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8.—12.

object which I am about to create by somebody other than myself, and then you ask me to contribute a further sum, it is of great importance to me if you give it me at a discount. What I mean is that in the case of original capital you cannot really make a man a present of the discount out of his own money ; the work to be created costs so much money, and it is going to be represented by a piece of paper, the shares which you give him, and it does not matter what you print upon those shares; the value of the share is only exactly that which represents the amount of the work created, and, as he had paid the whole amount of the money to create the work, of course if you issue the paper at a discount you are issuing it at a discount at the expense of the man himself, and therefore it is utterly delusive. 178. Mr. Salt.] Do you think that the effect of the recent decision of the law-courts will be to prevent money being raised and interest being paid upon unproductive capital in spite of the Standing Order 167 ?—No; I do not think it will prevent it; it will still be raised by the expedients which have been explained. 179. As soon as the financing people have recovered the first shock of the decision, they will, you think, devise some scheme of raising the money as hitherto, even though the Standing Order were to stand as it is ?—That is my opinion.. Moreover, I know of one instance especially which has come under my notice of very great importance where interest was promised, by an expedient similar to some of those that have been explained, to be paid during construction, and the company became very much embarrassed, and ceased to pay the interest before the railway was finished; but the public subscriber had no legal means of recovering it; and notwithstanding that—this was a long time ago—the public have subscribed to these undertakings in the usual way by the deposit of Consols. Some other expedient is always adopted if one fails. 180. Do you think that, if 3 per cent, were allowed upon unproductive capital under the Standing Order, that rate of interest would be sufficient to induce the public to invest ?—No, I think not; I think it would be ineffectual; and my opinion is that, if 3 per cent, were allowed, the expedients to make up the difference between 3 and 5 would still be adopted. 181. In other words, that the Standing Order would still be evaded?—lt would be evaded to the extent of more than 2 or 3 per cent. 182. I understand, from the remarks you made just now about various systems of financing, which is a matter a little complicated, that the idea in your mind is this: that it is desirable to bring the nominal and the real capital of a company as nearly as possible to the same point ?— Precisely. 183. The Chairman.] In the event of the Order being amended, would you advocate stating in the advertisements of these companies that the money was to be paid out of capital during construction, using those words?—No; Ido not see the necessity for using the words. I think, if the company were authorized to do it, or not prohibited from doing it by Act of Parliament, it would naturally follow. I see no necessity for absolutely using the words, because, if they could pay, they might pay out of any source of revenue which the company might possess. For example, in the case of a metropolitan railway, they could pay interest during construction out of the sale of their surplus lands or any other revenue they might possess. 184. I am speaking of new undertakings, and I am speaking in the interest of the public, many of whom know little about these things, and many of whom would be startled by the use of the words suggested :do you think it would deter capital if they were used ?—I think it would deter capital; and I think it would answer the purpose very much better if those words were left out.

Feiday, 28th Apuil, 1882. Present: Mr. Baxter (Chairman), Mr. H. E. Brand, Mr. Salt, Mr. Shaw, Colonel Walrond. Mr. Samuel Laing, a member of the House, examined. 185. The Chairman.] As you have expressed a wish to be examined before this Committee> probably you will be good enough to make a short statement with regard to your views with respect to this Standing Order 167 ?—I think an alteration ought to be made in the existing Standing Order. The payment of interest out of capital is of course contrary to all principles of sound finance. It is a thing which in the Budget of any State would at once be condemned as bad finance ; and with regard to public companies the principle is equally clearly laid down, that Parliament does not recognize payment of interest out of capital as being sound and legitimate. The object in view, of course, is to facilitate raising of capital for new schemes, mainly speculative schemes, which have not sufficient attractions on their own ultimate merits as paying concerns to induce the public to subscribe. 186. But the Standing Orders of Parliament only forbid it in the case of railway companies and tramway companies, as I understand ? —Parliament only forbids it in their case by a Standing Order; but under the general Companies Clauses Consolidation Act you will find that the principle is equally laid down in the case of other companies. There is a table—Table A—in the Companies Act of 1862, I think it is, which lays down with equal clearness that interest is not to be paid except from the earnings of the company. That is subject, I should observe, to being varied by articles of association specially framed by the company ; but, in point of fact, I believe that Courts of law hold that that payment of interest is not legitimate. There have been decisions quite recently in which it has been held that the payment of interest, otherwise than from the earnings, is not a legitimate payment. 187. In the case of all companies, you mean? —In the case of all companies. 188. Not only railways ?—Not only railways; but I should observe that of course railways stand in a very distinct category from ordinary private undertakings. A railway is, to a considerable extent, a public undertaking. It is only sanctioned by Act of Parliament, to begin with ; it is subject to all sorts of parliamentary restrictions in the matter of charging toll, and in the mode in