8.—12

18

135. Would it not have this advantage: it would be apparent on the face of the prospectus that this capital was issued at a discount because of the loss of interest during construction ?—lt might be so; but the very fact of putting out on the market shares at a discount tends to weaken the credit of the undertaking, I think. But again I would respectfully suggest that these questions bearing on finance should be addressed to those who know more about it than I do. 136. I. address them to you because they bear so very distinctly upon the question of retaining the Standing Order or altering it. My question was, "Do you believe that it would be as efficacious a way of meeting the difficulty, and a more legitimate way, to give the promoters this power of issuing capital at a discount ? " —My opinion is that it would not be so efficacious a way. I was only anxious for others to answer the question, because my opinion is founded necessarily on the opinions of others, who know more about financial matters than I do; and, though I can state what my opinion is, I can scarcely give all the reasons which ought to be given for such an opinion. 137. Still, you admit that such a proceeding would be an absolute protection, both to the subscriber of the original capital and to any subsequent purchaser in the open market of the capital during construction?— Yes, I believe it would. 138. Mr. Shaw.] You stated, did you not, that'some tramways had evaded this Standing Order, or could evade it, by registering under the Companies Act ? —I was pointing that out as an anomaly. 139. But they have done so practically, as I understand you ?—There have been a great number of tramway companies started as limited companies. 140. And they have paid interest out of capital during construction : is that so?--That I would rather make inquiries about. Ido not know how far that has been carried out. 141. Do you know of any other kind of company having done so ?—No, I cannot call to mind any. 142. Water companies or gas companies?—No, I think not. I think they are, to a certain extent, controlled by the operation of " The Companies Clauses Act, 1845," which prohibits the payment of any dividend by which the capital stock should be reduced. That applies to capital, but not to borrowed money. 143. You are driven at present to get your money by contractors?— Yes. 143 a. Do you not think you are just as well off as you would be if this change in the Standing Order were made?—No, Ido not think so indeed. I think a great number of companies have got into very serious financial difficulties ; the contractors fail, and all sorts of things happen. 144. The tendency now is this : that the contractors must deal for a large sum with intelligent financial operators; but if you get this change in the Standing Orders made you will be able to deal with the ignorant public for small sums, and they will come then under the temptation of this interest, and probably invest their money and lose it ?—I think that is put much higher than it should be put. Ido not believe very largely in that class of investors, to begin with. In every .operation in life I think there is always a certain percentage of persons who will act indiscreetly. I do not see that they require more protection in such cases as these than in much more important affairs in life where you leave them to their own discretion. 145. Calls on railway shares are made by instalments ?—Yes, as a rule. 146. You could make your calls towards the end of the work, and leave the contractor to do the work : would that meet your difficulty ? —I take it that you would have then to pay a much higher price for the work, because the contractor would have to work during that time without any funds found by you; he must make his own arrangements with bankers and others to finance himself ; and then the contractor in such cases not only recoups himself, but takes a heavy bonus. 147. You would rather finance with the public than through contractors ?—I think a railway should be made at its fair cost; and the fair cost of a railway is what the actual cash contract amounts to with the interest—the fair interest—whilst the work is being made. 148. But you would give notice to the investing public, and that in writing ?—Certainly. 149. The Chairman.'] You object to these sub rosd arrangements with contractors, as I understand ? —Yes; in every case they mean a very large bonus, which comes out of the pockets of the shareholders, and eventually, in the shape of increased rates, out of the public. 150. They have in many instances crippled and hampered undertakings ?—All over the country there are undertakings crippled. We have constantly before Parliament financial Bills, and companies have to go to the Court of Chancery for schemes of arrangement; and in nine cases out of ten those arise from the mode in which the capital has been originally raised by the instrumentality of contractors, some of whom have failed. 151. Is the Standing Order evaded in any other manner than by getting the business done by contractors? —I do not quite understand the process which is followed in a number of cases. 152. But your long experience enables you to answer the question, perhaps ?—Luckily, I have no experience in these matters. I never engage in any financial matters whatever; and therefore I have no experience of that sort. I never take any part in them, either during or after the passing of the Railway, Act; but lam puzzled with some of them, which are carried out in a way which I confess Ido not follow. It is this: There is a deposit of railway stock or Consols made in the names of trustees, sometimes directors of the company and sometimes not directors of the company. Where that money comes from, or how it gets into the hands of the trustees, Ido not know. It does not appear to be paid by the contractor. Here is one instance—the Banbury and Cheltenham Direct Eailway. The prospectus of that railway contains this paragraph: " Interest at the rate of 6 per cent, per annum will be secured for three years, to the Ist July, 1877, being one year after the date appointed for the completion of the line (thus allowing ample time for the development of the traffic), by investment of £100,000 in Great Western Eailway stock, in the names of the trustees above mentioned." I do not know what sort of an arrangement it is which leads to a deposit of