HL Deb 21 March 1887 vol 312 cc804-16

House in Committed (according to Order).


, in rising to move the insertion of a now clause before Clause 1, said, that the object of the clause was to recognize the interests which local authorities had in such matters. As the law now stood, when a Provisional Order was sought by a Company, they did not necessarily apply for the consent of the local authority, but went direct to the Board of Trade. It was true, however, that the Board of Trade took the opinion of the local authority, and there were then ample means of stating objections. The change which was proposed was that, in the first instance, the Company should go to the local authority and ask for their consent, and if that consent was refused, the Company had power to appeal to the Board of Trade against the decision of the local authority. The local authority would thus have a veto, which, however, the Board of Trade might override.

Moved, to insert the following new clause before Clause 1:— Notwithstanding anything in the Electric Lighting Act, 1882, no Provisional Order authorising the supply of electricity by any undertakers within the district of any local authority shall be granted by the Board of Trade except with the consent of such local authority, unless the Board of Trade, in any case in which the consent of such local authority is refused, are of opinion that, having regard to all the circumstances of the case, such consent ought to he dispensed with, and in such case they shall make a special report, stating the grounds upon which they have dispensed with such consent."—(The Earl of Camperdown.)


said, he had no objection whatever to the new clause which had been proposed by the noble Earl, as it was an accidental omission in the Bill.


said, the Government had loft the subject in the hands of his noble Friend (Lord Thurlow), who had shown so much interest in the matter, because they thought it would be more courteous so to do. The measure was the outcome of the Committee of last year, and, in fact, was similar to it, and the Government were prepared to support it, provided this and similar Amendments were accepted.

Motion agreed to; Clause ordered to be added to the Bill.

Clause 1 (Amendment of s. 27 of Electric Lighting Act, 1882. Purchase of undertaking by local authority).


said, he had an Amendment in page 1, lines 22 and 23, which raised a question of principle. The Bill, as it stood, proposed that the period during which Electric Lighting Companies should enjoy the fruits of their enterprise should be extended from 21 to 42 years, and, in addition, it was provided that at the expiration of that period any Local Authority was to be at liberty to purchase the undertaking upon the terms of paying the then market value of the goodwill of the undertaking. he objected to such legislation, for it appeared to him that this offered Electric Lighting Companies a greater privilege than was necessary or desirable in the interests of the public. If, after the period of 42 years, Local Authorities had to pay for the goodwill of these undertakings, their purchase would become impossible. Not only would a monopoly be created, but it would be a perpetual monopoly, just as the terms on which gas and water undertakings could now be acquired were so exorbitant that their purchase was impossible. It would be quite sufficient to allow the Company a monopoly of 42 years, and then to pay for their plant, but not their goodwill. He would move, therefore, that the words relating to the goodwill should be struck out. It was true the Act of 1882 gave only 21 years, and that term had not been sufficient to induce persons to invest their capital in Electric Lighting Companies, hence the Select Committee enlarged the term to 42 years; but it did not insert the power to a Company to exact a sum for goodwill when it sold the undertaking. He thought it was necessary, on behalf of the public, to omit these words, as the term of 42 years would be sufficient to enable a Company to recoup itself; and he might point out that in Clause 2 the Board of Trade would have power to vary the terms of purchase, which would be sufficient protection to a Company.

Amendment moved, in page 1, lines 22 and 23, to leave out ("of the goodwill of the business of the undertaking, and ")—(The Earl of Camperdown.)


regretted that he could not accept the Amendment, He felt that both his noble Friend and himself were of the same mind and working for the same end—trying to create a new industry, and to prevent the creation of a new monopoly; and he thought that the clause, as it stood, would effect that better than if the words were struck out. He could not see why Electric Lighting Companies should be put upon a worse footing than other undertakings. He was convinced that the provision in the Bill was necessary for the encouragement of that new industry, and he believed there were no other alternatives to it, but either to grant provisional orders for such a prolonged term as might enable undertakers to recoup themselves without charging a prohibitive rate, or to provide liberal purchase conditions at the expiry of a shorter period. He greatly preferred the latter alternative as flavouring least of a monopoly, and should feel bound to take the sense of the House on the Amendment.


said, he wished to endorse what had fallen from the noble Lord who had last spoken. Under the Act of 1882 Electric Lighting Companies had not succeeded, because the term of years offered—namely, 21, was too short to induce capitalists to invest their money in them with a reasonable prospect of advantage. He was, therefore, glad that a revulsion of public feeling had taken place in the matter, and that a longer term of years was now to be accorded to undertakers of electric lighting. He did not either think it unjust that the Companies should be paid for the value of their good will, and should therefore oppose the Amendment. He hoped that the words proposed to be inserted by the noble Earl opposite would not be agreed to. It was obvious that the Bill would not pass in the other House that Session; therefore if the Government would undertake to introduce, at some future time, a satisfactory measure dealing with this subject, he thought that the noble Lord (Lord Thurlow) would do well to wait and to be content with such an assurance, instead of pressing forward a Bill which could not get beyond that House during the present Session.


