I beg to move, in page 13, line 30, to leave out from "undertaking," to the end of the Clause.

This is a drafting Amendment, and is linked with an Amendment which I propose to move later to Clause 120, page 113, line 30, and to the new Clause on the Order Paper which redefines, in answer to representations made to me in the Committee stage, the definition of a canal carrier.

rose—

At this stage, Major Milner, I think that we had better be a little clearer about procedure. I recognise that the recommittal of the Bill, and the acceptance at such short notice of the additional Opposition Amendments, may present the Committee with a difficulty. We should not allow that confusion to develop, because it would prevent the Committee from clearly understanding what it is deciding. If it would meet the convenience of the Committee and would be agreeable to you, Major Milner, it occurs to me that it would clarify the position if we went through the Amendments as they are on the Order Paper.

It is proposed that the Amendments be taken in the order in which they should now appear. What I am proposing to do is to interpolate the Amendments moved by the Opposition between those set out on the Order Paper. I do not know whether the right hon. Gentleman the Minister of Transport has a note of them. The first four or five refer to Clause 16. I do not know how far they can be moved together, but I gather that the right hon. Gentleman knows of them. I therefore propose to call the selected Amendments in the appropriate order.

On a point of Order. It would be a great help, Major Milner, if you could see your way to read out again each of the Clauses which are being recommitted, because it was not very easy to hear.

I will certainly read them out in order that hon. Members may make a note of the interpolations.

rose—

On a point of Order. While thanking you very much indeed, Major Milner, for making this statement, is it now impossible to move any other Amendments during the Committee stage, because, not realising that this was going to happen, there are certain Amendments to the Sixth Schedule standing in my name which are not included in this group? I understand that if they are to be called at all they would have to be recommitted. Is there no way in which they can be recommitted?

We cannot recommit further Amendments now. The hon. Gentleman may have an opportunity of moving them on the Report stage.

I beg to move, in page 17, line 28, to leave out from "Commission," to the end of the Subsection, and to insert:

as hereinafter provided:

(2) The amount of compensation payable under the foregoing Subsection shall be such as may be determined by a tribunal to be called the compensation tribunal' consisting of three members of whom (a) one (who shall be chairman of the tribunal) shall be a Lord of Appeal in Ordinary or a Judge of the Supreme Court of Judicature to be nominated by the Lord Chancellor (b) one shall be an accountant to be nominated by the President of the Institute of Chartered Accountants for England and Wales; and (c) one shall be a person experienced in matters of finance or business to be nominated by the Chairman of the Bankers Clearing House Committee.

(3) The Compensation Tribunal shall determine the amount of compensation payable in respect of the capital and income rights and expectations of holders of each class of the securities specified in the Fourth Schedule to this Act having regard to all the circumstances of the case including in particular but without limitation of the matters to which the compensation tribunal may have regard any of the following:

(a) the income which, but for the passing of this Act, might reasonably have been expected to accrue to holders of each class of the said securities in the future on the basis of the estimated future net maintainable revenue of the undertakings;

(b) the relationship between the interest yield obtained on the various classes of the said securities and that obtained on reasonably comparable Government securities during the period nineteen hundred and twenty-three to nineteen hundred and thirty-eight inclusive;

(c) where the tribunal is unable to attribute an income value to any of the said securities the average of the mean of the quotations for such of the said securities as were shown on the Stock Exchange Daily List

(i) on the first, fourth, fifth, sixth, seventh and eight days of November. nineteen hundred and forty-six, and.

(ii) on the fifteenth day of February, the fifteenth day of March, the sixteenth April, the fifteenth day of May, the fifteenth day of June and the sixteenth day of July, 1945;

(d) the net assets of each undertaking transferred to the Commission under this Act."

At long last, after these most useful interruptions from all sides, I would point out, for the convenience of the Committee, that this Amendment will be found at the foot of page 2270 of the Order Paper. You mentioned, Major Milner, the matter of certain Amendments being taken together. Perhaps it would be convenient if I explained the first three of these Amendments. They are alternative suggestions as to the method of compensation for railway stockholders, and they raise different points. Although they arise out of the same subject I think they might properly be debated separately. However, perhaps we can consider that later. The Amendment which I have moved puts forward the suggestion of a tribunal which will deal with the question of compensation of railway stock holders by what has hitherto been the accepted method of fair and unbiased arbitration. The Amendment suggests a high-powered arbitration tribunal, and indicates the important matters to which that tribunal should direct its attention. We have had a period of over four months of considering the compensation proposals under this Bill, and we are still more strongly of opinion that not only is the compensation inadequate, but that the method on which it is sought to be arrived at is unprecedented, inequitable and wrong. We say quite clearly, as a matter of principle from which we do not shrink, that it is wrong in principle that the acquiring body should dictate the purchase price. It has always been the normal procedure to try to agree terms, and if terms cannot be agreed, then to refer the matter to an impartial arbitrator.

The right hon. Gentleman and his right hon. Friend the Chancellor of the Exchequer have sought to rely on the fact that they are inserting Stock Exchange market prices for selected dates, One thing that need only be said, and against which no argument of any soundness has ever been advanced, is that Stock Exchange prices are quite hopeless in the purchase of an undertaking as a whole. The volume of market transactions is quite unrepresentative, the prices are arrived at by taking the prices at which comparatively few small parcels of shares are sold, they postulate a willing seller and a willing buyer and do not apply at all when the whole undertaking is being compulsorily acquired. Apart from that one could go through innumerable anomalies that they create. One that is well in mind of any hon. Member who has studied this matter, is the difference of ultimate income which will be got from the Great Western 2½ per cent. stock and the Great Western 5 per cent. debenture stock at the present time, although both these stocks come from the same source and rank pari passu. In addition to that, there is no doubt that in regard to railway stocks in particular, as opposed to Stock Exchange values generally, they have been depressed by the fear of what has actually happened—that is, the imposition of unfair terms. If one is to take a fair view, and not a biased view one way or the other, of the future of railway stocks, and if one feels, as I think one is bound to feel, that three assumptions should be made—that railway charges should be adopted, to some extent at least, from the rise in prices level, that the full employment policy to which we are all pledged will be brought into effect, and even if one were to postulate some practical agreement on the lines to which rail and road had come with the consent and approval of all the great traders' organisations and the rail-road agreement —some sort of solution of that kind— then, inevitably, the values should have risen, and the values which have been taken must be wrong.

But I want it to be made quite clear, before we finish with this Bill, what has actually been done. The total nominal value of railway shares, in round figures, is £1,100 million. The compensation proposed is £900 million. Even on that basis, one must bear in mind that the receipts on capital account are very little below the nominal capital, and the capital expenditure is as high as £1,188 million. But, of course, what we are really complaining about, and what is the kernel of our complaint, is the harsh diminution and abstraction of income from the shareholders. On the basis which one must assume, that the Treasury will exercise its discretion and that the stock will bear, in consequence, 2½ per cent., the reduction in income is from £41,500 million to £22,500 million, or £19 million—an overall drop of something like 45 per cent., varying, of course, in the hardship of its incidence from 45 per cent. in the case of the Great Western 2½ per cent. stock to 81.6 per cent. in the case of the London Midland and Scottish average. But we say that a drop of 45 per cent., with the immensely greater drops that such an average involves, is harsh, unfair and inequitable to those who have held the stock. It is-not for me today to go into the motives of this attack, but I do remind the right hon. Gentleman and hon. Members opposite of the very serious words which "The Economist" contained in this connection. "The Economist" put it down, quite bluntly, as "feather bedding," to use the American term, the trade unions from which the right hon. Gentleman and hon. Gentlemen opposite thought they were likely to get political support, at the expense of the stockholders from whom they thought such political support was less likely to come. When that can be said—and the more one examines it, the more attractive it appears as the solution to this matter—one is, indeed, dealing with a very serious matter. That is the complaint.

How do we seek positively to better that condition of affairs? We ask for a tribunal which is composed on the lines of that under the Cable and Wireless Measure, with someone of the calibre of a high court judge or a lord of appeal in ordinary in the chair, an accountant nominated by the president of the Institute, and a businessman of experience in the third place—the kind of tribunal which has worked admirably in the past. We go further than that. We put forward the matters to which we think this tribunal should pay special regard. We recognise that there is no infallible, ready-made formula, but this Amendment shows that it is not difficult to find terms of reference which will deal usefully with the matter. We suggest that their attention should be specially directed to the net maintainable revenue, to the relationship between Government and railway credit. If these matters are not available, then and only then should they turn to Stock Exchange values, and, in any case, they should consider the net assets.

I have heard on many occasions that this is placing too difficult a task on any tribunal. With the utmost respect to those who have said it, I have never heard such utter and complete nonsense in my life. For 25 years I have been dealing with problems of valuation of one sort or another, either as counsel or arbitrator. To say that it is impossible, with these clearly defined and set-out terms of reference, to come to a conclusion on the matter of these stocks, is simply to ignore what is done every day and problems which are solved with the greatest of ease through every month of our commercial experience. That is the answer to the first charge. It is also said that we are placing too much emphasis on income. For that very reason, we suggest that the other matters, such as the assets and the relationship between Government and railway credit, should be taken into account, and we say that if that is done then we will find the reasonable value to the holder of the securities and the reasonable value to the Commission who are going to take them over. We especially ask that it should be noted that it includes the net maintainable revenue. That is, we are looking to the future, and the results for 1946 and 1947, as far as can be seen, show that that would be a reasonable method of attacking the matter.

I am sorry for having detained the Committee for so long, but this is a vitally important matter. There has been every attempt of every kind to diminish the importance of the position of these railway stock holders. Let us for the moment accept every attack and sneer that has been put at them in the course of this Bill's progress. Let us suppose for a moment that they are the wicked capitalists, which has been suggested; let us suppose that the hon. Member for Enfield (Mr. Ernest Davies) is right when he reduces the number who hold the stock from a million to somewhere about 350,000. Even if they are only 350,000, and even if their holding is thereby increased from something like £400 a stockholder up to something like £1,000 a stockholder, why should 350,000 British subjects, only because they have got some savings, be denied what their fathers have never been denied in the past—that is, the right of having expropriation referred to an independent tribunal? That is the position which we desire once again to bring to the assembly of the representatives of these people, as well as of the rest of the country. We ask for their justice. We know there is very little chance of getting it, but, surely, let us try once to approach this as a matter of justice and not of party bias.

We have gone straight into the heart of the Opposition's objection to this Bill. The right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe) has really given the game away by stating that hon. Members opposite prefer the appointment of an arbitration tribunal to accepting Stock Exchange values because they consider that the shareholders are unfairly treated as regards compensation on the basis of Stock Exchange values. The right hon. and learned Gentleman postulated three reasons why Stock Exchange values were inadequate at the present time, and I think each one of those reasons was a fallacy. In the first place, he implied that if one attempted to arrive at compensation through an arbitration tribunal on the basis of net maintainable revenue, the net maintainable revenue would be greater than the incomes that would be received as a result of compensation on the basis of Stock Exchange values. I do not think that is the case. First, it is impossible to assess what the net maintainable revenue of the railways will be in the future, and secondly, the state of the railways at the end of the war, and even just previous to the outbreak of war, was such that the wartime rental which was paid and guaranteed by the Government could not possibly be earned in the light of postwar conditions. In view of that, it is in justice to the State, in taking over the railways, that the future income of the railways should be written down by a considerable sum on the basis on which it is arrived at on Stock Exchange values.

