HL Deb 02 August 1918 vol 31 cc450-60

Order of the Day for the House to be put into Committee, read.

Moved, That the House do now resolve itself into Committee.—(Lord Somerleylon.)

House in Committee accordingly.

[The EARL Of DONOUGHMORE in the Chair.]

Clause 1:

Modifications of statutory provisions affecting charges.

1.— (1)Where it appears to the appropriate Government Department that the financial position of any undertaking to which this Act applies has been adversely affected by circumstances arising out of the present war, the Department may, if they think fit, by order provide for the modification of any statutory provisions regulating the charges to be made by the undertakers, and of any statutory provisions consequential on or supplemental to any such provisions as aforesaid, for such period during the continuance of this Act, in such manner, and subject to such conditions, as appear to the Department to be just and reasonable:

Proveded that—

  1. (a) where the undertakers are a local authority no modification shall be authorised which will increase the statutory maximum charge by more than fifty per cent., or which is more than sufficient so far as can be estimated to enable the undertaking to be carried on without loss; and
  2. (b) in any other case no modification shall be authorised which is more than sufficient to enable with due care and management a dividend on the ordinary stock or shares of the under taking to be paid at three-quarters of the standard or maximum rate of dividend, if any, proscribed for the undertaking, or at three-quarters of the pre-war rate of dividend, whichever is lower.

(2) An application to a Department for the purposes of this Act shall be accompanied by such information, certified in such manner, as the Department may require with respect to the financial position of the undertaking in question; and before making an order the appropriate Government Department shall require the undertakers to give public notice of the application for an order under this Act, and as to the manner in which, and time within which, representations may be made; and to give a similar notice in writing to the council of each county, borough, or urban or rural district, within which any part of the undertaking, or limits of supply of the undertaking, is situate; and the Department shall consider any representations which may be duly made.

(3) The undertakings to which this Act applies are tramway undertakings, including light railways constructed wholly or mainly on public roads, and undertakings for the supply of gas, water, hydraulic power, and electricity, and in calculating the maximum charge which may be uthorised under this Act in respect of such tramway undertakings fractions of a halfpenny shall be counted as a halfpenny.

(4) For the purposes of this Act—

THE MARQUESS OF CREWE moved, in subsection (1) (b), to leave out "three-quarters" and to insert "half." The noble Marquess said: I will not detain your Lordships at any length over this Amendment, although it is one of very great importance meaning a question of hundreds of thousands of pounds which fall mainly upon the shoulders of very poor people, and, therefore, one on which I am bound to take the judgment of your Lordships' House.

I need not explain at length that the case chiefly concerns—and, indeed, it is the only part of the case with which I am concerned—the statutory gas companies in London. These companies are in the main in London and the neighbourhood. They are also in the main on the sliding scale plan—a most valuable arrangement whereby the higher the dividend the lower the price, and the higher the price the lower the dividend; consequently it is to the interests both of the shareholders in the company and of the consumers of the gas that the working of the companies should he most economical. That system has worked admirably for a number of years, but, like so many others, it has been interfered with by the course of the war, and it has been necessary to come to some extent to the rescue of the companies.

A Committee of the House of Commons sat and inquired most carefully into all the circumstances, and they recommended that some provision should be made for the temporary modification of the statutory requirements. Their conclusion was that where a company operates under the sliding scale, and where its dividend had been reduced to one-half of the standard or maximum rate, or half of the average dividend of the last three years, the sliding scale or the maximum price should cease to operate, and the company should be able to charge such price for gas as the Board of Trade considered sufficient to provide such cost of manufacture and distribution as would enable one-half of the dividend to be secured to the shareholders

This went to the House of Commons, and there His Majesty's Government, for some reason or another, did not think fit to support the conclusions of the Committee, although those conclusions were stated to be unanimous. They left it an open question; with the result that, instead of one-half the dividend being permitted to be earned, the companies might receive not less than two-thirds of their dividends.

