will have studied carefully, because it conforms very closely to Socialist conceptions. I refer to the civilisation of the Incas in South America. Under that system, which was highly socialised, there were excellent roads hewn out of the mountains, but I wonder whether hon. Members remember that only officials were allowed to go down them. It was regarded as rather a nuisance in that kind of society to have people moving about, so they were forbidden to go to the next village down one of these excellent roads without a licence from the Government. I hope this licensing system under the Bill is not the first of worse steps and that, as the "Manchester Guardian" said, the only wonder is that one is allowed to take out a private car without a licence. [HON. MEMBERS: "One cannot."]

I would like to repeat how remarkble it is that so little attention has been given in this Bill to safeguarding the interests of the users of transport. It is a question not only of passengers but of the whole of the trade of this country, and it is remarkable that there is practically no effective machinery in that connection. For that reason, I feel that this Bill is highly dangerous, and is one which has been introduced in far too lighthearted a spirit.

9.4 p.m.

Mr. Ungoed-Thomas (Llandaff and Barry)

Like other Members on this side of the House, I am enthusiastically behind the Minister in this Bill, but I would not have ventured to intervene in this Debate merely for the purpose of patting the Minister on the back. It is rather my purpose to prod him along further towards nationalisation. My right hon. Friend has been prodded a good deal in the past, and I hope he is not too tender in the prodded part, although I am sure he is much too tough for that.

I wish to invite attention to Clauses 70 and 71, which deal with docks and harbours. May I first bring out three points which seem to me to be important in connection with those Clauses? First of all, there is no provision in the Bill directly imposing any scheme for dealing with ports and harbours in the way, for instance, in which the railways are dealt with under the nationalisation provisions. It merely provides that a scheme may be prepared. The scheme which may be prepared is, in other words, purely optional. That is the first point. Secondly, the schemes are, to quote the words of the Bill, for any trade harbour or group of trade harbours. The important thing there is that it is not a scheme for the ports of the country as a whole. It is to be for a harbour or a group of harbours. The schemes are not to be national but local. The third point is that the schemes may specify a body to which a harbour or group of harbours may be transferred. Under that provision it is open to the Minister to transfer, under these Clauses, harbours that have been nationalised under other Clauses in the Measure. In other words, so far as Clauses 70 and 71 are concerned they are not just nationalisation provisions, but denationalisation provisions. Those are the three points to which I would invite the attention of the House: first, that the schemes are optional; secondly, that they are local and not national; and thirdly, that they provide for a sellout by the Minister.

Lord William Scott (Roxburgh and Selkirk)

Could the hon. Gentleman tell us what he means by "optional"? Optional to whom?

Mr. Ungoed-Thomas

Optional to the Commissioners and the Minister. There is nothing in the Bill itself which lays down any provisions comparable to the nationalisation provisions for railways. It is, therefore, quite open—I am not suggesting the present Minister would do it, but it is quite possible as far as the Bill is concerned—for the nationalised South Wales ports to be sold out to a private company, which will have authority over the Bristol Channel group of ports, and it is also open to that private company to shut down the Welsh ports, or to limit the Welsh ports in the interests of Avonmouth, or some other port. Similarly, of course, it could happen the other way round. There is this danger in the Bill as it stands, and I hope the Minister will give some assurance as to how he proposes to work these Clauses. It certainly would be open, under these Clauses, for a benighted Minister, in some distant future age, to take precisely the action which I have suggested is possible. The trouble, as I suggest, is that the Minister really has not grappled with this port problem at all, and he never has done. He has handled these provisions in this Bill with butterfingers.

The ports problem, as far as we of the Bristol Channel are concerned, is not just a problem of the organisation of the Bristol Channel group of ports. The problem is not a port facilities problem at all. It is a shipping problem, and a national problem. It is a problem of what share of the shipping of the United Kingdom the Bristol Channel ports are to get. This Bill does not face up to that problem. Clause 3 lays down the purpose of the Commissioners. It refers to an "integrated system of public inland transport and port facilities." The ports themselves are at the junction of inland transport, on the one hand, and shipping on the other hand. One cannot deal with the ports problem merely as an inland transport problem. The Government in so far as they have dealt successfully with the ports problems in my own part of the country have done so by dealing with shipping on a national scale. I have attacked the Government before on this issue, and I now acknowledge gladly the great part which the Government have taken in dealing with the South Wales ports problem since the summer; and all of us in South Wales, quite irrespective of party, recognise and are thankful for what the Prime Minister has personally done. I have here a letter from a gentleman in a big company; certainly not a Socialist; and I should like to refer to one or two passages from that letter. It says with reference to this ports problem in South Wales: The position during the last few weeks has been very much more healthy than at any time this year. I am quite satisfied that a very sincere and practical effort is being made by everyone to comply with the Prime Minister's directive"— that is, with regard to dealing with South Wales ports— and in particular, I would mention the Minister of Food. And the writer refers to a record shipload of motor cars which was recently exported from Newport.