4.15 p.m.

The reasons I say that the £40 million received during the war could not be maintained are as follow. First, the railway companies would not be allowed, whatever Government was in power, to increase their charges up to the point at which they would be high enough to maintain the payment to the shareholders that was made during the war, because to increase the charges to that extent would lead to a rise in the cost of living which was pointed out by the Charges Consultative Committee when they showed that, if the freight charges were put up as was suggested by the railway companies from 25 per cent. to 37 per cent., the price of steel would go up by 4s. a ton, and that when the rates were raised from 16⅔ per cent. to 25 per cent., the cost of steel went up 3s. a ton. It is not in the national interest to allow charges to go up to such an extent that general living costs would rise in this country. The second reason is that, however much one put up railway charges, one would not necessarily increase the income of the railways in proportion to the extent to which the charges were increased. One would not do so because certain traffics would be diverted from the railways to the roads and to other transport forms, such as coastwise shipping, and it would act as a certain deterrent to travel and to the transport of goods by rail.

The second reason put forward by the right hon. and learned Gentleman was that there was a proposed Road-Rail Agreement which was very largely based on the "Square Deal" they were putting up in 1938, and that Road-Rail Agreement would have enabled the railway companies to increase their earnings, or rather not to lose further revenue to the roads. I would point out to the right hon. and learned Gentleman that the Charges Consultative Committee stressed that the competition of roads with the railways had increased following decontrol and the abolition of the Road Haulage Organisation, and they pointed out that this competition would tend to increase, and that, in their view, this would be as great a danger to railway revenue in 1947 as was road competition in 1938. That does not allow, of course, for the Road-Rail Agreement to which I have referred, but I think it is a mistake to imagine that the Road-Rail Agreement would eliminate road competition as far as the railways are concerned.

One of the main reasons for that is that the "C" licence operator still continues to exist—and would have still continued to exist in any case—and as long as there are "C" licence holders, the ancillary users, they can take their traffic from the railways and carry it themselves if the railways put up charges 'to the extent that it becomes economic for them to do so. As soon as railway charges go up and it pays a firm to carry its own goods, it will do so. The Road-Rail Agreement did not affect the "C" licensee, and, therefore, it left the way open for the continuance of that competition. That is another factor which, in my view, would have limited the railways in increasing their charges, on the one hand, and earning sufficient revenue, on the other, in order to maintain the income which it would be necessary for them to receive if they were to continue to pay out dividends and interest on the same basis as during the war.

If it is proposed that the assessment of compensation be referred to an arbitration tribunal, and if, as hon. Gentlemen opposite think, the arbitration tribunal resulted in greater compensation to the railways, it would mean that the Transport Commission would have to be subsidised by the State. If there is to be any subsidisation of transport in this country it must not be in the interests of the shareholders, but in the interests of the community as a whole. If it is necessary to subsidise the Transport Commission, the subsidies should be to enable the charges to be kept down so that the cost of living will not increase, and not subsidies to the railways in order that the shareholders may receive dividend and interest on the basis they have received them in the past.

Is not the hon. Member arguing that confiscation would be far better than compensation?

Certainly not. No hon. Member on this side has argued, during the Debates on the Floor of the House or in Committee, that confiscation should be considered in respect of the taking over of the railways. All we have asked is that the compensation to be paid should be fair and equitable compensation, and not excessive. If we depart from Stock Exchange values as a basis of compensation, I consider that we would be paying excessive compensation. We must look at the question of compensation realistically. We are concerned with the charges which will be imposed on the Transport Commission in operating the nationalised undertakings of this country in the future. We are not concerned with what the shareholders are to receive in the future after they have been bought out. We are concerned not to impose on the Transport Commission a greater burden than it will be able to bear. I urge the Minister not even to consider changing the basis of compensation, and not to consider accepting this Amendment as regards the appointment of an arbitration tribunal.

I realise that hon. and right hon. Gentlemen opposite feel very deeply about the provisions of this Clause, which is one of the most important in the Bill, in that it deals with compensation. The Clause lays down that the method to be followed in settling the amount of compensation to be paid for the railway and canal undertakings shall be on the basis set out in Subsection (1), and it is to that Subsection that this very long and rather complicated Amendment is directed. As hon. Members know, this Subsection provides that the compensation shall be the Stock Exchange market values on certain dates of the securities of the undertakings, and these securities are listed in Parts I and II of the Fourth Schedule. The Amendment challenges the whole basis set forth in the Bill, and proposes that another basis of computation should he laid down. Instead of compensation based on Stock Exchange values, the right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe) and his friends wish to substitute an arbitration tribunal composed of three persons—a Judge of the High Court, a qualified accountant, and a business man familiar with and expert in finance. According to the Amendment, this tribunal would be charged with the duty—and when one looks at the terms of reference laid down in the Amendment, it is our view that it would have an impossible task—of determining, to begin with,

"the amount of compensation payable in respect of the capital and income rights and expectations of holders of each class of the securities specified in the Fourth Schedule."

It would also, although I understand it would not necessarily be obliged to, take into account:

"The income which but for the passing of this Act, might reasonably have been expected to accrue to holders of each class of the said securities in the future on the basis of the estimated future net maintainable revenue of the undertakings;"

together with the relationship between the interest yield obtained on the various classes of securities and that obtained on gilt-edged securities between the years 1923 and 1938. In addition, they would have regard to the capital value of the net assets of each undertaking. As I understand—I have no desire to misrepresent the right hon. and learned Gentleman —where it is impossible to arrive at a true value otherwise, they could take the Stock Exchange value on the dates given in the Rill. As the right hon. and learned Gentleman said, the object aimed at by the Amendment is to express in capital values the future net maintainable revenues of the railways and canals. My hon. Friend the Member for Enfield (Mr. Ernest Davies) has dealt with some of the points which the right hon. and learned Gentleman made, and has shown how difficult it would be to ascertain the net maintainable revenue even if it were possible under the terms which the Amendment suggests.

Is the Financial Secretary arguing against the principle of arbitration, or against the terms of reference given in the Amendment?

I will touch on that a little later. The Stock Exchange itself could be described as an independent tribunal in that it lays down what is reckoned to be, from day to day, the values placed by willing buyers looking for willing sellers on the securities listed. As to the net maintainable revenue, we do not object to that on principle, because in other directions we have adopted it. We followed that principle in the Act which was passed to deal with the taking over of the Bank of England, and the same net maintainable revenue formula was laid down in the Act taking over Cable and Wireless shares. We have no objection whatever to the adoption of that principle. The right hon. and learned Gentleman will no doubt remember that it was adopted in the Coal Bill. We have no objection to the net maintainable revenue formula, as such. If it had been an easy way of doing justice to railway shareholders, I think I can say that we would most certainly have adopted it here. It is our case that, in this instance and in connection with these undertakings, it would be impossible to adopt the net maintainable revenue formula as a basis for compensation. An interjection was made by a Member of the Liberal Party, who asked my hon. Friend the Member for Enfield (Mr. Ernest Davies) whether it would not be better to confiscate, if my hon. Friend's argument held good?

That is not quite what I intended to say. I intended merely to say that the argument of the hon. Member for Enfield led to the logical conclusion that the Government should confiscate.

There were people in the party to which I have the honour to belong who believed that, in taking over certain industries and services, there was much to be said for confiscation. On the other hand, for many years it has been the settled policy of the Labour Party that right, proper and just compensation should be paid. When we faced the electors at the last General Election that principle was made clear in the document familiar to us all as "Let us face the future." Therefore we say that in our view, in taking over industries and services mentioned there, just compensation should be paid. Nothing was said as to the manner in which compensation should be made and no promise was given that the net maintainable revenue should be taken as a basis. In fact, it is good commonsense and it certainly is a principle which this Government will follow—it was laid down also by my right hon. Friend the Chancellor of the Exchequer who said, when moving the Second Reading of the Bank of England Bill that although we were adopting the net maintainable revenue basis there, that fact must not be taken as a precedent—that the Labour Party are not pledged to adopt any particular formula.

The only thing the Labour Party desire to do, and what they feel they are doing here, is to give just and proper compensation to those who have been dispossessed. Therefore, in our view, railways and canals do not lend themselves easily, if at all, to the principle of the net maintainable revenue being taken as a basis of compensation. From that fact every other argument springs in this Committee. We have gone into the matter carefully and we have come to the conclusion that adoption of the net maintainable revenue standard is impossible. [HON. MEMBERS: "Why?"] I will come to that point in a moment.

Let me now deal a little more fully with the arguments used by the right hon. and learned Gentleman. His speech demands that I should deal, if briefly, with the arguments which he used. How could the Tribunal implement its decisions? Take the permissive instruction listed under paragraph (d) in the Amendment, and the words:

"the net assets of each undertaking transferred."

How could we obtain a true value of the net assets of each undertaking transferred? It would be very difficult. I do not say that it would be impossible, as that would be wrong, but it would be next door to impossible. It would be a most laborious job and would necessitate the employment of a very large technical staff, who, quite frankly, are not available. When we had valued many of those assets, what guarantee should we have that we had placed the proper value on them? Many of these things are relative. [Laughter.] Oh, yes, indeed. I do not want to enter into a long discussion upon how to value one asset as against another, but taking the ramifications of railways and canals, it would be very difficult to decide how they should be valued. Suppose one particular station were to be valued at £x. Should another station exactly the same in another part of the country be valued at the same valuation or at some other figure? Such questions would take a long time to settle, and we have not the staff to employ on that work. It would definitely mean that the process would be protracted for several years at least and it would have, in our view, an unbalancing effect upon the railway stock market.

The right hon. and learned Gentleman seemed to think that on this side of the Committee we dislike railway shareholders. Speaking for myself and for those whom I know, I can say that I have come across no dislike for railway shareholders. This is not a time to take it out of the railway shareholders. Some of us who have suffered the discomforts of British railways would like to take it out of some of the directors, but the shareholders are relatively innocent in these matters. We want to see the railway companies, and particularly the shareholders, whether large or small, compensated upon a just and proper basis. In his speech and in his Amendment the right hon. and learned Gentleman lays it down that the Tribunal, in arriving at the value upon which a net maintainable revenue basis is to be placed, should have regard to the future. How that Tribunal could forecast what the net maintainable revenue of the railways would be in the future I find it difficult to understand.

Surely the inter-war years cannot be taken as providing any proper value? In the inter-war years, under the Railways Act, 1921, railway charges were fixed to ensure a certain standard net revenue, which was laid down I think as £50 million to £51 million a year. Nothing like this sum was earned, for the simple reason that traffic would not bear the charges which it would have been necessary to impose if anything like that sum had been sought. As a matter of fact, in the interwar years, revenue fluctuated considerably between £28.7 million and £45 million, and the average for the period was, I think, £36 million per year. In 1938, the year before the war broke out and the year which we perhaps might take if we wanted an average year before the war, the net income was no more than £29 million. It is true that during the war the revenue rose to something like £40 million per year, and as has been pointed out already—

I think the right hon. Gentleman must have mistaken the figure there. Of course, revenues rose far beyond £40 million a year during the war. Perhaps the right hon. Gentleman will correct that figure.