There is one point which must never be forgotten in dealing with this position of the gas companies—namely, that a considerable part of their income is earned from the sale of the by-products, or, as they are termed, residuals. They are of great value, particularly at the present time. They include benzol, toluol, creosote oil—which is of the first importance for naval use; and last, but by no means least, sulphate of ammonia. The prices of all these by-products have been arbitrarily fixed at a figure far below what they would make if they were sold in the open market. It was necessary to do this because in the absence of imports, the price of sulphate of ammonia—to take the last item first—would no doubt have risen to a figure which would have been exceedingly hard upon the agricultural community; and the coal tar products were required for national uses, largely for the manufacture of high explosives and of dyes; therefore the price had to be fixed. But the loss thereby occasioned ought in the opinion of many people, and of many people who are as a rule by no means hostile to the interests of limited companies trading for profit, to be borne not only by the consumers of gas but by the country as a whole. Just as in the case where it has been found necessary to fix the price of bread at an arbitrary figure, far below its real market value, the whole country has come to the rescue of those who grow the corn from which the bread is made, and the farmer is subsidised at the expense of the taxpayer, I think that the gas producer ought to be similarly subsidised if it is thought to be unfair to let his dividend fall below a stated figure—whatever figure may be considered fair.

But then it is stated that His Majesty's Government, having left this an open question in the House of Commons—not having put their Whips on to support their own Committee—think the conclusion of the House of Commons ought to be maintained here. I believe I can give one or two reasons why that is not a very sound argument. This Bill, beside including these great London gas companies, covers a vast number of other statutory undertakings—electric lighting, water, and tramways—all over England, and of all sorts and sizes. To have lumped all these together is, of course, a great convenience, as was pointed out by the noble Earl, the Lord Chairman, on the last occasion. It is far more convenient to treat the different undertakings as though they were in parimateria, whereas they are in fact absolutely different in all their relations. But when the hardships of one set of people are involved the process is somewhat disastrous.

I can easily give two instances from what occurred in this House. My noble friend Lord Balfour of Burleigh had on the Paper an Amendment relating to a comparatively small company in Scotland. I also received a communication from that company—the Stirling Gas Company—who stated that their earnings would be somewhat interfered with if the figure of two-thirds were not allowed to be maintained. On the Second Reading a noble Lord whom I do not now see in his place, Lord Plymouth, mentioned the hard case of a water company somewhere in South Wales, and all those who are interested in any of these special cases naturally come to the support of those who desire to see the figure of two-thirds maintained, due to the fact that all these cases were treated as though they were parallel concerns.

But it is very hard on the consumers of London, who are now to be mulcted to the tune of £300,000 a year by this Bill, that this injury should be conflicted on them by the votes of people who naturally have not looked into the matter and have no knowledge or conception of the rights and wrongs of this particular case as between the Gas Companies and the consumers of gas in London. The London gas-payers are already paying more than £4,000,000 a year for an inferior article to that which they were buying before the war. The gas which is supplied is less valuable, both in its heating and lighting qualities than the gas that was supplied before the war. It cannot now be properly enriched, and the result is that the working man who depends for his light and his heating on a gas jet finds it assuming both the appearance and the calorific qualities of a will o' the wisp. I can assure your Lordships that there is a great deal of strong feeling in London upon this matter; it is by no means only confined to London, because the strong view which the London County Council have taken has been explicitly enforced by the representatives of other public bodies in the country. I am compelled, therefore, although I am sorry to do so at this hour, to press this Amendment on the attention of your Lordships' House.

Amendment moved— Page 2, line 2, leave out ("three-quarters") and insert ("half").—(The Marquess of Crewe.)

LORD FARINGDON

I have been requested by one of the largest gas companies—the Gas, Light and Coke Company—to say a few words on behalf of the gas companies generally. The position as mentioned by the noble Marquess just now is quite correct as far as the sliding scale is concerned, and the effect of the higher prices that have to be paid for coal upon the cost of the commodities to the public. The pre-war price was 2s. 6d. per thousand feet; the present price is, I believe, 4s. 4d.The reason for that is patent to every one. It is the higher cost of everything—it is not only coal but oil labour, and materials of all classes and description which have caused very much higher figures. The result is that the working of the Gas Light and Coke Company and other companies has reduced their dividends from upwards of 4 per cent. before the war down to £2 18s. 8d., which was the last dividend paid, and to a current rate of £2 2s. 8d. per cent.