said, he did not think that the Electric Lighting Companies could demand to be placed upon the same footing as the existing Gas and Water Companies. When the Gas and Water Companies were dealt with, the public did not make the best bargain with them; but that was no reason why they should now make the same mistake in dealing with the electric light. In his opinion, the Electric Lighting Companies ought to be glad to got such a Bill as this; if they waited for what they might deem to be a more perfect measure, they would run the risk of not getting a Bill at all. He trusted their Lordships would pass the Bill in the same shape as nearly as possible as it was passed by the Select Committee He should be glad to see the words referred to in the Amendment struck out.


said, that, on the other hand, he trusted that their Lordships would not agree to the Amendment. He thought that the less Local Authorities were allowed to acquire Water or Gas undertakings the better it would be for the community at largo. But supposing they wore to do so, what was the substance of this controversy? It was this—capitalists said that they would provide the necessary capital for carrying out electric schemes, if the Legislature would give them time to obtain a reasonable amount of profit upon their undertaking; and that if such undertaking resulted in a profit, instead of a loss, they were to receive compensation for the risk of loss they had run, by being allowed to receive something like the reasonable value of their undertaking. The suggestion of the other side was, that the capitalists were to run all the risk of loss; and that, when their undertaking had become a success, they were to receive, not its full market value, but merely—he did not say the old iron value—but the value of the plant, less the amount of its depreciation. This was in itself most unreasonable. But it would be attended with this mischievous consequence—As time went on the work would extend, new plant would be required for them to replace the old; and, as the time approached when the Local Board would purchase the undertaking, the undertakers would be desirous to limit their outlay as much as possible. The consequence would be that the renewal of the plant would be scamped, and every effort would be made by the undertakers to lessen the value of that which was about to be taken from thorn by the Local Authorities. This policy of the Local Authorities was a dog-in-the-manger policy. They said—"We shall not do it ourselves; and you shall not do it except on the terms we are willing to grant, but which you will not accept." Their Lordships should remember that those unreasonable capitalists who desired to make a profit were bound down in such a way that the dividends were limited to 10 per cent, and that when now capital was required, it could be raised only on certain stringent conditions. He also asked their Lordships to bear in mind that not one of the witnesses called before the Committee said that 42 years would give time enough; and if it did, it was open to the objection that it would prevent electric undertakers from doing their best towards the end of the term. He, therefore, asked their Lordships to reject that which he had already said was one of the most unreasonable provisions ever proposed. As to the argument, "Beware of another place," what did that mean? It meant that if their Lordships did right here, others would do wrong "elsewhere," which ought not to be supposed, nor, if supposed, acted on.


said, that he agreed with the noble Lord who spoke last but one (Lord Balfour) that they were now dealing not with a case of vested interests already created, but one in which a new bargain was to be made, in which the interests of all parties could be fairly and judicially considered, without reference to the past. The figures brought before the Committee impressed him (Lord Lingen) with the magnitude of the question. The Birmingham Town Council, in 1875, acquired the gas and waterworks of that town, for which they paid £3,500,000. In that payment, £1,500,000 was for goodwill, and was not represented by any works which they acquired. It represented the interest of the shareholders, and what was understood by "a going concern." The decision, therefore, to which their Lordships might come was of very great importance to municipalities. As to municipalities coining forward as Trading Companies, it was to be observed that when monopolies were imported into local jurisdictions by consent, there was very little difficulty in the matter; but it complicated the case when the monopoly might be introduced without the consent of the Local Authority. That made the great difference between the case of towns and that of private persons who wished to have electric lighting introduced into their houses. It should be remembered that the Local Authorities had the interests of the entire community to consider. When these powers were given, it was not only for the lighting of the streets, but of private houses. If very hard bargains were driven with the public on the introduction of those practical monopolies, it was almost certain that, at some time or other, the feeling would be to break through them; and, probably, on much less favourable terms to the Companies that if, on the introduction of the enterprise, the promoters accepted reasonable and proper limitation. He thought a compromise might be effected on the basis of excluding the consideration of the very uncertain matter of future profits.


said, he was not able to follow his noble and learned Friend (Lord Bramwell) in the view that municipalities, which represented the public, had not a right to make the best terms they could in the public interest, when persons had to come to Parliament to get a monopoly.