As to the revenues that the railways were allowed to maintain, it is true that colossal profits were made during the war, but they were not made in a sense by the railway companies. They were made by the State, which had taken over the railway companies and was using the railways for war purposes. If there is any hon. Member on that side of the Committee who will now rise in his place and tell us that the revenue earned by the railways during the war will be continued in the coming years I should be very glad if he will say so now. Hon. Members must know that railway revenue is going down sharply and that nothing like the revenue earned in the war years is likely to accrue.

It is not likely either—although here one enters the realm of prophecy—that the £29 million, or the average earned between the two wars, will be reached in the years ahead. Expenditure now, compared with that of 1938, is doubled. It is about £268 million, while gross receipts are, for the last accounting period, only about £160 million and the net receipts about £134 million. That being so, it is obvious that the revenues now being earned by the railway companies are dropping and certainly are not likely to reach the figures which obtained in the inter-war years and possibly not even the figure which obtained in 1938, namely, £29 million.

Will the right hon. Gentleman allow me to interject a remark? Of course, he must be aware that railway rates and fares have not been raised above 33 per cent. whereas, as he pointed out, the cost of working has risen 100 per cent. Such a basis, which is maintained on the instructions of the Minister, is hardly one upon which to base an argument now about the net maintainable revenue.

As a matter of fact, I quoted the figure I was looking at as I was speaking, but the net revenue is not £134 million as I quoted. I actually have not the figure here. What I have here is that expenditure over 1938 has doubled. It is practically doubled. It has gone from £134 million to £268 million. I would like to make that correction. I have no desire to use wrong figures or to mislead the Committee in any way. It may be urgued that the railways would be able to increase their revenue if they were allowed to increase their charges. In other words, if they were allowed under free enterprise to see what they should charge in order to give them a reasonable return upon capital invested, the query arises how far that would be possible. It can be argued with great force that there is a serious limitation to the increase which railways could impose by way of extra charges.

4.45 p.m.

The railways are, unfortunately for them, strictly limited by the competition from road traffic. It was so between the wars. That is a fact which goes to the root of this controversy. Under the free play of competition between road and rail it is possible that the future net maintainable revenue basis, if this Tribunal were set up would give the shareholders much less than they will get under the formula which we propose to take. The Amendment instructs the Tribunal when making its estimate to have regard to all the circumstances, and even if this Amendment were accepted, it would have to take notice of the fact that the road operators will be increasing their business and that the railways could not increase their charges even though they were losing trade to the roads. One of the circumstances to which it would have to have regard would be this competition, and I think in computing the future net maintainable revenue the Tribunal will find that it would not be as high as hon. Gentlemen opposite seem to think. For all these reasons we think that the only possible course in fixing the basis of compensation under this Bill is to take Stock Exchange prices at certain given dates. We take alternative dates whichever is the fairest to the stockholder. They can have, if they are so minded and the price is better, a date before the General Election when this Government took office, or another date before the Bill was introduced.

If it is argued, as it sometimes is, that the General Election was held under the shadow of the return of a Socialist Government I think that the answer is "Nonsense." It was generally believed by hon. Members opposite that the prestige and glory surrounding the right hon. Gentleman the Leader of the Opposition would carry the Conservative candidates home in the great majority of constituencies. Therefore, it is unfair and largely untrue—and the memories of all of us will bear this out—to suggest that the Stock Exchange quotation prior to the Election were written down because of the impending arrival of a Socialist Government, which would nationalise transport. For these reasons I am sorry we cannot accept this Amendment. We desire to do justice to the stockholders and we have considered all alternative methods. This appears to us to be the only one which is fair to the shareholder, fair to the public and fair to all concerned.

The right hon. Gentleman the Financial Secretary has used this word "justice" practically every two minutes in his speech. May I ask him before he sits down to tell us how can there be justice, when the income of so many of these people is to be reduced? Can he explain that?

Answer.

The Financial Secretary to the Treasury can answer that query later. I thought there was going to be another split in the party opposite on the subject of whether compensation should be paid at all, but for the moment that has been averted. However, there has been no split in essence between the arguments delivered by the right hon. Gentleman the Financial Secretary to the Treasury and those of the hon. Member for Enfield (Mr. Ernest Davies). What the hon. Member for Enfield said was not that we should do justice to the stockholders, but that we should do justice to the new Transport Commission in the sense that it will be better for it to be grossly undercapitalised than fairly capitalised. That is the point which he put in the Committee upstairs.

I think the hon. Gentleman is unintentionally misinterpreting what I said. What I said was that we must not impose upon the Transport Commission a greater burden of increased charges than that Transport Commission was able to bear, otherwise the State were -simply subsidising the shareholders in their interests.

I am glad that the hon. Member confirms what I said. Here are the words which he used in the Committee upstairs:

"The Transport Commission must not have imposed upon it an actual burden of greater interest than the Transport Commission can easily earn."—[OFFICIAL REPORT, Standing Committee B., 6th March, 1947; 629.]

What we are trying to do here is justice to the actual owners. That is the question at issue.

Surely justice to the owners is paying a price to the owners which is the value of that undertaking and the undertaking is worth no more than the earnings that can be gained by the undertaking.

Precisely. I am grateful to the hon. Member for confirming the point we are trying to make.

The hon. Member and the Financial Secretary to the Treasury cannot have it both ways. The hon. Member for Enfield and the right hon. Gentleman devoted large parts of their speeches to trying to prove that if we did, in fact, set up a tribunal compensation would be lower than now. That might be so, but the point we are making is that what the stockholders would get would be that to which they were justly entitled. That can only be found out by independent arbitration and by an independent tribunal. Whether it would be more or less we do not know, it is a difficult thing to determine. Hon. Gentlemen opposite will have to give up having it both ways, because we continually hear the accusation—and the Chancellor of the Exchequer referred to it when speaking on the Budget Resolutions the other night—that there is a lot of water in railway capital. If that is true it must be wrong to take the Stock Exchange value. If the right hon. Gentleman really believes that the railways have a poor bag of assets—and no doubt he is as ready to answer for this belief as he is to answer for his statement that the Coalowners flitted—then the tribunal would take these things into account. If they believe what they say they accuse themselves of throwing away public money.

The right hon. Gentleman the Financial Secretary said that he would do justice provided an easy way of doing justice could be found. He did not mind about justice if it was at all difficult. Then it would not be done. He went on to say that in this case it was impossible to do justice, and he instanced the question of valuing the assets. He had to admit that it was not impossible to value them. I can really conceive no difficulty about that at all. He said that some assets were worth relatively more than other assets. How profoundly true. He went on to say that it was really impossible to estimate the net maintainable value. I might perhaps have accepted the argument and believed that there was something in it if he had applied it to the net maintainable revenue in the case of the coal industry, a far more hazardous and difficult estimate. Further, it would have been more convincing if the right hon. Gentleman had not adduced this difficulty of estimating net maintainable revenue in the case of the electricity industry where in fact, it is far easier to estimate future earnings than in any other industry. I do not think that a very strong case has been put up by hon. Gentlemen opposite who have spoken so far, and I hope that we shall have something better before we pass from this Amendment.

It is all very well for the right hon. Gentleman to say that the Stock Exchange is an independent tribunal, but, as the right hon. Gentleman himself pointed out, at the time these prices were recorded the railways were under the complete control of the Government, and, secondly, the dominating factor determining the price of any stock which may be liable to nationalisation is what is likely to be got in compensation. No other consideration once nationalisation is decided on is of any importance. Finally, a point which has never been answered by the right hon. Gentleman or any of his colleagues is that when nationalisation was announced a stopper was put on prices; holders could only guess what would happen in the matter of compensation. Meanwhile, against the interests of this country, the Chancellor of the Exchequer rigged the gilt-edged market. At the time nationalisation was announced Consols were at 83, now the price is 95. The prices of railway stocks have been pegged owing to nationalisation while this rise has taken place. Compensation will be given in Government stock at inflated prices. That is a heavy loss. That argument has never been met in any way.

The right hon. Gentleman says he will not do justice because it is not easy to do so. He will not have a tribunal because the tribunal might decide on lower prices. If he believes that what he is really saying is that the Government are throwing away the country's money. He is impaled on the horns of a dilemma for he is either robbing the shareholders or the State. I do not know which he prefers, but both I think are highly disgraceful.

It was with some amazement that some of us on this side of the Committee heard one hon. Member talk about confiscation. We knew that there was a considerable divergence among hon. Members opposite as to whether there should be total or partial compensation. What is now being indicated is a divergence of opinion regarding partial compensation and total confiscation.

rose—

It was not the hon. Member for Enfield (Mr. Ernest Davies) who said it.

Who did?

It was an hon. Member who sat behind the Government Front Bench.

The great objection I have to the Bill is that a minority party in the country representing less than 50 per cent, of the electorate are acting as judges. That is contrary to the British sense of justice and an insult to the constitution. I do not want to speak on the internal financial arrangements in this matter although they are of great interest. Since the Committee stage I have been abroad and it would surprise a lot of hon. Members opposite to know of the extent of the interest that foreigners are taking in this matter. If as Members of this Committee we are going to indulge in confiscating practices, can we stand up abroad and say that we object if such measures are used against us? I want to ask the Financial Secretary. Does he object to the terms negotiated in connection with the Argentine railways because the price agreed on is very much over the Stock Exchange values?

I am sorry but I must interrupt the hon. and gallant Member for Hythe (Brigadier Mackeson). We have negotiated no sale of any railways through the Argentine Government.

The Government have not negotiated the sale—

No.

I agree, but it has been negotiated and the price that has been paid is very much higher than the Stock Exchange level. I think the Financial Secretary will agree that it is some £25 million above Stock Exchange values.

What the shareholders do is really their affair. We have not taken any hand in it.

Nevertheless, this country has gained a very large sum of money. The position that the Government are putting themselves into is that they will find it really difficult to stand up for justice for the British shareholder and the Treasury abroad, when at home they indulge in partial confiscation of this kind and refuse to accept arbitration. I challenge any hon. Member to say that this is not an absolute scandal and that it will not have a grave effect on our financial future abroad, particularly in hard currency countries where we are so short of dollars.

I should like to say a word in support of the Amendment. Both the hon. Member for Enfield (Mr. Ernest Davies) and the right hon. Gentleman the Financial Secretary to the Treasury made a number of points, some of which have been extremely well dealt with by my hon. Friend the Member for Flint (Mr. Birch). I should like first to refer to this net maintainable revenue of which considerable point has been made. It is very difficult to suggest that to make an estimate of the net maintainable revenue is an impossible task to put upon a tribunal. As has already been pointed out, an even more difficult estimate has been made in the case of the coalmines and will certainly be made in the case of the future revenues of Cable and Wireless. It is by no means an easy task, but it is one which, nonetheless, has to be undertaken.

When the right hon. Gentleman talks about the probable net maintainable revenue and suggests that it is likely to be a very poor one, I should like to put one or two considerations before the Committee. To begin with, as I pointed out in an interjection while the right hon. Gentleman was speaking, the present state of affairs is one where the railway companies are faced with costs in the way of increased charges for coal, wages and so on, amounting to about 200 per cent., whereas the increase in their charges and fares, which vary according to different parts of the railway schedules, does not exceed 33 per cent. It is not surprising, therefore, that the situation as disclosed by the Financial Secretary is not in every way satisfactory.