The Select Committee which enquired into this question was very sympathetic. They said that some provision should be made for the temporary limitation of statutory requirements with regard to prices and dividends in the case of the gas undertakings, and they then said, after, I dare say, very fully considering the question, "We will give them half of the statutory dividend." At the time when that Committee came to fix the figure at one half, the price of coal was 60 per cent. above the pre-war price. When the Bill came before the House of Commons the price of coal had risen to 100 per cent. above pre-war price, and, therefore, after the most careful consideration during long debates, the figure of 75 per cent. instead of 50 per cent. was inserted and although divisions were taken—the House was left, as the noble Marquess mentioned, to vote as it pleased, no kind of Government Whips being put on—the 75 per cent. was carried by very large majorities. I believe it was contested at every stage, and these divisions in every case showed very substantial majorities.

I do not know that I need say very much more, but I should like to mention these figures. The companies before the war brought nearly all their coal to London by water at a cost of 3s. per ton. The water rate is now 18s. a ton, and the increase in the price of coal at the pit's mouth has raised the cost of coal to the company from 12s. to 40s. per ton. The companies would not be in a very bad position notwithstanding these very high prices but for the fact that the prices of the by-products and residuals are controlled. If they could sell their benzol, toluol, and other by-products at their full market value, I do not believe this Bill would have been before the House, because it is very likely that they would have been paying their pre-war dividends. But the Controller has fixed the prices of the commodities that they produce, which are essential at the present time and which it has been recognised the gas companies have done their utmost to produce in the largest quantities. Probably the prices which they have got for these by-products are such that, as I say, the dividends will be reduced to £2 2s. 8d. per cent. There may be a certain school in the country who would not be averse to seeing the great gas companies in a rather tight position with the view of their possibly being acquired. One cannot ignore that that is a possibility, but it would I think be very unfair that advantage should be taken of circumstances which are so abnormal as those current at the present time, first, of all to depreciate a security, and then possibly purchase it at a very low price.

There is no doubt about this: that if the noble Marquess's Amendment should be carried, it would have a most disastrous effect upon the ability of the companies to raise fresh capital. There is not such a thing as a closed capital account with any undertaking that has any life in it. The gas companies are constantly issuing their capital, and ever since 1876 all gas companies capital has not been issued to shareholders or any privileged body but it has to be offered by public auction; the highest price that is tendered is accepted, and any premium that the company receives is carried to the benefit of the whole undertaking, being placed to the credit of their capital account. In the past the companies, I think, have deserved very well of the community. They have reduced their price over and over again. It is true that at the same time there has been a moderate increase in their own dividends.

I sympathise with the remark that has fallen from the noble Marquess that the effect of fixing this 75 per cent. will possibly be a little addition to the gas bills of the consumer. It is estimated, however, that this burden in the case of the small consumer will not exceed the sum of ls. 3d. per annum, and therefore in these times, when we are providing by higher wages for almost every kind of commodity that the poor have to buy, if the gas companies should by any chance get in consequence of this arrangement of the gas companies' dividend the large sum of ls. 3d. we know that the consumer has ample money in his pocket for any such little outgoing. If you should by any chance damage the gas companies it would have very disastrous effects not only upon the concerns to-day or to-morrow but possibly for all time to come, for we know that the investor always looks back over a long period to see what dividend has been paid. If you reduce the dividend very largely the result will be that the companies will suffer in the future, and through the companies the public also. I hope sincerely that the noble Marquess will not press his Amendment.

LORD SOMERLEYTON

In replying to the noble Marquess who has moved this Amendment I will be as brief as I can, and only put a few facts before the House. The noble Marquess is no doubt specially interested to-night in the two principal London gas companies—Gas Light & Coke Company and the South Metropolitan Gas Company. Of these, the London Gas Light & Coke Company paid £4 17s., 4 per cent in 1913, and pay £2 18s. 8d. now; the South Metropolitan Company paid £5 9s. 4d. in 1913 and pay £4 now. Under the Bill, with a standard dividend of 4 per cent., they will be entitled to pay up to 3 per cent, if they can satisfy the Board of Trade that they need and have a good case for relief.