They have a perfect right to get the possible bargain for the public.


said, that the Public Authorities were bound to take care that rights were not acquired by Companies which would be injurious to the public. He agreed with the noble and learned Lord that it would be mischievous to pass a measure in such terms as to prohibit the introduction of a system of lighting, or of anything else that would be advantageous to the public. Hence they had to consider those two points—that, on the one hand, the municipalities should be able to make the best terms they could; and, on the other, that Parliament ought not to impose restrictions which would prevent the public from getting an advantage that large numbers of people desired. For his own part, he should much regret any legislation which might have the effect of interfering with the introduction of electric lighting in private houses by those who desired it. As to the question whether the terms of the Bill were sufficient or not to promote the object in view, he thought one circumstance had been somewhat left out of sight. There could be no doubt that a monopoly was practically given to Gas and Water Companies which were first in the field, and simply because there was not room for more than a limited number of gas and water pipes under the public streets; but with electric lighting that would not be the case, because the space that would be occupied by such a system would be so comparatively small as to obviate all difficulties in this respect. He did not know whether, under the Bill, a municipality would be precluded from entering into competition with an Electric Lighting Company for the term of 42 years.


Not so.


said, that in that case, if the system of electric lighting turned out a success, there would be no difficulty in giving the public a competing scheme, if unreasonable terms wore exacted by the Company in existence. That might materially affect the view as to the terms which the promoters of a Company would have a right to ask; it would strengthen their right to ask that the undertaking, when it was acquired, should be taken upon terms which would fairly recoup them for the risks they had incurred. His noble Friend behind him had suggested a course which had been often taken in similar cases, and that was not merely to pay for the plant, machinery, and so on, but to take the average price of the shares for a number of years, and the earnings for a number of years. That would seem to him to be a reasonable course. He believed that municipalities would be conciliated by some such proposal, much more than if the Bill was passed in its present form.


said, he objected to the omission of the words in question; and he did so not in the interests of capitalists, but in those of the public. What was now required was to encourage the start of a new industry; and if the words were omitted, it was clear that the terms then offered under the Bill would be insufficient to attract capital. The real point of difference seemed to be which was the safe side to go on. Was it the safe side to put too severe terms in the way of the Companies? This appeared to him to be the unsafe side. There was a general desire to encourage and develop this movement, and it would be a mistake to impose severe terms at the outset. If in the future it were found that there was a great rush of capital, it would be open to Parliament to revise the terms applicable to new undertakings, of which the risk would be much less. Unless they offered reasonable terms in the first instance, it would be impossible for the electric light to get properly under weigh in this country.


said, that he told their Lordships last year that the House of Commons in 1882 disregarded the evidence of all the competent authorities which was brought forward on this subject, and now everybody knew that the result was that the Act of 1882 had proved a complete failure. No other country has such legislation, and every civilized country except this has public electric lighting. By the attempt of the Committee of 1882 to go ahead of all mankind, they had fallen behind all mankind in this matter. The Select Committee of this House last year did the same thing; for he found, on looking over the evidence, that every single engineer and financier of experience who was examined was distinctly of opinion that the Bill, in the form in which the noble Earl opposite (The Earl of Camper-down) put it, would be again a failure. As the matter stood, they had to choose between the opinions and evidence of the most competent electric engineers and scientific men and financiers, on one side, and that of a number of Town Clerks and Aldermen, on the other, exactly the same class who, in 1882, had deprived the Kingdom of the advantages of the electric light, by the terms for which they stipulated. He hoped Parliament would not listen to them again, and repeat the mistake by aceepting the Amendment. A great deal had been said about monopoly; but the word was altogether inappropriate to the matter in hand, and the arguments founded upon it were incorrect. There was no more monopoly of Electric Lighting Companies than of bakers. The point at issue simply was practically whether the property was to be sold for what it was worth, or the owners were to be obliged to sell it at a loss. Both parties argued that that was the issue and the effect of excluding or admitting what is called goodwill, though it may not be an accurate term to express the commercial value of a going concern; but it is universally understood. As to Gas and Water Companies, such an obligation as it was sought to impose in this case was never placed upon them, unless the practice had been very recently altered, and he saw no reason for imposing it on Electric Lighting Companies. He strongly supported the clause as it stood. It seemed to him that if this important industry was not to be treated unfairly, the Amendment must be rejected, or we shall be, in five years more, in exactly the position which the Act has brought this country into now.