Does not my right hon. Friend mean an increase of 100 per cent.?

My point, of course, was that the costs had about doubled compared with prewar, which is a 100 per cent. increase in the sense in which my right hon. Friend puts it. The costs are about double, whether by way of payments for coal—which has much more than doubled in cost—or salaries, wages and so on.

On the other hand receipts from fares and the rates have not risen by more than 33 per cent., and in certain categories by less than that, so that the argument which the Financial Secretary put forward is not one which I think holds water at all. Then, as to future possibilities, surely the Financial Secretary has overlooked the fact that not very long ago there was a road-rail agreement which was some indication to show that road and rail interests were ready to co-operate and to seek some solution of the problems which had created so many of the difficulties before the war?

I was very glad that neither the hon. Member for Enfield nor the Financial Secretary professed himself in favour of confiscation. Indeed, I should not have expected either to do so, but I was very anxious about the way in which the hon. Member for Enfield put it. His idea was that if the Government cannot afford to pay a fair price that is just too bad for the railway stockholders. I am glad that the Financial Secretary did not put the argument on those grounds, although two hon. Gentlemen on the back Benches said "Hear, hear" when the Financial Secretary told the Committee that some Members of his party would have liked outright confiscation. I am very glad that the Financial Secretary has not himself suggested anything of the kind, but I begin to see his difficulties and those of the hon. Member for Enfield. They have had to seek some sort of compromise.

Is the right hon. Gentleman not aware that in the prewar years the road passenger transport industry's private monopoly confiscated and knocked the small man out of business, and that nothing was said about that by the party opposite?

I do not accept that for one moment, but, supposing it were true, would it be a good example for the British Government to follow? I do not think it has anything to do with the present argument at all. The Financial Secretary was telling the Committee that he was not in favour of confiscation. My argument was that he and his hon. Friends who think with him have been pushed about by those in his party who are in favour of confiscation and that, therefore, this proposal has come forward which, though it is not what the Financial Secretary calls confiscation, is that those of us on this side of the Committee who have studied the figures do regard as confiscation. Part of the property of the railway companies is being confiscated because the price which is to be paid is too low. I do not want to say too much on the question of the price, but the Financial Secretary has told us that the average net revenue of the railway companies in the inter-war years, when things were admittedly bad, was £36 million a year. He now tells us—and the Bill supports him in this—that the proposal is to give compensation which will produce something like £22,500,000 a year, thta is to say that the difference between £22,500,000 a year and the average received before the war is being taken away from the railway stockholders No one can deny that.

Is the right hon. Gentleman suggesting that the railways suffered a bad period during the war?

No, I said during the "interwar years," which means in the years between the wars. During the war the railways had a very good period indeed and the profits then were nearly all removed by the Government and—I was going to say "tucked away"—had unfortunately to be spent in the war effort. Had they been left in the coffers of the railway companies the railway companies would not now have to consider the problem of increasing fares and charges.

I suppose that the right hon. Gentleman is aware—and the Committee should most certainly be aware —that the figure he quotes of the average net revenue during the interwar years of £36 million is in actual fact what the railways will receive under the present compensation at 25 years' purchase, which is not bad?

I was, of course, accepting what the Financial Secretary told us, which was that the average income the railways received was £36 million a year during the interwar period. I am now telling the Committee that the income which they are likely to receive under the proposals put forward by the Government is about £22 million a year. If the Financial Secretary has something to say about that figure I will willingly give way

I am merely saying that the £908 million which is the global amount of compensation which they will receive at 25 years' purchase works out at £36 million a year, which is the average yearly profit during the interwar years, though actually in 1938 it was down to £29 million.

I do not doubt that the Financial Secretary has observed also that when 2½ per cent. stock stands at par the number of years' purchase is 40, so that it is no use speaking of 25 years' purchase in quite another period. We are in a different period of values. As my right hon. and learned Friend has said, this proposal is wrong in principle. We have asked for a tribunal because we think that a tribunal would be a fairer answer to this problem. Why are hon. Members opposite so afraid of having a tribunal? Do they think that the figure which a tribunal would give would be much greater? If they are frightened of a tribunal it can only be because they fear (that the tribunal will do better justice than do the proposals of the Government.

The terms are very harsh and are based on a period when market values were depressed owing to the expectation of nationalisation. We have already heard about market values from my hon. Friend the Member for Flint. The suggestion that the Stock Exchange is itself a tribunal which assesses these values is, of course, utter nonsense. The Stock Exchange does not fix the prices; in fact, the Stock Exchange authorities put out a very carefully considered statement in which they explained to the general public and to the House that they did not themselves take that view at all. They do not fix the prices and the compensation is not, in their view, just. The prices are fixed in the market by the buyers and the sellers and not by the men who deal in the stocks. If sufficient stock is being sold the price will go down whatever the stock jobber says; if sufficient buyers come in the price will go up, again in spite of anything the Stock Exchange may say. The sooner the Financial Secretary learns that about the Stock Exchange the better it will be.

On two points we have received no substantial answer at all. No reply has been made to the suggestion which has been put forward time and time again from this side that these terms are harsh and will cause great hardship to numerous individuals—to old people who have retired with a reasonable expectation of obtaining a fixed sum of money each year, to charities, pension funds and funds which are the basis of insurance policies, and so on. Again, no answer has been given to the suggestion made in the Committee and on the Floor of the House that there were anomalies in these proposals which could not be defended. The Financial Secretary has never answered the particular anomaly quoted by my right hon. and learned Friend about the two Great Western debenture stocks which were absolutely pari passu yet received absolutely different treatment. The right hon. Gentleman has not answered these points because he cannot answer them. He knows that these proposals are not fair, but he has not the courage to tell us so. There is a great deal one could say about these proposals, but I do not think it is necessary to say any more now. The Committee is aware of the injustice which is being inflicted on the stockholders and I and my hon. Friends will press this Amendment to a Division.

The right hon. Member for the City of London (Mr. Assheton) knows that there is no confiscatory element in these proposals and that the values on which compensation is being given are higher than the prices at which these stocks have stood for most of the last 15 or 20 years. He knows, also, that if this Bill were abandoned tomorrow, all railway stocks would fall by 15 or 20 points on the Stock Exchange, which is common knowledge in the City. The right hon. Gentleman knows also that one does not expect to receive the same number of years' purchase for the dividend on an exceptionally risky share as one does for the interest on a Government security. I do not therefore wish to argue further on these points. I propose very briefly to put to the right hon. and learned Member for West Derby (Sir D. Maxwell-Fyfe) what I regard as the serious reason why this plan for an independent tribunal is impracticable. The hon. Member for Flint (Mr. Birch) asked why it was impossible to value assets in this case. Surely the reason is that the value of assets depends on the expected maintainable revenue; and in the case of the railway, unlike coal and similar undertakings, the prospective revenue depends almost entirely on the policy and actions of Government. The railways are at present receiving a large subsidy; whether that continues depends on the Government.

The Road-Rail agreement has been mentioned; and the question whether that will be allowed to go through again depends on the policy and decisions of the Government. If a tribunal were appointed, the first thing it would have to do would, therefore, be to estimate the result of the next General Election; and I suggest that that is not the kind of job that an independent tribunal—consisting of judges and so on—could possibly undertake. The second thing it would have to do would be to decide—having estimated which party was likely to he elected—what the policy of the new Government would be with reference to railways. I suggest that the difficulty there would be even greater if it were a Tory Government than in the case of a Labour Government. We have had one example already in this Committee, which I cite by way of illustration, of the absurd position the tribunal would be in in practice on account of the attitude of the party opposite to the Road-Rail agreement. We know that the right hon. and learned Member for West Derby is favourable to that proposal, whereas the hon. Member for Monmouth (Mr. P. Thorneycroft) has told us that he is opposed to it. Therefore, on that very important issue, we know that there is a split in the party opposite; and the tribunal would not know on which side any future Conservative Government would come down.

It is, therefore, impossible to estimate the future revenue of the railways because that entirely depends on Government policy. We are, therefore, brought back to the conclusion that the only fair and practical, independent valuation is that of the Stock Exchange which, as the right hon. Member for the City of London rightly said, is an independent decision by buyers and sellers in the markets. Since we have such a decision available, and seeing that the level of compensation is higher than that at which these stocks have stood over the last 15 to 20 years, this is the only practical and fair way of deciding the issue.

I desire to support this Amendment, and to put forward two points of view in regard to the basis of confiscation, namely, whether it should be on an income basis, or whether it should be on a capital value basis. The House of Commons is the place to put forward the grievances and difficulties of the people of the country. I have had hundreds of letters in regard to the confiscatory procedure adopted under this Bill. I will give the House only one example, which is typical of the others. I have not the letter with me, but it comes from an old country doctor, and was written in the following terms:

"For 40 years I have faithfully served the sick of this district. I have managed to buy a small house, and to save £11,000 in 40 years. I am crippled with rheumatism, and I live in a small house with my old wife and my old sister. My income has been £435 a year, but by this Bill it is to be cut by nearly half. What am I to do?"

It may be said that he could go and buy an annuity, but that is no argument at all. This is pure confiscation in the case of a valuable citizen who has served his people well. He has no appeal whatever, and this poor old gentleman may have to go to the public assistance board.

Another question which has been raised is that of security. The Government have chosen this moment to take over the railways, when they have given their best, and all their rolling stock and equipment have depreciated as a result of six years of war. The Government have taken this moment to confiscate the railways, and this is where the question of security arises, because they are taking them over at the same time as the Chancellor of the Exchequer is playing with loaded dice and marked cards to push up the gilt-edged market. It is nonsense to say that the credit of this country is enhanced. If a shareholder of the railways is compelled to take a Government security, it is not so good while this Government is in power. It is arrogant nonsense for the Chancellor of the Exchequer to go to America and say that the credit of this country is enhanced because of the advance in price of gilt-edged securities. I should like to know how much of the taxpayers' money he has spent in buying gilt edged securities to push up the price. One day, sooner or later, this South Sea bubble will be pricked, and gilt-edged stock will come back to 3 per cent. or 3½ per cent., and then who will have to stand the loss for this speculation in his own stocks by the Chancellor of the Exchequer?

I listened with great interest to the speech of the hon. Member for North Battersea (Mr. Jay). He made great play about the uncertainties of the future for railway shareholders. As I listened to him, I thought that he at least was going to hold out some certainty, in his alacrity in resisting this Amendment, by letting them know the very worst right away. The Financial Secretary spoke about the difficulties of ascertaining what the net maintainable revenue would be in the future. I am sorry that he takes such a gloomy view of what our financial and economic conditions are to be in the immediate future, and particularly so far as the railways are concerned. As my hon. Friend the Member for Orpington (Sir W. Smithers) has shown, there are many people who are very seriously disturbed and worried if an Amendment such as this is not accepted. The right hon. Gentleman seemed only too willing to turn it down, supported by cheers from his party, because he thought we were putting it forward in an endeavour to give the shareholders more than they would otherwise receive, or, as some put it, more than that to which they are entitled. I dissent completely from that point of view.