The circumstances in which the limit of relief now in the Bill was fixed are these. The Select Committee on Gas Undertakings recommended that some temporary modification of statutory requirements was called for with the view of maintaining in the public interest the stability of gas undertakings, but that the price allowed should not be more than sufficient to enable companies to pay half their standard or maximum rate of dividend, or half their pre-war dividend, whichever was the lower, after making due allowance for proper revenue charges.

The Government introduced a Bill giving effect to this recommendation, but the companies urged that 2 per cent. was not sufficient return to maintain their stability, and enable any new capital that might be required to be raised, except at a big discount. I will not go into the question of new capital, as Lord Faringdon has already dealt with it. The companies also pointed out that they had rendered great national services in providing toluol, benzol, and other by-products for munitions, and sulphate of ammonia for agriculture, at comparatively moderate prices fixed by the Government. They asked for their standard or pre-war dividends. An amendment was then moved by Mr. Tennant splitting the difference—i.e., putting the limit at three-quarters. The President of the Board of Trade left this for the House to decide, and neither supported, nor opposed, nor voted on, the Amendment. I will only remind your Lordships that there were two divisions in Committee on this question. In one case there were 153 in favour and 22 against, and in the second case this Amendment was carried in Committee by 118 to 42 and was endorsed in a division on the Third Reading by 141 votes to 97.

In the course of the Second Reading of the Bill in your Lordships' House the Marquess of Crewe and Lord Buckmaster stated that pressure had been brought to bear upon members of Parliament by the companies interested, but no doubt some pressure was also exerted on the other side, and it has to be remembered that consumers can influence more votes than shareholders because they are more numerous. If the Amendment is carried it is unlikely that the other House will accept it after the large majorities which they have given for the limit in the Bill, and it is to be hoped that the noble Marquess will not press it to a division. With regard to residuals, my information is that the amount is not large enough to affect the price of coal to any extent worth mentioning. Therefore I venture to trust that a Division will not be taken on this Amendment.

THE MARQUESS OF CREWE

May I say, on one point which the noble Lord mentioned, that my information is that the value of residuals—I take it from the evidence of the Select Committee—is 5½d. on every 1,000 feet of gas, and I cannot see how he can regard that as a negligible amount. Perhaps I might say with regard to pressure—what is known as "lobbying"—that there has always been a certain distinction drawn between people who go about putting what may be a quite legitimate pressure on Members of Parliament in order to put money in their own pockets, and representations on behalf of those who have sent them to hold office by Members who have nothing personally to gain.

LORD SOMERLEYTON

Perhaps I might point out, in reply to the noble Marquess, that these are statutory companies, and that if a larger price is paid for these residuals the amount will go into the funds of the company, and will not be squandered.

On Question, whether "three-quarters" shall stand part of the clause?—

Their Lordships divided:—Contents, 32; Not-contents, 3.

CONTENTS.
Somerset, D. Hutchinson, V. (E. Donoughmore.) Leigh, L.
Leith of Fyvie, L.
Lincolnshire, M. St. Davids, V. Penrhyn, L.
Salisbury, M. Rotherham, L.
Allington, L. Strachie, L.
Grey, E. [Teller.] Avebury, L. Stuart of Wortley, L.
Halsbury, E. Beresford of Metemmeh, L. Sumner, L.
Jersey, E. [Teller.] Blythswood, L. Sydenham, L.
Brodrick, L. (V. Midleton.) Tenterden, L.
Churchill, V. Cottesloe, L. Wemyss, L. (E. Wemyss.)
Hood, V. Kintore, L. (E. Kintore.) Wittenham, L.
NOT-CONTENTS.
Canterbury, L. Abp. Chaplin, V. Inchcape, L.
Finlay, L. (L. Chancellor.) Cross, V. Islington, L.
Curzon of Kedleston, E. (L. President.) Milner, V. Kenyon, L.
Peel, V. Lamington, L.
Wigan, L. (E. Crawford.) (L. Privy Seal.) Newton, L.
Annesley, L. Parmoor, L.
Crewe, M. Balfour, L. Phillimoro, L.
Lansdowne, M. Cawley, L. Pontypridd, L.
Brassey, E. Clinton, L. Queenborough, L.
Chesterfield, E. Colebrooke, L. Ranksborough, L.
Eldon, E. Denman, L. Ribblesdale, L.
Lytton, E. Elphinstone, L. Sanderson, L.
Russell, E. Emmott, L. Shandon, L.
Stanhope, E. Faringdon, L. Somerleyton, L. [Teller.]
Verulam, E. Gainford, L. Stanley of Alderley, L. (L. Sheffield.)
Gorell, L.
Farquhar, V. (L. Steward.) Hylton, L. Stanmore, L. [Teller.]
Sandhurst, V. (L. Chamberlain.)