said, he was bound to say, personally, that he supported the Amendment moved by his noble Friend opposite (the Earl of Camperdown); but there was a wide and an honest difference of opinion in many quarters with regard to it, and he should be sorry to prejudice in any way the action which any noble Lord might wish to take in this matter. His noble Friend behind him made a kind of appeal to him to say that the Government would bring in a Bill dealing with this subject. He did not think it would be honest on his part to give his noble Friend such a pledge. He had already explained that it was owing to his having been prevented by circumstances from introducing any measure dealing with this question, that he told the noble Lord opposite (Lord Thurlow) that he thought it was advisable that he should proceed with this Bill, and that they should endeavour, as far as they could, to assist in passing it through the House. Therefore, he thought the matter ought not to be postponed, but dealt with at the present time. The question, then, was, whether the Bill would be of the use it was intended to be, if this Amendment wore added to it. He could not help thinking that, in this matter, they ought to go stop by stop. He was bound to a certain extent by negotiations and arrangements which took place consequent upon the Committee of last year; and, standing as he did, therefore, in the position of having to deal with this matter, he was bound to say that he preferred the lesser Amendment instead of taking the larger step. In some way or other, the question of the goodwill might here after have to be considered; but he did not feel himself able to accept that at the present time, and, consequently, he must vote against the Amendment of the noble Lord. The extension of time, from 21 to 42 years, was a large concession; and he thought they would do well to leave the goodwill to be dealt with at some future time. He should vote for the Amendment.


said, his noble Friend who had just addressed the House spoke for himself alone, and not on behalf of the Government. This was not a matter on which the Government had taken a decided line, and, for his own part, he saw no reason whatever why a public body should get for less money that for which any private person would have to pay a larger sum. Therefore, he should support the Amendment.


said, he was sorry to find that the President of the Board of Trade had departed from the generous line indicated by Lord Salisbury, on the second reading of the Bill, as the proper method of treating this question. he was confident, speaking from three years' experience, that the working of an electric lighting undertaking was so difficult, that no Local Authority would have done what had been done by the personal care and attention given to the extension of electric lighting by members of the Companies. In regard to the alleged creation of a new monopoly, he held that there was no monopoly in gas, which had to compete against oil and candles; and electric lighting ought not to be put on any less favourable footing than gas, because it would have to compete with gas, oil, and candles. No monopoly was asked for, excepting that which the Companies could create for them selves by the excellent quality of that which they supplied, and the moderate price they charged for it. As to what had been said about paying for old iron, he acknowledged that there was a difference between buying new machinery and buying the same machinery which had been laid down in the ground for a definite purpose. The proper price to be paid by the purchaser would be the value at the moment, and that would involve a reduction for depreciation from the original cost. But with this must be a sum for the "goodwill," which would fairly represent the trade value of the business, which had been built up by the efforts of the undertakers, and this entirely apart from any question of value of machinery plant and other property.


said, he would recommend his noble Friend opposite (the Earl of Camperdown) to withdraw the Amendment, for he must see that the feeling of the House was against him. Their Lordships had to answer two questions. The first was, whether they were to deal out to Electric Lighting Companies the same measure of justice they had dealt out to other Companies; and the second was, whether they desired to incite the men of science to drive away from this country the best light in the world?


, in reply to the various questions which had been asked, said, he held that it would be most unfair that a Local Authority should have the power to compete with an Electric Lighting Company during the 42 years for which a concession had been granted; and he did not believe that a Local Authority would have such a power under the Bill. If the Board of Trade granted a concession to the private Company for 12 years, he apprehended it would refuse a similar concession to any other Company, or to a Local Authority for the same district. How could we know, without trial, that the provisions of the Bill would be prohibitory of electric lighting experiments under the new term of 42 years? On the question of goodwill, he would assent to a compromise, if one could be arranged. He was prepared to accept an Amendment which would pay the value of plant and other things mentioned in the Bill, with a percentage added on account of compulsory purchase. But he was anxious to exclude uncertain calculations and valuations of prospective profits, which would be due to the expansion of a town, and not to the outlay of an Electric Lighting Company. Therefore, he must ask their Lordships to decide on the Amendment.

On Question, "That the words proposed to be left out stand part of the Clause? "Their Lordships divided:—Contents 45; Not-Contents 10: Majority 35.

Amendment disagreed to.


said, that, after their Lordships' decision, he did not think it necessary to proceed with the remaining Amendments on the Paper.


said, he did not quite understand why the words about "goodwill" had been introduced. He should have thought that if the under taking were purchased on the terms of paying the value of the undertaking, that would have covered the whole thing.


said, he quite thought the word "undertaking" was sufficient.


said, he thought that the word was necessary.

Clause, as amended, agreed to.

Remaining clauses agreed to.

The Report of the Amendments to be received on Monday next; and Bill to be printed as amended. (No. 49.)

House adjourned at a quarter past Six o'clock, till To-morrow, a quarter past Ten o'clock.