The right hon. Member for the City of London (Mr. Assheton) quoted the very great disparity between two classes of Great Western Railway shareholders. I should like to call attention to the fate of the investors in certain issues in the London Midland and Scottish Railway Company, and, in accordance with Parliamentary custom, I at once declare my own interest. I am thinking of the preference shareholders. The right hon. Gentleman tried to make the point that if this Amendment were accepted, it might not always be possible to pay them in the future what they had received in the past. I am limiting my remarks to the London Midland and Scottish 4 per cent. preference stock, and the 1923 4 per cent. preference stock. Up to now, except in one year in the case of the 1923 stock, the investors have always received their 4 per cent. in full. They are now given the certainty by the right hon. Gentleman that they are not to be allowed to take their chances in the future, even under the gloomy conditions which will prevail under the Socialist Government. They are to have their income, on a reduced capital value, brought down to only 2½ per cent. I think that the money invested in the first of these issues, the old 4 per cent. preference stock—

Will the hon. Member say how much is to be paid for the stock?

If the hon. Member had waited, he would have heard me make that point. He is quite at liberty to follow me and to make a speech of his own controverting, if he can, every argument I have put forward. He asked me what the terms of purchase were to be. So far as the first of these issues is concerned, something like £118 million is invested. If there are £1,100 million invested in British railways, then, if my arithmetic is correct, this represents something like 10 per cent. of the whole.

The hon. Member has misunderstood my point, which is that the amount to be received for that stock is very much more than £100.

The hon. Member has not followed me. I was talking about the London Midland and Scottish 4 per cent. preference stock. I take it that he was thinking of the 4 per cent. debenture stock. Preference stockholders are to receive—and I am speaking from memory —£85 8s. 9d. for £100 of stock. On a 15 per cent. reduction in capital value, the stockholder will receive 2½ per cent. in the future. I hope that the stock will be issued at par, and that there will be no discount. This is a very important point, and the Government should give us some information on it, because it is of considerable moment to the people holding this stock. I will now give the hon. Member for South Derby (Mr. Champion) a little more light regarding the 1923 4 per cent., London Midland and Scottish preference stock. This is to be taken over at £62 15s. An old lady rang me up to tell me that nearly all she had in the world came from this 1923 stock. Holders are to receive £62 15s., which means that they will have an income of 2½ per cent. on a reduced capital value. In other words, they are being mulcted of something like 40 per cent. of their capital and about 60 per cent. of their income. We are asked by the Financial Secretary, and by his able lieutenant, who, I think, would have been a better spokesman in support of this iniquitous proposal, to agree that this is fair and equitable to these large numbers of small investors whose existence depends on this kind of investment.

The Financial Secretary was good enough to include a sneer about directors. I am not concerned about directors, although I want to see fair play to everyone. I am much more concerned to see fair play for this other class of deserving people such as was mentioned by my hon. Friend the Member for Orpington, who are eking out their dreary existence on something like £100 or £150 a year from the shares they hold in railway stocks. It must be remembered that very often these investments have been left to them by parents or relatives, and were made long before the first war, when they were considered to be the best investments you could have. Now, under this Socialist administration, we are asked to consent to this sort of thing, without any reasonable excuse being given for resisting this Amendment. In consequence, I shall certainly support it.

I want to declare my interest in this matter. Having been a railway clerk for 28 years, I think I can claim to have as much interest in this problem as any hon. Member. It has been my view, and the view of railwaymen generally, that the railways have been over capitalised. I have not the time now to go into this question of capitalisation, but there certainly is a great deal of overcapitalisation, and we think, therefore, that my right hon. Friend is quite right that the new organisation shall not be burdened with the heavy capitalisation which was experienced in the past. I believe that the shareholders are very fortunate indeed in the Government having decided, at this time, to nationalise transport. Had they waited another five or 10 years I am afraid that the value of their existing holdings would be considerably reduced. Those who have been intimately engaged in this industry for a long time know that in addition to its over-capitalisation, and the difficulties arising therefrom, it has been almost impossible for the railway companies to get sufficient new capital to modernise their enterprise. They can get plenty at 5 per cent. and above but that is absolutely beyond their earning capacity. Even before 1939, the companies had to go to the Government for new capital, and the Government sponsored loans to the railways to the extent of £67 million at 2½ per cent.

That is an indication of the moribund condition into which the railways had fallen. The right hon. Member for the City of London (Mr. Assheton) referred to the difficulties of maintaining net revenue, and to the increased expenditure which, he said, did not compare with the increased rates and charges. He said that rates and charges had increased by 33⅓ per cent., which was too low by comparison with increased costs. I noticed that he was careful not to advocate any increase in rates and charges. I would like to know whether he does advocate that. Assuming that the railway companies took that course, to maintain existing rates of dividend and interest, what would be the reaction? We know that every time rates and charges are increased traffic is automatically turned away from the undertaking. If rates and charges are increased again the inevitable corollary is a further loss of traffic to other forms of transport. In these times, when industry is struggling to get on its feet, is it fair to them, and to the country's interests, that the shareholders should resort to increased rates and charges, thereby making industrial recovery much more difficult? We cannot afford to see the railways continuing in their present state of ownership. There is one essential contribution to the economic recovery of our country, and that is the existence of cheap rates for the transport of goods and commodities. This cannot be accomplished if the Minister starts off with an over-capitalised industry. I believe that the future will prove the financial proposals of the Bill to be the soundest part of the Bill. They will put the railways and transport generally on a sound financial basis, and will enable them to contribute to the welfare of the nation in a much greater way than ever before.

As we are concerned with the largest financial and property transaction under the Bill I do not think anyone can complain about the time we have spent on it during the Second Reading, on the Committee stage, and now, again, in this part of our deliberations. The accusation has been made that the compensation provisions of the Bill, as applied to the railways, represent confiscation. Well, when compensation is represented by a sum of £908 millions that is a rather peculiar method of confiscation—

Suppose the property had been worth £909 million. If the right hon. Gentleman paid £908 million there would be confiscation.

The principle of confiscation may be introduced with regard to £1 million, but I do not think that is a very convincing argument. It was said that had been pushed about by supporters of the Government on this issue. Well, I have not been conscious of being pushed about by my right hon. and hon. Friends, and I must say that I do not intend to be pushed about by the Opposition in this matter. Members opposite are complaining because these compensation terms are not such as they would have given to the railway shareholders if they had been carrying through a Bill of this description —although I do not suppose for one moment that they would ever have attempted to put forward such a Measure. [HON. MEMBERS: "Hear, hear."] Yes, that represents the major difference between us, but I do not think it does any good to level a grotesque charge of confiscation. There are alternative methods by which the Government, having accepted the principle of compensation, can apply it to different industries. The Government have applied different methods and procedure in relation to compensation for existing owners of property which has been transferred by the State to public ownership.

The procedure adopted by the Government is, I believe, much more advantageous than that proposed by the right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe). We have to satisfy ourselves whether, on the whole, it assesses fairly the amount of compensation which would be received under any fair process. There is the question of the period of delay, disturbance, uncertainty, the locking up of capital investments, the reactions on trade and industry, and the individual. After full examination of the alternative methods, the Government eventually decided to adopt the principle of market prices. It had the advantage that British Transport stock, issued in payment, would be freely negotiable so that the individual who was not satisfied could realise his stock. The idea that because an investment in a private form of enterprise has earned 4, 5 or 6 per cent. Parliament is under an obligation to maintain that rate of interest is quite unacceptable. It is contrary to the whole principle involved in the transfer of private property to public ownership. When the whole community becomes liable for the capital investment and credit, and stands behind that investment as a security, then the community is entitled to take advantage of its communal credit. If capital can be raised at a lower rate of interest than in a private undertaking then the people as a whole are entitled to that advantage.

Persons who sell and buy railway shares get expert advice about their transactions, and we contend that for securities of this description, which have been marketed publicly over a long period, this compensation roughly assesses the value of their securities. When I was determining which basis should be adopted I examined the movement of these shares over many years before, during, and after the war. I found that their value has changed very little indeed, that it did not make a great deal of difference what period was taken for the purpose of getting a fair valuation—

Is it the right hon. Gentleman's view that the Government of the day can take away the property of private individuals without arbitration?

Yes, I think that the Government of the day, which has the will of the people behind it, can do anything it likes with regard to services which are necessary in the interests of the community.

Without arbitration?

Yes, certainly. As a result of many years' experience of this House, and sitting under many Conservative Administrations, I have observed property being dealt with very roughly, from time to time, when it suits the convenience of the Government of the day. But I do not think that is the issue. I recognise that there were alternative methods. It was only after full examination that it appeared that the advantages—I am putting it on the balance of advantages, because I do not think that there is any principle involved here—[HON. MEMBERS: "Oh."] No, I do not think there is any principle involved here; it is merely a matter of what is the best procedure, and the fairest method, of coming to a decision which the circumstances require. It appears to rue that on every basis on which one analyses the two alternatives, the balance is on the side of that which the Government eventually decided.

I have already referred to the fact— and it has not been substantially disputed —that if you have arbitration procedure, no one could say that a very substantial difference would emerge as a result of that process. [Interruption.] I am pointing out that there is no advantage in it. I prefer the alternative method. Let me put it this way: Hon. Members opposite do not want to see this Bill go through at all and therefore, it is only natural that they should put up procedure which represents difficulties. Hon. Members on this side of the House are determined that this Bill shall go through, and, therefore, provided we meet the basis of equity and fairness, we naturally come down on the side of the process which will most quickly effect our purpose. I am not shirking the need to compare the two processes. No one has brought any evidence that if we had followed the tribunal procedure in this case there would be any substantial difference in the result. It has not been assumed that there will be. It has been assumed that there will be a sense of fairness and greater equity about it, and investigation will give a sense of satisfaction. On the other side, I have pointed out that that represents considerable delay and uncertainty—the blocking of the capital involved—and in my view it is desirable that the Minister, in that case, should take the responsibility of saying, "No, that procedure and that process is not the best in these circumstances." I think that there has been considerable advantage from the fact of saying that British Transport stock of a freely negotiable character will give a considerable amount of latitude and freedom.

Can the right hon. Gentleman say why it should necessarily involve delay, so far as the main purposes of the Bill are concerned, to submit to arbitration, and would it not be to the advantage of the Government if those whose securities were taken over were themselves satisfied that the method was an equitable one and decided by arbitration?

I am not at all satisfied that the "to do" raised round this is not a result of agitation and propaganda. With regard to the delay, which I think is the material point of the hon. Member's interjection, we are considering the properties of the railway companies, and the Financial Secretary mentioned some of them, such as station buildings, the permanent way, locomotives and wagons; and if we take practically the whole of the equipment of the railway companies they do not represent saleable stock, plant or equipment in the ordinary sense. They are tied in their value to the earning capacity of the railways. The earning capacity of the railways as such, which so vitally reacts on the capital value of their assets, is a very difficult thing to assess at the present time. I would myself have hesitated very much to place upon any tribunal the responsibility of trying to assess what the net maintainable revenue of the railway companies would be in the immediate future. First of all, I do not think that that would have been entirely fair to them. I am not satisfied that the compensation figure would have come out, as a matter of fact, if it were assessed properly and accurately, as well as these figures.