On Question, Motion agreed to.

CONTENTS.
Finlay, L (L. Chancellor. Chaplin, V. Elphinstone, L.
Curzon of Kedleston, E. (L. President.) Churchill, V. Faringdon, L.
Hutchinson, V. (E. Donoughmore.) Hylton, L.
Wigan, L. (E. Crawford.) (L. Privy Seal.) Islington, L.
Peel, V. Kenyon, L.
Lansdowne, M. Newton, L.
Annesley, L. Queenborough, L.
Chesterfield, E. Balfour, L. Ranksborough, L.
Lucan, E. Beresford of Metemmeh, L. Somerleyton, L. [Teller.]
Lytton, E. Cawley, L. Stanmore, L. [Teller.]
Stanhope, E. Clinton, L. Stuart of Wortley, L
Farquhar, V. (L. Steward.) Colebrooke, L. Sydenham, L.
Sandhurst, V. (L. Chamberlain.)
NOT-CONTENTS.
Crewe, M. [Teller.] Strachie, L. [Teller.] Parmoor, L.

Resolved in the affirmative, and Amendment disagreed to accordingly.

THE MARQUESS OF CREWE moved, in subsection (2), after the word "situate," to insert "and in the case of a tramway undertaking also to the council of any area in which through running arrangements are in operation." The noble Marquess said: This is also an Amendment which affects London. There are certain tramways which run out of the county of London into some of the neighbouring boroughs, which it is desired to bring under the Bill. As the noble Lord will see, the effect is not a very wide one, but it would be a great convenience to the London County Council, where this notice is given, that they should receive the information as well as the local authority of such a district as East or West Ham. The point is not a large one, and I confess I cannot see any reason why the noble Lord should object to allow the council of the county to receive similar notice. There are some other cases in the North of England which are exactly parallel, where tramways run through more than one authority, and it would he a great convenience to them to receive a similar notice.

Amendment moved— Page 2, line 16, after ("situate") insert ("and in the case of a tramway undertaking also to the council of any area in which through running arrangements are in operation").—(The Marquess of Crewe.)

LORD SOMERLEYTON

I am sorry I had not an opportunity of conferring with the noble Marquess before he moved this Amendment, because I think I should have been able to show him that it hardly seems to be necessary. Under the pro- visions of the Bill as it stands, public notice of any application for an Order has to be given, and it would be open to any local authority concerned then to make such representations as they might think fit To put the local authorities of districts in which through running arrangements are in operation in what might appear to be a position in which their representations might be entitled to special weight, might, in some cases, alarm the tramway undertaking concerned, and lead them to withdraw the through running arrangements in order to avoid the possible consequences of any such provision. I therefore venture to suggest to the noble Marquess, with due deference, that this Amendment is unnecessary. Due notice will be given, and it will be widely known. I suggest that it is hardly worth pressing the point at this period of the session.

THE MARQUESS OF CREWE

Of course, if the noble Lord and his Department are not able to accept this Amendment, it really is useless to press it. It would have been found a great convenience, in the case of London undoubtedly, not to have to depend merely on the advertisement, but to receive a notice which, I think, might have been given without much trouble. In the circumstances I will withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Remaining clauses agreed to; and Bill reported without amendment.