The Government have been making a direct contribution towards our problem in South Wales, but it has been done, not by dealing with port facilities; it has been done by dealing with shipping, not on a local scale, as a Bristol Channel problem, but on a national scale.

Major Legge-Bourke

When the hon. Gentleman says this is being done through shipping on a national scale, does he mean certain ships have been diverted from other ports to the South Wales ports?

Mr. Ungoed-Thomas

Certain ships have been induced to use South Wales ports in the same way, I suppose, as certain factories have been induced to go into that devastated area. More can be done within the Government's present powers, and I should like to touch upon three things which can be done. First of all, conversations are now going on with various Government Departments, and what we are finding happening is that the onus is being put on us in our interviews with those Departments, instead of those Departments themselves taking the initiative. They have the means and knowledge, and, instead of their merely putting the onus on us, I suggest they should take greater initiative themselves. Secondly, the Government Departments themselves now control a good deal of the imports and the exports of this country. Under ordinary commercial practice, the person who pays the freight can choose the port to which the freight is to go. What we find happening so often in the case of Government freights is that the shipowners themselves are allowed to dictate the port of loading or of unloading, partly due to the fact that different Government Departments have goods going by the same ship; and there is no coordination at all between these different Departments which would enable the Government to say, "We want the goods delivered at that particular port". That is a matter which could be remedied, above all, by the Minister of Transport providing coordinating machinery for the Government Departments.

Mr. Orr-Ewing

The hon. Member has just made a most important statement, with which I entirely agree, that there is no co-ordination between Government Departments. Yet at the same time I gather that he is on the whole supporting this Measure, which will call for a very great deal of co-ordination within Government Departments. How does he bring the two things into line, how does he explain it?

Mr. Ungoed-Thomas

I am tied by time at the moment. I am making a point on this particular problem of the ports, and I do not really appreciate the relevance of the interruption on that point [HON. MEMBERS: "We do."] What happens now is that the shipowners themselves take the line of least resistance, and go to a home port which is not, generally speaking, a South Wales port. They do that, because it is for their own convenience, when it is not the most economic thing in the interests of the country as a whole. I have no time now to go into figures, but there are cases of substantial freights—tin-plate, for instance—being taken from Swansea for export from an English port when they could perfectly well have gone from a South Wales port. There have been cases too where identical cargoes have been shipped from Newport and from an English port, the one from Newport costing half as much and taking half the time. These are facts, I have the figures here but I have not time to produce them.

In order to deal with this ports problem I suggest that the following principles should be adopted: First, that the ports must be severed from the railways and from any other interests. I recognise that there is a glimmer of this in these Clauses, but they do not go far enough. Second the ports must be integrated not only with inland transport, but with shipping, too. Third, the ports development and policy must be national, and not be just dealt with by groups locally. Fourth, it follows from the other principles that the port authority must be a national authority. It is by development along those lines rather than on the lines contained in these two Clauses that we shall find a solution of the ports problem, at any rate as far as we see it in South Wales. This means, in fact, the nationalisation of the ports. It means, too, the regulation of shipping, and it is only by dealing with these problems that the difficulties we are having with the ports ran be solved so that we shall get a properly integrated ports service in this country.

I welcome the proposals for nationalisation which are contained in this Bill, and I am in complete agreement with the observations made by my hon. Friends the Members for West Swansea (Mr. P. Morris) and Rotherhithe (Mr. Mellish) in the course of this Debate. AM these proposals will be welcomed enthusiastically by the men in the industry. It is the men in the industry, the officials and the working men, who run the industry. It is not run by guinea-pig directors or absentee shareholders. The great organisations are run by the officials and the men in the organisations themselves.