In the first place, the railway companies are meeting the immediate after war position at a time when they have had to carry the whole strain of the war activities of this country—and not only that, because Britain, of course, was a base for the whole of the Allied Nations fighting operations—and the strain on the railways was enormous. At the present moment, we are labouring under conditions in which they cannot even, spend the depreciation reserve necessary for the purpose of bringing the permanent way, the locomotives and wagons up to normal efficient standards. We are living in a period in which civil aviation has not yet got into its proper stride. [HON. MEMBERS: "Hear, hear."] I see no need for cheap merriment. If one were dealing with the reasons for that, which it is not competent for me to do now, it is linked organically with the wartime structure of this country. The material point is that it represents a competitive service with the railway companies. In the same way as the right hon. Member for the City of London (Mr. Assheton), when he was dealing with this problem and the ordinary capacities of the railways, referred to the position between 1921 and 1939, I think this is an appropriate occasion to remind the House that the party opposite set out after the last war in a legislative effort to remedy the financial position of the railways under the 1921 Railway Act, and they left out of account entirely the problem of road competition, which vitally affected sub—sequently the earning capacity of the railways. I will give some additional information to that supplied by the Financial Secretary. In 1927, when the new Act was getting into its stride, the revenue for all of the four main line railway companies was £42.6 million. In 1928 it dropped to £41 million. In 1929 it went up to £45 million, by 1932, it had dropped to £28.7 million, in 1933 it was £31 million, in 1934 £38 million, and by 1938 it was down to £29 million.

One can examine the annual revenue by the railways during that period—and it was a period immediately following Conservative legislation which was designed to put the railway companies of this country in a sound financial position—yet the circumstances were such that the railways experienced this uncertain financial result, with the result that the railway companies' appeal to the public for capital was very severely interfered with. The consequences of that are being experienced at the present moment. Who can say that the railways in their present plight of over strain and the general position which prevails today, with new groups of industry coming along, would be in a strong position in the future to improve their situation? If we followed this tribunal procedure, all factors of that description would have to be taken into account. I say that that is just an impractical business responsibility, financially, or in equity, to put on three persons. It is an impractical way of dealing with the situation.

With regard to the person who has put money into railway securities with a view to old age, and matters of that description, I do not in any way belittle that point. I know that for propaganda purposes, cases of this description are "trotted out" and made an undue amount of; but I agree that there are persons in that position. There are organisations who had their funds invested in railway companies. In the case of the individual, if the purpose is to secure an income for the rest of that individual's life by transferring their stock into an annuity, he can safeguard his individual income for the rest of his life; but I frankly admit that if a person is thinking in terms of leaving property and interest in perpetuity—

There are many cases in which railway shares are held on trust and the revenue derived by the trust funds is entirely from the railway companies.

The question of trustee securities is a matter which, from time to time, is dealt with by the Treasury. I was dealing with the individual person who may be affected by these circumstances, and I was pointing out that there is a way in which an individual can secure his income for the rest of his life.

On the question of perpetuity of interest charges, I am not disposed to evade that issue at all. That is a fair and square issue. From the standpoint of the Government, they can raise the necessary capital at a lower rate of interest than the railway companies have been able to raise capital in the past. Whether they have wanted to or not is another matter; they have not done so. The State can raise that capital at a lower rate of interest and the State is entitled to have that lower rate of interest. Persons who accept that British transport stock get a greater security. There is Treasury guarantee behind it, and if they do not like it and can get better investments elsewhere, this procedure frees them to do so. That being the case, I think that this stands up as a good sound business Bill. It frees the capital involved for ordinary investment purposes, and there is the normal procedure by which the individual is safeguarded for the rest of his life. Finally, as the Financial Secretary said, this represents 25 years purchase of the railway securities at a figure of £36 million per year. In view of the figures I have quoted, which represent the period between 1927 and 1935, I think this is a fair basis of compensation, and at the same time a sound business bargain for the State.

The right hon. Gentleman has rejected the idea that any stockholder should be entitled to the continuance of the same income. In that rejection he included the large number of stockholders whose income was secured upon unimpeachable security. He has included many holders of trustee stock, who, by no conceivable stretch of the imagination, however badly the railways might be paying, could have received less than their contractual rate of interest which had been enjoyed, and they would have been entitled to receive that contractual rate in perpetuity. The right hon. Gentleman has justified his proposals upon a number of grounds. But one thing we have not yet been told—and apparently we are not to know until the Treasury make a decision later on—is, what rate of interest will be paid upon the compensation stock, or what amount of compensation stock will be given—that is to be assessed by the Treasury on the basis of current market values or what will be the terms of redemption.

The Chancellor of the Exchequer has given an assurance—although it is not yet reflected in the Bill—that the stock given in compensation will be a dated stock, with a fixed ultimate date of redemption. But we do not yet know what that date will be, and that is an immensely important factor. If it is a reasonably short-dated stock, then presumably it would be possible that stockholders could feel certain of being able to sell compensation stock in the market for an amount of cash approximately equivalent to the value which is prescribed in the Bill for the stock which they have to surrender. If, however, it is a very long-dated stock, and if markets are weak, they may well get something far below the nominal value of the compensation stock which they get in exchange. It is quite possible that the issue of this compensation stock may be followed by heavy selling in the market. Indeed, it is quite possible that the stockholders may find it impossible to realise their compensation stock, if it is a very long-dated stock, at any price comparable to its nominal amount. If that situation arises, it cannot be said that they are getting anything which is the equivalent of cash. It has always been understood —at least I have always understood—that when people's property is expropriated they are paid in cash. I understood the case of the Government to be that in this instance they are giving really the equivalent. But it will not be the equivalent of cash if it is a long dated stock.

Therefore, we ought to have some assurance from the Minister that the stock will not be a long-dated stock, or even a medium-dated stock, but will be a shortdated stock, something redeemable within 10 years. Then, it will be possible for this compensation stock to be regarded, in some sense, as the equivalent of cash. I do not think the House ought to leave this very important Amendment until we have heard something from the Minister on this vitally important point. I very much hope the Minister will be good enough, before we proceed to a Division, to say something more upon this particular point, especially in regard to the terms of redemption. Will it be a short-dated stock?

I notice the right hon. Gentleman refuses to answer. I am not surprised. I should not have intervened in this Debate at this point except for one thing, and that was the attack made by the Minister of Transport when he said that propaganda was being used on behalf of these shareholders. There is nothing wrong in that. There has

I do ask the right hon. Gentleman, if he would be good enough, to reply.

I will not reply, because the Chancellor made that position quite plain during Second Reading, namely, that he was not prepared to commit himself at the present moment.

I beg to move, in page 18, line 10, at the end, to insert:

"of such amount as will yield interest on the values of the securities arrived at in accordance with the provisions of the next succeeding section at a rate equivalent to the average of the mean of the interest yield obtainable on reasonably comparable Government securities on the dates specified in Subsection (2) of that Section."

This Amendment, though it is couched in rather complicated terms, has, in fact, an extremely simple purpose. We have heard a good deal tonight already about the Government's desire to do what is just and proper. This is an opportunity for them to practise what they preach. The purpose of the Amendment can be put in this way. Suppose a man's holdings of railway stocks is valued at £1,000, and upon the dates mentioned £1,000 worth of Government stock would have produced £30: then we say that he should be given stock which will produce £30 when he is compensated. If, for example, he is given only £1,000 worth of 2½ per cent. stock at the present time, that would mean that his income, instead of being £30, would be £25. Although I agree that the whole of his £30 would not thus be confiscated, in fact £5 of it would be confiscated; and I fail to understand the argument that partial confiscation is not confiscation at all. I submit that it is only fair to give him an amount of stock which will produce the same amount of income as would that amount of Government stock which he would have received had he been compensated on the dates at which the value of his holdings is to be calculated.

There are two ways in which the Government can achieve this object. If, having regard to the date at which his compensation is to be calculated, the yield of £100 is three per cent., the Government can issue £100 at three per cent. stock or £120 at 2½. The purpose is to give him an equivalent yield to the yield he would have received had he got the same amount of money when his compensation was calculated. I submit that this is a fair purpose, and I think it is only just that it should be accepted.

The Amendment seeks only to ensure that if the Government insist on the basis of the Stock Exchange value, that basis should be applied under fair conditions. The terms of compensation are divided into two parts. There is the basis for arriving at compensation value, which the Government insist would be the Stock Exchange price. That is the first part of it. The second part is the method of satisfying that value, and it is the intention of the Government to satisfy that value by issuing to stockholders a certain amount of British transport stock guaranteed by the Government. That is the point. The Government have given to the stockholders an option. They say, "You can either take the price which the stocks were standing at before the election, or you can take the price at which they were standing in November, just before the Bill came out."

That is the option which the Government have given. The fact that they have given the option to choose the date before the election shows that they are sensitive, at any rate, to the criticism that we have made on this side of the Committee, that the prospect of the Labour Government's being returned to power tended to keep down the price of the stocks. It shows that they are sensitive to that possible criticism. We are asking the Government in this Amendment only to complete the attempt they are thus making to do equity in this particular aspect of the matter. If they are to do equity, not only must they give stockholders the chance of taking the preelection price, but they must also give them the opportunity, if they so elect, to have the pre-election rate of interest. If, on the other hand, they choose in any case to have the post-election price, then it is clear enough they should have the post-election rate of interest—fair enough, I say, on the basis that we are doing this in this particular way, of which, of course, we on this side of the Committee do not approve.

I do not know whether I have made my case clear to the Financial Secretary. It is the case that before the election, in the year 1945, the rate of interest was a little about 3 per cent. Local loans were 3 per cent. stock. They varied between 94 and 98. The 2½ per cent. stock is varying somewhere about the same figures. So it is quite clear that there is a half per cent. lower rate of interest today than there was in the pre-election time. If we are going to give the opportunity to the stockholders to choose the pre-electionprice in this case, and if they choose the pre-election price, I am asking only that they should have the pre-election rate of interest; where they choose the post-election price let them have the post-election rate of interest. I have no doubt that the right hon. Gentleman will accept the Amendment.

I am sorry, but I should make it quite clear straight away that we cannot accept this Amendment. This Subsection, as I think is clear to the Committee, states that the compensation payable shall be satisfied in British transport stock, which will be paid to the undertaking or to its nominee. The Subsection should be read in association with what is now, I think, Clause 87 (2), which defines the manner in which the stock is to be issued. There is an assumption—I can neither deny nor confirm it, because, unlike hon. and right hon. Gentlemen opposite, I do not know—that this stock is going to be issued at 2½ per cent. There is nothing in the Bill to say so. All it says is that it will be issued at rates prevailing as and when the time comes for it to be issued. We do not know what the rate of interest will be. It may be 3 per cent. It may be the amount that the right hon. Gentleman the junior Member for the City of London (Mr. Assheton) wants. I do not think it will, but it may, possibly, be even 5 per cent. [HON. MEMBERS: "Oh."] The suggestion here is that we should see to it that the sum given in compensation should be raised, in order that, if the rate of interest is 2½ per cent., the yield will actually be 2¾ per cent., or as the right hon. Gentleman said, 2½ per cent. My right hon. Friend the Chancellor of the Exchequer did consider this. A great deal of consideration has been given, I can assure the Committee, to the terms of this Measure, and this was one of the points which he did, in fact, consider; and he came to the conclusion that the option he was giving to the stockholders was as far as he could go, and in his view—and I use the phrase again would be fair and just to all concerned. It seemed to him, and it still seems to us, unfair that the suggestions made in this Amendment, put with great force by the hon. Gentleman and the right hon. Gentleman on the other side—

And sincerity.

