8.—12

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351. Mr. Forbes suggested the absolute repeal of the Standing Order just now; but I gathered from his evidence also that he would leave it to the Committee before whom the Bill was brought in the House of Commons to settle the percentage, and to limit the time. Under the circumstances, would you agree with that, or would you rather have a Standing Order framed ?—I should prefer to have a Standing Order framed, with certain questions left to the discretion of the Committee. I mean, by that, that I think the rate of interest should be settled by Standing Order. I mean that the time should vary with what the Committee think is reasonably necessary for the construction of the works. In some cases two or three years might suffice; in others, not less than five or eight years would suffice. With reference to the amount of interest, I think it is desirable for that to be fixed at 5 per cent. I see no object in leaving that to the discretion of the Committee, and for this reason : that 5 per cent, is the usual and ordinary and legal rate of interest, and the fluctuations in the value of money are so great that there are times when, if the Committee fixed the rate of interest arbitrarily, say at 4 or 4-J- per cent., the directors would or might find themselves extremely embarrassed, and might find themselves under the necessity of pushing on their works with a limitation of time, and being forced into the market at a time when they could not raise their capital under 5 per cent. 352. It would be impossible, you think, for them to raise it with a limit of 3 per cent. ?—You would never raise a shilling. 353. Mr. Brand.] You have applied a very strong word to the practice of issuing shares at a discount; you said that so much discredit would attach to that course that you yourself, as a banker, and you thought that Messrs. Smith, Payne, and Smiths, of Lombard Street, would not take subscriptions for such shares over the counter. Would you apply the same course of conduct to the case of the Metropolitan District Eailway, as mentioned by Mr. Forbes just now, or even to the issue of a new Eussian loan ?—I do not know how I can well answer the question. With regard to foreign loans, it seems to me that the question probably lies in a different compass, and, especially with reference to foreign loans, I should not be competent to deal with it: but railways are a particular class of business in themselves, and bankers are constantly consulted as to investments in that class of securities, and the first question which would be put would be this: " You say that this is a good thing; but it is issued at a discount: what is the reason of that ?" "We cannot tell you." "I am very sorry, but I cannot invest." I think there is a tendency to discredit, there is a taint of discredit, about the issuing at a discount. 354. The Metropolitan District Eailway has been a very improving railway lately; and it is rather a strong term which you used ?—I do not apply it to the Metropolitan District Eailway Company. 355. But you applied it to the practice?—l applied it to the practice of new railways. Ido not wish to be misunderstood. Ido not apply it to the issue of stock at a discount by old railways. I thought I had carefully guarded myself against that. The other day, I think, the Great Eastern, in which I am a shareholder myself, issued some stock at £80, but there is no objection to that in the case of old railways. In the case of new railways, at the present moment it is illegal, and, if it was made legal, the effect would be such as I have described on the minds of those called upon to find the capital. 356. The Chairman.] You are chairman of the Hull and Barnsley Eailway, are you not!?— Yes. 357. Is there anything in connection with that particular undertaking you wish to state to the Committee ?—Only this : that we had before us the question of how we were to raise our capital, and after taking a great deal of advice, and being told that several of the modes which were suggested to us were not legal, we did what the Master of the Eolls said was perfectly straightforward; indeed, he thought it was so patent and obvious that it was an insult to the Court or to the common-sense of any man to suppose that he could think that it was not an evasion. 358. You meant it to be an evasion, and wished the thing tried, I suppose ?—No, we did not wish the thing tried; but we thought that there was a doubt about the legality of the thing; we did not know there was a distinct decision against doing it in the way we proposed, but we did not desire to overlay it with other methods of evasion, and we thought that the simplest and best way of doing it; and the result is familiar. If this Standing Order is altered, there are one or two things I should like to lay before you with reference to the amount of interest being added to the estimate. The estimates for works are never too high. We will say that you have a work which is to cost, it may be, 2d., or £2,000, or £200,000 to make : if it is to cost 2d. to make, you must not take Id. out of it to pay for something else; therefore the effect, if you did so, would be to necessitate the company, in order to finish their works, coming for additional capital before the works were finished; therefore I would suggest that the estimated amount of the interest should be added to the estimate, and that could be ordered to be done in the passage of the Bill between the House of Commons and the House of Lords Committees. Then there is a point with reference to the protection of the debenture-holders, which I should like to point out to the Committee, and that is this : that if you increase the capital—add, that is to say, the interest during construction to the capital estimated for works—your borrowing powers, in the ordinary course of things, would be one-third of the amount on the construction of the works, plus the interest : that would be an undue amount of borrowing powers, and would naturally reduce the security of the ordinary shareholder. If the Standing Order, therefore, is altered, the borrowing powers should be exercisable only in respect of the capital required for the construction of the works ex the interest, without the interest. 359. Mr. Salt.] Are you speaking of the nominal or the real capital ? —I mean the capital for the construction of the works. 360. But if you issue the shares at a discount you have two capitals, one nominal and one real ? —I am not dealing with the question of raising the shares at a discount. If I might be allowed to continue, I might point out one effect which, if the Standing Order is altered, the alteration of it would have. I think that those who promote new undertakings would be forced into this position : that they must bestir themselves and get their capital and construct their works; otherwise, if they