Colonel Clarke (East Grinstead) rose

Mr. Ungoed-Thomas

No, not now; I am just about to finish. These men, if they are given an interest and a stake in the industry, will give a much more enthusiastic service than we are getting now. An hon. Member has referred to the coal industry. I accept the challenge. Output per man shift in the coal industry has been going up from the very prospect of nationalisation. Nationalisation has to be tested, I agree; it has to be tested severely by its practical operation and by its efficiency. It must pass these tests, but there is more than that to nationalisation and to Socialism. I remember a great speech made by the right hon. Member for Woodford (Mr. Churchill) in which he stated, before the war, that we should face the great problems that were looming up at that time and that it was essential that we should have not just efficient armies but a moral purpose, too. In this Bill, by bringing in nationalisation, we are extending the principles of democracy to industry, and giving to industry and the men in industry a moral purpose, a say in industry and a stake in the country.

9.30 p.m.

Mr. Assheton (City of London)

My first duty is to declare my interest. I am not only a railway shareholder, but a railway director, and in view of what the hon. Member for West Swansea (Mr. P. Morris) said about genealogical trees, I would like to inform him that my father was a railway director and that I am not ashamed of it; that I am proud of that and proud of the record of the railways from the time that George Stephenson drove the "Rocket" from Stockton to Darlington, to the time when 24,459 special trains were provided for D-day. I have another special interest, which is this. I am a trustee for a number of charitable and other trusts, including railway superannuation funds which have holdings of something like £4 million of railway debenture securities. It is appropriate, therefore, that I should consider, with particular care, the effect of these proposals upon such trusts. I propose to speak solely on the question of compensation. I am, as hon. Members opposite know, a convinced opponent of nationalisation, because I believe that it is contrary to the interests of the public, and likely to cause-great damage to our trade and industry. I also think that it has many other serious objections, some of which have been put forward already by my hon. Friends, and others, no doubt, will be put forward in tomorrow's Debate.

I do not want anyone to think, because I am only speaking on the subject of compensation, that the transport interests would agree with nationalisation in any circumstances. I want to make it absolutely plain that they object to nationalisation, quite apart from the question of compensation.

Mr. David Jones (The Hartlepools)

Would the right hon. Gentleman apply that statement to the railway general managers?

Mr. Assheton

I certainly would. I would also observe that money alone cannot compensate owners for the loss of their businesses. I am sure that anyone who has a heart—and hon. Members opposite have hearts as much as any other hon. Members—must realise what this Bill means to owners of transport businesses, as well as to those who have been associated with the railways. I say that in passing. I am not asking for sympathy, or for anyone to shed tears, but I think that it is useful to remember that monetary compensation is not everything. The Chancellor of the Exchequer and the Minister of Transport, yesterday, made the case that the compensation under this Bill, was fair and reasonable— I do not think that is over-stating the case put—but the Opposition regard the compensation as unjust, inadequate and arrived at by wrong methods, and that is the case I propose to make out to the House. The Chancellor of the Exchequer quoted from one or two of the newspapers, and he must have had considerable difficulty in finding his quotations, because the vast bulk of newspapers in the last few weeks have been strongly critical, although I appreciate that he was referring to the first day the scheme was announced.

Mr. Dalton

I quoted statements from the newspapers, including a number of Conservative newspapers, on the first day after the announcement of the scheme, and before they had been be devilled by organisation, education and propaganda.

Mr. Assheton

The right hon. Gentleman looked at the newspapers the morning after his Press conference, and was satisfied, but since then a lot of water has flowed under the bridges. If I may quote from yesterday's "Times," a respectable newspaper not on our side, it said: The basis of purchase of the railway appears extremely unfair. "The Times" also said: The more it is examined, the less equitable it appears. "The Times" said further: The most singular feature of the compensation Clauses of the Transport Bill is that stockholders have no right of appeal against them other than to Parliament. There the Government will be judge in its own case. That is "The Times" up to date. On the methods of compensation, I will say this to begin with: we have had a number of different proposals for nationalisation in recent months, and in each case the method of compensation has been different, and in this Bill there are four different methods of compensation set out. It looks rather as if expediency were the governing factor rather than a desire to do justice. I approach this matter, however, on the basis that the House of Commons, whatever its political complexion, desires to do justice, and that is why I want to make the case that the Government's proposals are not just. I do not know whether I can carry the whole House with me when I suggest that compensation to be fair should put those who are being compensated, as far as possible, in the same position financially as they are today. That, I suggest, is the test that should be applied, and I think I shall carry the majority of the House with me when I put that proposition.