And with sincerity. As most of the stocks are valued at November, 1946, prices it would be completely out of line to take November, 1946, prices and rates of interest which by then had ceased to apply. Therefore, for that reason, and the others which I have indicated, my right hon. Friend was unable to accept the proposition when it was first put up, and now I must ask the Committee to reject it.

I should like to draw particular attention to the word "amount" in this Amendment—"such amount." I intervene for three reasons which, I think, are reasonable and, I hope, sound. In his earlier speech the Financial Secretary made great play with the word "justice," and later the Minister spoke to us and gave us a very fatherly lecture on the need to get acclimatised to the cheap money policy, and the Government's idea of what rates of interest should be. On the score of justice, letters have been sent to Members on the Government benches as they have been to us. In justice to shareholders I think it is only right that those who have their stock taken from them compulsorily should be compensated in a reasonable way. The hon. Member for Enfield (Mr. Ernest Davies) has, over and over again, made the point that, in his view, the Commission should not be asked to shoulder a greater amount of capital than it can be expected to service. He is looking ahead with foreboding, and he does not think that that Commission should be asked to shoulder the interest of a greater sum of capital than he foresees will be earned. I am convinced that he holds that view with very great sincerity; and if he does, then, I think, I am justified in presupposing that he would agree that shareholders should not be asked to suffer a greater reduction in their income than they can bear. So for these reasons, first, on the score of justice, second, on the score of the rate of interest, and thirdly, on the score of reasonableness to these people, using the reverse of the argument put forward by the hon. Member for Enfield, I beg to support this Amendment.

The Financial Secretary has said that the rate of interest on gilt-edged securities may be 3 per cent. or even 5 per cent. Either he is speaking in a realistic manner, in which case he thinks that he has made a sensible contribution to the Debate, which may have some effect on the gilt-edged market, or he is not, in which case it is not a very useful contribution to the Debate. It would be interesting to know whether the Financial Secretary has put forward his observations in all seriousness or not. If the current rate of interest on trustee stocks is not linked to the pre-election prices, the option is really reduced to something of no value at all. We must take account of the rate of interest on trustee stocks before the election. It must be remembered that many of the stocks that are being acquired ranked in a position which could hardly be distinguished from British Government securities. Some of the first debentures of the British railways were considered in almost the same light as Government stock, and, probably, the yield on those debentures only differed by a minute fraction from the yield on Government stock. I think this Amendment is eminently justified, and I hope the right hon. Gentleman will clear up the point about the future rate of interest on British Government securities, and that he will give us a rather more seriously considered forecast of what he thinks is possible in regard to the prevailing rate of interest when the compensation stock comes to be issued.

I would press the Financial Secretary on the point which has just been made by the hon. Baronet. Even if he is not prepared to give us now any details of the rate of interest on the stock, or, indeed the date of the stock, the right hon Gentleman must realise that this is a matter of the greatest importance to a vast number of people. It is impossible for them to plan their lives ahead if they do not know, and are not to be told, what the value of the stock will be, the interest upon it or the date when they get it. In his remarks today, the Financial Secretary has cast great doubt on what many people are thinking. No doubt, the majority of people were thinking that the rate would be 2½ per cent., and I therefore urge the Financial Secretary, to say—not now but at some later date—that, if there is to be any material change, he will make it public as soon as possible.

I am sorry if hon. and right hon. Gentlemen opposite have taken this matter too seriously. Obviously, I have no more means than hon. Gentlemen opposite of judging as to what the rate of interest will be when the stock comes to be issued. There is a strong supposition, and it could be correct. Now we have entered upon the era of cheap money—and, in his Budget Statement, the Chancellor of the Exchequer indicated at some length the reasons why he desired to continue that policy—the chances are, of course, that it will not be 3 per cent. or 5 per cent. and I should not have thought that the money market would have been disturbed by any joking reference that I made a few moments ago to the fact that hon. Gentlemen opposite seemed to be more informed than I was on this matter. I do not think that any of us can say with any certainty, because these things depend upon factors largely outside our control—not altogether outside the Government control, but, to a certain extent, outside the control of all of us.

Surely, the more the Financial Secretary is right in saying that the future is uncertain, the stronger is the case for this Amendment? It is not logical for the Government to tell us that they are giving the people of this country social security, when that is a thing which they are going to destroy, because they are creating a situation in which people cannot plan their future.

I beg to move, in page 18, line 10, at the end, to insert:

"Provided that the British Transport Stock to be issued in satisfaction of the compensation payable in respect of loans perpetual annuities or debenture stocks shall be of such amount and bear such rate of interest as will assure to holders the equivalent of the annual interest payable on their securities for the last complete year prior to the passing of this Act."

This Amendment is a further attempt on the part of the Opposition to do a little justice to stockholders, after the rejection of the two previous Amendments which had that object very much in view. This Amendment refers only to debenture holders and to annuitants. I believe the Committee is aware that, in the case of railway debentures, the interest on them has always been met in full. Therefore, the holders of these securities have had, both in good times and bad, an absolutely reliable security. I daresay the Committee will ask why I am pleading for special consideration for these classes of stockholders. The answer is that debenture holders are not proporietors of railway stock, as are preference and ordinary stockholders, taking their chance with the good years and the bad, as to whether they get a higher or lower dividend. Debenture holders are those people who have put themselves into the position of having an obligation which the company is bound to meet. I suggest to the Committee that it is only fair that debenture holders, who are largely trustees, charitable organisations, and others, should be given this particular consideration.

I do not know whether the Committee will remember, but a little while ago the Minister told us that he thought it was perfectly all right for the Government to take advantage of current rates of interest in financing the purchase of a public utility organisation of this sort. That was his point of view, and was said in answer to a criticism from this side. I would draw the Committee's attention to the fact that, in consequence of representations made both here and in the Press, the Government have given way on the important point of Government guaranteed securities. There was, for example, the London Passenger Transport Board's guaranteed security, the terms of which, we pointed out, should be implemented. The Chancellor of the Exchequer has agreed to do that. Why, therefore, will the Government not pay the same regard to the obligations of the railway companies as they do to their own? Do they wish to put the debenture holders of the railway companies, whose assets they are taking over, in a worse position than those who are their own creditors? No railway company would think of doing anything so dishonest as to reduce the rate of interest on its debenture stock. Even in the case of the debenture where there is a date for repayment, the obligation of the railway companies will not be supported by the Government. It seems extraordinary that the Government are going to take over all the assets, but none of the obligations. Can that be honest? Can the Financial Secretary put forward any case showing that that is honest?

The Government are buying out the obligation at the market price.

The hon. Member will find that a perpetual debenture holder is entitled to a perpetual annuity of so many pounds a year. The 4 per cent. debenture holder of the L.M.S. is entitled to £4 a year in perpetuity. He is not entitled to receive back the stock at par at any time. Therefore, if the Government take over the assets of these companies, they should, at least, implement their obligations.

We must ask the Committee to reject this Amendment. Many of the arguments that I might use against what this Amendment proposes to do would be similar, if not identical, to those which have been used from this side of the Committee this afternoon by my right hon. Friend the Minister, by hon. Friends behind me, or by myself. As the right hon. Gentleman pointed out, this Amendment seeks to maintain the interest on British Transport stock, exchanged for loans, debenture stock and perpetual annuities, at the rate which those particular classes of investment enjoy at the present moment. In other words, it proposes that a new type of British Transport stock should be brought into being, different from that envisaged and provided for in the Bill, and that the holders of such stock should receive the same interest as they now receive from their present holdings. I may be wrong, but I believe that there are some debenture stocks which only receive interest sporadically.

The right hon. Gentleman is wrong.

On second thoughts, I agree that there are no debenture stocks, other than railway stocks, which do not at the moment attract interest.

They have not always received it.

The argument used by the right hon. Gentleman was that the Chancellor has now agreed that certain of these stocks should be put into a special category, and, that the door having been opened, there is something to be said for widening it, and including the debentures and perpetual annuities to which he referred. But there is a great difference between the stocks to which he referred and those mentioned in the Amendment. To begin with, there was, and is, a Governmental guarantee attaching to stocks which have been placed in a special category. Although, as I have said, and as my right hon. Friend the Chancellor has said more than once, the Government do not agree that there has been any broken faith on their part, so far as those stocks are concerned, nevertheless, they have agreed, as the Committee now knows, to put them into a special category, and to give the holders the same terms as they are now getting under a Government guarantee. But there is no Government guarantee here, and, therefore, there is no analogy between the two types of stock.

The intervention of my hon. Friend the Member for Enfield (Mr. Ernest Davies) really answers the right hon. Gentleman's point—that these stocks were fairly valued on the Stock Exchange, and that the price quoted can be taken as a fair price which reflects the Government's cheap money policy, or the pre-Election date which was taken, and that it would be unfair on other types of stock if these securities were picked out for special treatment. In order that it shall not be said that we have picked out special forms of securities for particular treatment by way of giving them a higher rate of interest, we must ask the Committee to reject this Amendment. It is our view that not only would that be unfair, but that the privileged position which they occupy was definitely reflected in the price quoted on the Stock Exchange, and which they are going to receive when the Treasury takes them over.

I thought that the last remarks of the Financial Secretary were interesting. The fact that the Stock Exchange might have fixed a fair valuation prior to the Elections, shows that the City did not fully anticipate what treatment they might expect to receive from a Socialist Chancellor of the Exchequer. That was a price fixed before the Elections, when business people were inclined to stick to their bond and to honour agreements, which they have since found out is not the procedure adopted under Socialism.

I feel particularly strong about this Amendment. I have had a number of letters from my constituents, as have all hon. Members, many of them old people, who have been dependent for their livelihood upon railway stocks, and which they have always understood were trustees securities. I and other hon. Members have also had letters from ordinary stockholders and others. But this Amendment deals exclusively with those railway securities which were regarded as trustee holdings. One surely expects that a trustee stock should have a life equivalent to the length of the period of the trust for which the money is invested. Such a period could reasonably be taken as 20 years. A trust of this sort would be for minors or for old people in their retirement whose allotted span of 20 years may not last them out. I think it would have been reasonable for the Government to have said that the present holders of trustee railway stocks should enjoy the prevailing rate of interest for 20 years, and that after that period they would be redeemed by the Government in the ordinary course of events. It is true, of course, that in past years, especially in the last 10 or 15 years, all holders of Government securities have witnessed a steady decrease in the rate of interest they receive from their securities, beginning, of course, with the reduction in 1933 from 5 to 3½ per cent. on War Loan. Therefore, railway debenture holders could not necessarily always have imagined that they would go on drawing their 4 per cent, in perpetuity, although those were the terms of the stock when it was originally issued.

7.0 p.m.