I do not propose to spend very long on road haulage, which has already been discussed, except to say that we do not accept the proposition that from three to five years' purchase of the profits of the business makes it possible for the arbitrator to give a fair compensation in a great many cases. It must not be forgotten that in the case of many of the small hauliers, the Government are taking away the tools of a man's trade. It is just like taking a joiner's tools or a surgeon's knife. It is no good thinking that compensation with a small number of years' purchase is adequate in those conditions. With regard to the privately owned wagons, I think the Chancellor of the Exchequer was in some difficulty. I do not think he can have fully appreciated the different treatment of these wagons under the Coal Industry Nationalisation Act and under this Bill, but I admit that the question is a complicated one, and had better be considered fully in Committee. I expect that both the Minister and the Chancellor of the Exchequer will be ready, when we come to the Committee stage, to listen carefully to the arguments, which I think are very cogent, in that regard.

As far as the railways are concerned, I suggest that it has never been the practice of Parliament itself to fix the value of an undertaking or property compulsorily acquired, unless by agreement, and if there are any precedents to the contrary, I should very much like to hear them Earlier this evening, one hon. Member suggested a precedent, the case of Imperial Airways, but that precedent has since been found not to be a good one. Valuation is a very technical business. I do not think Parliament is qualified for the task. I believe that hon. Members on all sides know that. The method proposed in the Bill is, as the Chancellor has told us, to adopt Stock Exchange quotations on certain dates, and I will endeavour to show that that is not fair. These are my reasons. First, the Stock Exchange quotations are not related directly to the value of the company's assets or to its earning capacity, and consequently, these quotations, for whatever days they are taken, cannot form a fair and equitable basis for compensation. The Stock Exchange does not determine the prices at which stocks and shares are sold. The Chancellor quoted from the memorandum issued by the Council of the Stock Exchange, which, I think, made their case extremely well and stated: It is the considered opinion of the council that the only fair and equitable method of arriving at a proper basis of compensation is, failing agreement between the parties, by arbitration. I suggest that that is the only English way of settling it too. Stock Exchange prices are the result of buying and selling on the part of a very small number of individual stockholders on any one day. They are persons whose actions and opinions, as the Stock Exchange council tells us, are the result of hope, fear, guesswork, intelligent or otherwise, good or bad investment policy, and many other considerations. The report of the Trades Union Congress, which was quoted by my right hon. Friend, was also to the same effect. They state, in their document dealing with nationalisation that although the basis has superficial advantage, "it has however serious objections." That is what the T.U.C. said. I would like, if I may, to tell the House what Lord Keynes said. Unfortunately, he is not here to tell us himself. He explained, in his book "The General Theory of Employment," why it was that Stock Exchange quotations were so unstable. I will just use one quotation from the book: Day to day fluctuations in the profits of existing investments which are obviously of an ephemeral and non-significant character, tend to have an altogether excessive, and even an absurd, influence on the market. It is said, for example, that the shares of American companies which manufacture ice tend to sell at a higher price in summer when their profits are seasonally high than in winter when no one wants ice. The recurrence of a bank holiday may raise the market valuation of the British railway system by several million pounds. It is clear that people who have given thought to this matter have come to the conclusion that although market value may be an interesting factor it is not a clear basis of valuation, when it comes to taking over an undertaking.

Mr. Jay

Supposing that the alternative method, arbitration, which the right hon. Gentleman suggests, produced a valuation lower than the Stock Exchange quotation, would the right hon. Gentleman be prepared to accept it. or would he call it confiscation?

Mr. Assheton

I am asking for arbitration. If the terms of the arbitration were fair I would be prepared to accept them.

Mr. Jay

Even if they produced a lower figure?

Mr. Assheton

Of course. I am asking for fair arbitration. I want to know the answer. Those Stock Exchange figures do not give the right answer.

The next point I want to make relates to the doubts and uncertainties of the Government's policy on transport, which, for many years, have led to fluctuations in price. Fear of nationalisation and of unfair treatment have undoubtedly resulted in Stock Exchange prices being lower than they otherwise would be. I do not think anyone who has followed the argument can challenge that statement. It is not surprising that those who buy and sell stocks and shares—that is, the general public and not members of the Stock Exchange, who carry out the transactions—should take into consideration the point that if a Labour Government came into power it would be liable to nationalise the railways. It is not surprising that that possibility is taken into account when people assess the value.

Mr. Messer (Tottenham, South)

They never expected a Labour Government.