The holders should have been given some warning that their income would have this drastic reduction. I am appealing particularly for those people who have to rely upon trusts of one sort or another, and I refer to cases not only where the debentures were owned by particular individuals, but where income from railway debentures was paid to the funds of almshouses and other institutions where old people benefit from such income. If the securities have to be taken, I would like some date to be given— say 10 years hence, if the Financial Secretary could not agree to 20 years. If he could have said, "These will be paid in 10 years' time," the holders would have had time in which to readjust their standard of living, and possibly look out for an alternative investment. Instead, we have this sudden change and reduction from four per cent., and in some cases five per cent., to something which we believe will be in the neighbourhood of three per cent. or 3¼ per cent. For example, the London Midland and Scottish four per cent. Debenture Stock is being repaid at £118, and, therefore, if it is repaid in 2½ per cent. Government securities, although the actual return will be higher than 2 per cent., it will not come up to the level of four per cent. from which they have been reduced. I ask the Financial Secretary to reconsider the position and see whether he can arrive at some solution which would make this sudden drop of income less onerous on the people on whom it is brought.

I hope the Financial Secretary will reconsider this extremely important and human question. The answer which we have heard from the other side of the Committee to the case made by my right hon. Friend the Member for the City of London (Mr. Assheton) has been that all these stockholders will be compensated at market prices. But that answer fails to take into account the different nature of the security which they will receive. My right hon. Friend has pointed out that the legal position of the debenture holder is entirely different from that of the holder of an ordinary or a preference share. The debenture holder has special rights. He is entitled, if need be, to sue the company for that to which he is entitled by way of annuities. The ordinary shareholder cannot do so, of course. His rights depend upon the profits which are made by the company. In these circumstances, the debenture holder is in a very special position. The Government have expressed themselves as desirous of being fair to all who will have to hand over their securities in exchange for transport stock. It seems to me—and I hope it will appeal to the Committee—that the debenture holders, being in that special position, are entitled to special treatment.

I am sorry the Government are not prepared to give more favourable consideration to this Amendment, because it embodies a principle which the Government themselves have accepted in another Measure. In the case of the Bill nationalising the Bank of England, under the new set-up the shareholders were guaranteed the income which they had before. I really cannot see why the Government should not be prepared to treat the holders of these securities at least as favourably as they have treated the shareholders of the Bank of England. If one considers the matter from the point of view of the need for income, I 'would have thought that the case was even stronger,' and I would point out, too, that those who hold these securities are, for the most part, people who have been very hardly hit by the rise in the cost of living. They are a class to whom the recent Budget gave no relief whatever, from the point of view of expenditure; if they happen to be tobacco smokers, they, like many others, are worse off financially.

Therefore, I appeal to the Government to be a little more generous in their approach to this matter. If they wish to nationalise transport and take over securities, so far as they can without sacrificing any of the principles for which they stand, they ought to try to carry with them as much as possible of the good will of those those property they propose to take over. Therefore, I would ask them to reconsider the position of these people, realising that they and the institutions which hold these securities will suffer a very great loss of income, and that the compensation which it is proposed to give will not help them. I ask the Government to look at this matter particularly in the light of the principle embodied in the Bill nationalising the Bank of England.

I do not think the Financial Secretary should be allowed to get away with his statement. He said the type of security with which we are dealing at the moment is different from that on which the Chancellor of the Exchequer has already made some concession. Surely, one is a Government undertaking and the other is a railway undertaking. If the Government take over the railways, surely, they should take over the undertaking with it. That seems to be common justice. I hope we shall have an answer to that point, because it seems to be a clear statement which requires an answer. It has already been said by my right hon. Friend the Member for the City of London (Mr. Assheton), that this stock about which we are talking confers a right to a perpetual annuity payable out of the concern. That has been safeguarded more than once in a court of law. I cannot quote the actual case, but it is to be found. I would like to know whether that court of law ruling is now completely washed out, and, further, what is the situation under the Trusts (Scotland) Act, 1921, in which this income is specifically guaranteed. There is neither a representative of the Scottish Front Bench nor of the Scottish Law Office present, but I would like an answer to that point because, as a trustee, under the Trusts (Scotland) Act, 1921, I have certain obligations towards my bene- ficiaries, and I would like to know what is the situation at the moment, because it seems to be grossly unfair.

I speak on this Bill for the first time, and with hesitation, not having been so deeply immersed in the details of the Bill as other hon. Members have. But I found the Financial Secretary's reply extraordinarily unsatisfactory, even with my none too close knowledge of the provisions of the Bill. If hon. Members will be good enough to turn to the Fourth Schedule, they will find set out the various railway companies' stocks and shares, and the amount of Transport stock security which is to be placed against them. Hon. Members will see opposite the London and North-Eastern Railway Company, four per cent. debenture stock which is going to be compensated at £118, and lower down they will see deferred ordinary stock as low as £3 12s. 6d. What is the situation here? For the first time, the ordinary and deferred shareholders, who for years have not had any dividend on their money, are going to be compensated in Transport stock which will give them dividend. [An HON. MEMBER: "Does the hon. Member object?"] I do not object to that at all. I think it is a reasonable proposal, but does it not show how unfair it is to the debenture holders whom it is not proposed to compensate somewhat in excess of that? Here there is a wide range of stocks of different values and different degrees of security in the mainline railway companies. The Government compensate these with British Transport stock all paying the same rate of interest. Surely, it is proper that debenture holders—although I quite agree that there is a differentiation made in the capital valuation—should be given something in excess of the interest paid in order to recognise the fact that they are prior debenture holders in the railway companies and will be so in the British Transport organisation. To say that they are only to have the same rate of dividend as the lower scales of shareholders is, surely, quite wrong and unwarranted.

They will get the same rate of dividend because they will get the same stock. Surely, when they get their securities transferred into gilt-edged stock, they will all be on the same level and will, quite naturally, get the same rate of interest?

The difference is that the ordinary shareholder is now to receive interest whereas he never received it before, and the debenture holder is to have his rate of interest seriously reduced, and the Government do not recognise the prior claims of certain classes of people who have held a stake in the great railway companies for a long time. The Government are unduly compensating the lower classes. There are many debenture holders who will say, "What a pity we ever became debenture holders; how much better it would have been if we had been ordinary share-holders."

This Debate has raised a very important issue and one on which I venture to intervene, even without full knowledge of the business of the Standing Committee; but when a matter is discussed later, it is not by custom out of Order for hon. Members other than those who were Members of the Standing Committee to take some part in the discussion. Therefore, I make no apology for intervening. I am a little disappointed, indeed, at the reticence of hon. Members opposite on this matter. The Financial Secretary always deals with these questions in such an agreeable manner that he rather disarms our criticism. What he cannot get away with by argument he wins by charm. On this occasion, however, I thought his argument was rather more than usually disingenuous.

In a Measure of this kind, what we are doing is to produce an amalgamation of a large number of separate interests into a single unit. The only way in which nationalisation differs from any other monopolistic amalgamation is that all the final equity holdings will be in the hands of His Majesty's Government, but the same rules of common honesty in carrying out the process of the amalgamation ought to apply, whether it is a private or a public affair; and indeed, one would have thought that an even higher standard of probity and equity ought to be maintained by the nation, which is the highest possible example of absolute fairness. When one sets about to produce an amalgamation, one can do it either by voluntary or by compulsory methods. In this Bill, it is done by compulsory methods, and therefore we must be all the more careful to preserve the rights and processes which are common practice in honest business transactions.

This can be done in various ways. First, one must accept all the obligations taken over from the constituent companies. That is the first thing. Even if you are a co-operative society wanting to buy some property from somebody else, to buy a shop or take over a business, even in that case the Minister of Transport would be forced by the law of the land to preserve the ordinary honourable undertakings and obligations of the property he took over. The right hon. Gentleman has shown that in the course of the proceedings on this Bill; if all that we have heard is true, he has been particularly careful when any co-operative society interest was concerned. That is the only time he ever makes concessions. First, then, one must take over all the obligations. One must arrange a voluntary scheme with the various constituent bodies by which the terms of those obligations are altered. That is a very common thing in business amalgamations. A person gets hold of the majority of shares, he sets out a scheme, and if it is in accordance with the rules, and the appropriate majority of shareholders all agree, there is a voluntary arrangement by which debentures are paid off before the date falls due, or the rate of interest may be altered. But one cannot just say, "We do not like those debentures, so let us wash them out." That is not done in any ordinary amalgamation. There is no reason why, in law or in equity, it should be done if the nation undertakes such an amalgamation. So much for voluntary schemes.

If there are compulsory powers, as in this Bill, the Government should at least not be the judge itself. What should be done, if compulsory powers are used, is to set some outside third party as the fair adjudicator of what is a reasonable method of meeting the purpose, which is not to have a large number of outstanding obligations, but to try to settle the whole thing in a way that is fair to all. There ought to be outside arbitration, as in the Act to nationalise the coal mines. The curious thing is that the only argument which the Financial Secretary adduced as to why there was a difference in principle between the concession made on the London Passenger Transport stock and the moral and legal obligations of the railway companies was that one had a Government guarantee and the other had a guarantee only of the companies. That was a very false argument. A guarantee is a guarantee whether it is made by the Government or by a great statutory authority such as a railway company. What is honest and right is equally honest and right for the private individual, the statutory company, or the Government.

The truth is that in all these various schemes the Government have operated on different systems. In the Act to take over the Bank of England, there was one method, for the mines there was another method, and now in this case they are taking the Stock Exchange valuation. In no case have the Government operated on the method which would apply in the normal process of making an amalgamation of a number of various undertakings. To do so they should recognise the prior obligations, and if they want to go round them, they must have either a voluntary arrangement or an independent arbitration. That is what they ought to do. They have not not done these things. They have neglected and overridden the ordinary principles of justice and equity, by the application of which this country has become great over a number of years, and by neglect of which the Government will fatally hinder the goodwill and honour of the nation.

I would not have intervened at this stage were it not for the fact that reference has been made to the position of trustees and trustee stocks. I am not at liberty to develop the matter, but a proposal has been submitted to the Chancellor of the Exchequer in connection with stock held by some trustees, and I believe that proposal is still receiving attention. I sincerely hope that that proposal will be the subject of a reply, after due consideration, by the Chancellor of the Exchequer. I cannot, for various reasons, support the Amendment. The first reason is that it is unfair as between different stockholders. That the noble Lord the Member for South Dorset (Viscount Hinchingbrooke) should be pleading for stockholders after he has done what he could in the country to crab the national credit is, to say the least of it, a trifle audacious.

I know many L.M.S. men who, on retirement, and under the promise of a new era for railways under the Act of 1921, put all their life savings into L.M.S. ordinary stock. Under private enterprise, that investment has entirely or almost entirely disappeared. Why should they not receive consideration as against the debenture holders? As to the speech which was made by the right hon. Member for Bromley (Mr. H. Macmillan) about honesty of purpose, I wonder whether he made the same sort of speech when his late leader, Mr. Neville Chamberlain repudiated the promise of five per cent. on war loan and reduced the rate of interest to 3½ per cent?

Would not the hon. Gentleman agree that the 5 per cent. war loan was redeemable at par in 1929 and that it could have been redeemed at any time after that date at 100?

We had behind it the guarantee of 5 per cent.—[HON. MEMBERS: "No"]—for a limited period, it is true, but it was going on.

Due notice was given.