Mr. Assheton

The majority of people in this country decided there was to be a Labour Government. I assume that a lot of people had decided that they were going to vote that way.

Let us look at the results of the method which the Chancellor of the Exchequer has proposed, and see whether it works out fairly. There are two main classes of stock, debenture stock, which represent money lent, and there are stocks which have different rights in regard to income which are owned by the proprietors of the company, and carry votes. In general, railway stocks carry the right to a certain income. The holders of debenture stocks—I would direct the attention of the Chancellor of the Exchequer very closely to this point—have only a right to a perpetual annuity. I would like to quote to the Chancellor from Halsbury's "Laws of England," 2nd Edition, Vol. 5, page 57, referring to this matter of railway Debentures. It states: The holder of Debenture stock is not a creditor of the company, except as to the annual interest; he has only a right to a perpetual annuity, payable out of the concern. The capital cannot be called in, or paid off That is the law as it stands now, and which it is proposed to alter. The interest to the Debenture holders of these companies—and I ask the House to listen to this carefully—has always been paid in full. Holders have been absolutely secure in receiving that income. What will their position be now? Let me illustrate it by an example from the Great Western Railway. The 2½ per cent. G.W.R. Debenture holder will receive, in future, interest of £2 7s. 9d., instead of £2 10s. So, he will lose only 4½ per cent. of his income.—

Mr. Dalton

No risk.

Mr. H. Hynd

What percentage was he getting?

Mr. Assheton

Two and a half per cent., and now he is to get £2 7s. 9d., a reduction of only 2s. 3d. per cent. But the 5 per cent. Debenture holder will receive, instead of £5 per annum, £3s,. us. 2d., so that he will lose nearly 30 per cent. of his income. These two stocks rank, pari passu in every degree, with exactly the same security, yet one holder is to have 30 per cent. of his money taken away while the other has only 4½ per cent. of his money taken away. That is not equitable. The Chancellor referred to cheap money, about which I would say this: Cheap money, obviously, has many beneficial aspects if it is natural, but if it is artificial I should say that cheap money was not only dangerous, but dishonest. I have looked back to 50 years ago yesterday when money was cheap and the 2½ per cent. debenture stock of the G.W.R was standing at par. What do I find? I find that the 5 per cent. stock was standing at 194, which is just what I should have expected, nearly double the price of the 2½ per cent. stock. That shows that before there was any fear of nationalisation a reasonably proper relationship was maintained between those stocks. I ask the Chancellor to examine that position, and I challenge him to justify it by reference either to precedent or equity. I specifically ask for a reply to that particular illustration.

I give a second illustration. The 4 per cent. Debenture stock of the Forth Bridge Railway is valued, in the Schedule, at a considerably lower figure than the Debenture stocks of the London and North Eastern Railway over which it has prior security, and the Forth Bridge Debenture holders get less. There are a number of of these anomalies, and it is necessary that the Chancellor should give his mind to this matter. If he has given his mind to it, I should like some fuller explanation than we have had so far. May I go on to the case of stocks other than Debenture stocks? The L.M.S. 4 per cent. guaranteed stock—

Mr. Dalton

What about the L.N.E.R. ordinary, on which no dividend has been paid for 20 years?

Mr. Assheton

They have never failed to receive interest at the rate of £4 per annum. They will now receive £2 14s. per annum and lose one-third of their income. On a stock which has always paid interest in full, that interest has now been reduced. Holders of L.N.E.R. second guaranteed stock who received £4 per annum will now receive £2 10s. 5d., and holders of Great Western 5 per cent. Preference Stock who received £5 now receive £3 2s. 7d. In all these cases there has never been default and there was never likely to be.

Mr. H. Hynd

There has "never been default," although the poor widows about whom we are hearing so much were getting no dividend on their shares.

Mr. Assheton

These are the stocks which the poor widows are holding. [HON. MEMBERS: "Oh."] Of course, they are. These are the stocks held in the trust funds and superannuation funds. Take the railway superannuation funds of the L.N.E.R. to which I referred. They hold £4 million of railway stocks. These are the stocks held by the Ecclesiastical Commissioners and Queen Anne's Bounty With regard to the ordinary stock, let us take the Great Western Railway.

Mr. Dalton

Take the L.N.E.R.

Mr. Assheton

I will take the L.N.E.R. in a moment.

Mr. Dalton

Twenty years and no dividend.

Mr. Assheton

Let me take the Great Western Railway first. [HON. MEMBERS: "Why?"] Because I am making the speech The Great Western Railway have paid an average dividend for the last 70 years of £5 4s. per cent. and for the last 20 years 4½ per cent. There was nothing so horribly speculative about that. What are they to receive now? They are to receive £1 9s. 6d. per cent. The Chancellor of the Exchequer wants to talk about the L.N.E.R. deferred shares, and he will observe in a Schedule to the Bill that the price put down by the method he has chosen is £7 6s. 3d. per cent. on the £100 preferred ordinary stock and £3 12s. 6d. per cent. on the deferred ordinary stock. That will give the holders of the equity of that company an insignificant amount for the equity of that company.

Mr. Dalton

Would the right hon. Gentleman tell us what dividends have been paid in the last 20 years on the L.N.E.R. Railway deferred ordinary stock?

Mr. Assheton

None. What the right hon. Gentleman offers is 3s. 8d. and 1s. 10d. per cent. respectively.

Mr. Dalton

They get something now under this Bill. They got nothing before.

Mr. Assheton

But they always had a prospect of getting something. I now come to the question of ownership of these railway stocks. Some hon. Members opposite give the impression that railway stocks are owned by the rich capitalists. I do not know if they have taken the trouble to study the figures, but there are over one million railway shareholders, and they are not the rich capitalists. Hon. Members can jeer if they like, but let me read to the Chancellor of the Exchequer an extract from his favourite paper the "Economist": There can hardly be a trust fund estate, pension fund, sick club, hospital, school or charity in the country that does not hold railway stock. The big rentier has not been the characteristic railway stockholder; it is the widow and the orphan, the patient and the pensioner, who will mainly suffer. Moreover, the trade unions and their benevolent funds are known to be large holders of railway stocks. Hon. Members can laugh at that, but that is true. When I tell the House that there are one million stockholders, they cannot all be Supertax payers. Look at the effect on the Church of England The Church of England will lose more than £2oo,ooo per year. That will be reflected in the diminishing income of hundreds of country rectories and vicarages. Then there are pension schemes in numerous businesses. I know from my own experience something about superannuation funds. Then there are insurance companies which have invested their money on the assumption that these debenture stocks were to receive a perpetual interest, and their actuarial valuations have been based upon that. These proposals will upset all the actuarial payments, and every pension and superannuation fund in the country. In addition to that, there are innumerable small investors who put their money into stocks many of which were trustee securities, and the Chancellor does not even indicate that he is willing to consider the possibility of changing the Trustee Act. It is not surprising that there is going to be suffering, when it is realised that 45 per cent. of the income of the railway shareholders is to be taken from them.

Mr. Shurmer (Birmingham, Sparkbrook)

How long has the right hon. Gentleman been concerned with suffering?

Mr. Assheton

What have we been told to justify this? To begin with, we have been told by the Chancellor that the holders will get British Government security. But they do not want it. As British Government security, they are going to get guaranteed stock, and I hope the guarantee on it will be better than the guarantee on the London Passenger Transport Board 3 per cent. guaranteed stock 1967–72. I have a prospectus here in my hand which says: The Governor and the Company of the Bank of England give notice that, with the consent of the Treasury, they are authorised to offer London Transport 3 per cent. Guaranteed stock 1967 to 1972 guaranteed as to principle and interest by His Majesty's Treasury. Whatever the Chancellor may say about the law—and on the law there are different opinions on this now—in the market place the people who bought this stock did so in the belief that the words: guaranteed with principle and interest by His Majesty's Treasury, under the provisions of the Finance Act, 1934, meant what they said. I warn the Chancellor that if he is going to put out a thousand million pounds' worth of guaranteed stock, and does not take care to implement the guarantee on this stock, he is not likely to keep the trust of the public which every Chancellor of the Exchequer of this country should have. Will he consult his investment council on this matter and take their advice and would he be good enough to inform the House what they tell him?

The Chancellor then said that but for this Bill the railway companies and the stockholders would lose their money. What is the truth of that? That is the second big contention he put forward. The first was that they were going to get Government stock. The next was that if it were not for this Bill they would lose their money. Let me tell the House that every year before this war the railways earned many millions more than the Government are now prepared to pay the stockholders. During the war, the Government took control and took away from the railways earnings of more than £200 million. I am not complaining of that now; I am saying that during the war the railways earned £200 million in addition to the return which the stockholders got as a fixed annual sum. After the war, if anything like justice is done to ensure fair play between road and railways, they should be able to continue to earn a fair return on the capital invested, and unless the Government's policy of full employment is all "ballyhoo" and an utter failure the railways look like having more traffic than they can easily carry. What justification is there for the idea that the stockholders are going to lose their money? If I may speak for the stockholders, I say that they are quite prepared to take that risk.

The next point I want to mention is the question of the capital assets. The capital assets of the railway companies are estimated now at something like £2,000 million for replacement purposes. In his speech the Chancellor jeered at the railway companies. I am sorry that he did so. He said that their permanent way was in bad condition before the war. [HON. MEMBERS: "So it is."] That is quite untrue. The permanent way of the railway companies was finely maintained in the years before the war, and they did wonderful work on it during the war. It would be getting better now if we could get the timber for sleepers. The Chancellor gibed at the assets of the railway companies but I think that one day he may regret it. For these assets which, as I say, would cost £2,000 million to replace, the Government are offering £900 million, and I cannot think that assets which have been able to earn as much as these have over the last 20 years could, with the prospects that are before them, possibly be valued at as low a figure as that. What is the Chancellor going to do with his ill-gotten gains? He told us that he was going to make a profit of £17¾ million—

Mr. Dalton

I said that my right hon. hon. Friend the Minister of Transport would make a profit.

Mr. Assheton

I will accept that figure for the purpose of this argument. Is the Chancellor going to reduce the cost of transport to the public? He did not say anything about that, and I feel sure he would have done so, had it been in his mind. He talked of building some better stations and better restaurants; those are very desirable things in their right place and in their right priority, but it is much more important to get the permanent way, and the rolling stock into proper condition. The others are things to be done in due course.

From the general point of view, I want to ask the Chancellor whether he has considered the inflationary effect of the proposals in this Bill—the fact that it will make quick and alive a lot of assets which are now dormant. There will be money seeking investment, and stocks and shares sold bringing money alive which has for many years been dormant, and this will undoubtedly have an inflationary influence on the whole structure of the community. If the Chancellor does not agree that that is so, I should like to hear in due course why not. I suggest that it is about time that the Government looked at this thing again. The Prime Minister—the right hon. Gentleman the Member for Limehouse—made a speech to a meeting of railway stockholders in 1936. [HON. MEMBERS: "We read it."] I am glad that some hon. Members have read it, but it may interest them to hear it again. The right hon. Gentleman said then: However much I may wish to 'sock' him, I think it is always better done by a separate process…. that means taxation— and so I believe you will find that the community will make a very fair bargain with you… I think you will find that a Labour Government will give you proper compensation. I ask hon. Members to think these things over and to search their consciences—not just to put aside their responsibility—and say whether they think these proposals are fair. There is only one fair and equitable method of arriving at a proper basis of compensation. Either the parties must agree, or there must be arbitration by an impartial tribunal. This is no sale between a willing buyer and a willing seller here such as there is on the Stock Exchange. It is a case of compulsory purchase by the State. Are the owners who are being expropriated in all these forms of transport to have no say whatever, and no opportunity of putting their case? This Measure does not go upstairs to a Select Committee of this House so that there is no such opportunity for them to put their case at all. Are the Government really asking the House to agree that they are themselves the right people to value the property which they themselves are taking over? Can they really carry out such a transaction with impartiality?

Mr. Dalton

The Stock Exchange.

Mr. Assheton

They say, "the Stock Exchange," but they have decided that it is to be the Stock Exchange prices. Can it be right that they should decide? I think that it is the essence of British justice that this matter should go to an impartial tribunal. After all, have they not agreed to that in all other cases of nationalisation? Are undertakings in the future to be taken over at any price which His Majesty's Government feel they can afford or are inclined to pay? Is that going to be the measure—[HON. MEMBERS: "Yes."]—of the principle we are going to follow? If such a practice is going to develop in this country it will undermine the whole confidence in our financial affairs on which industry depends so much. It will undermine confidence in our financial structure. I feel -sure that when the Government have re- flected upon this they will find it possible to reconsider the decision they have come to. What is the Government asking the House to do? [HON. MEMBERS: "Nationalise transport."] To approve a Measure which we on this side of the House say has in it a very serious element of confiscation, and confiscation is a long word but what it means is theft by the State.

Debate adjourned.—[Mr. Pearson.]

Debate to be resumed Tomorrow.