8.—12,

19

that sort. Others show that the contractor himself has undertaken to pay the interest during construction : that is much the commoner form. There was one matter I intended to mention, which perhaps you will allow me to refer to now, and that is this: that it often happens that interest is paid out of capital in this way: A company obtains an Act of Parliament, such, for instance, as the Ely and Newmarket Eailway Act of 1875. An arrangement is made during the progress of that Bill with one of the larger companies, by which the large company undertake to work the line after construction, upon certain terms, those terms being frequently a percentage upon the actual outlay, as it is called, upon the construction of the line. Then, that term, " actual outlay," is defined aa meaning not only the moneys actually paid to the contractor, but interest upon those moneys up to the time of the line coming into the hands of the working company. In that way undoubtedly interest is virtually paid out of capital, and the Standing Order is evaded also : that is not at all an uncommon form. 153. Mr. Shaw.] Interest is added to the capital, and produces interest afterwards?— Yes. 154. The Chairman.] In the prospectus of the Hull and Barnsley Eailway Company I find this: " Interest at the rate of 5 per cent, per annum will be paid half-yearly on the Ist January and Ist July until the 31st December, 1884, upon all amounts paid up :" would you have any objection to put in the words " out of capital " ?—ln that case it would have been scarcely correct to say " paid out of capital." It was not out of capital direct; it was a payment by the contractor, as appears by the prospectus itself. 155. lam putting the question hypothetically. Supposing the Standing Order were altered so as to enable you to do that, would you object ?—You would not require such a means of evasion then. 156. I mean, as an intimation to the public, would you object to it ?—You could state it directly to the public. 157. Colonel Walrond.] Do you not think it would have the effect of deterring the public from subscribing ?—I am not a competent authority upon that point, but from what I hear I should say not. My opinion upon that point would be valueless, and I have no experience in the moneymarket at all; but you will have before you gentlemen of great experience in that respect. The honourable member for Stafford asked me just now whether I knew of any other case than that of a railway in which interest had been allowed to be paid during construction. This Act has been put into my hands this moment. It is the Lincoln Waterworks Act of 1846, in which interest is authorized in the same way. 158. Mr. Shaw.] Is that a corporation ?—lt is a company. 159. An independent company ?—Yes. 160. It had no other funds to pay interest out of ?—No; it was a new company. 161. Mr. Salt.] That again was a case in which the construction would take a considerable time ?—No doubt. 162. Perhaps one, two, or three years might elapse before the capital could arrive at an earning point?—" Well, I should judge not a very long period, from the amount of capital. 163. Mr. Shaw.] They had an ascertained business to begin with when they did begin absolutely?—lt was an incorporation of a new company. 164. They had an area of business for supplying water; it was not a mere speculation ?—That is so; and waterworks are known as being a much more safe and secure investment than railways. Mr. Chaeles Waking examined. 165. The Chairman.] You have been present in the room to-day ?—I was not present during the whole of the time Sir Edward Watkin was giving his evidence, but I heard a part of it, and I am acquainted with the substance of it. 166. You heard a part of Sir Edward Watkin's evidence and all Mr. Eees's evidence ? —Yes. 167. What is the view that you take of this matter?—My opinion is very strongly in favour of the alteration of this Standing Order, to the effect that 5 per cent, should be permitted to be paid legitimately and directly out of the capital of the company by the companies themselves. 168. A maximum of 5 per cent., do you mean? —My opinion—l am venturing to give my opinion—is this : that 5 per cent, for the period of construction of a railway is quite necessary in order to induce the public to subscribe to that undertaking; and I found that opinion upon this circumstance : not only that I have never known of less than 5 per cent, being offered to the public during construction, by means of the expedients which are resorted to, and which have been described to the Committee already, but I have very frequently known much more than 5 per cent, offered, and very frequently 6 per cent. In the majority of cases in which I have examined prospectuses that have been issued within the last twelve years, more than 5 per cent., generally 6 per cent., has been offered to induce subscribers to invest their money, and therefore I do not think that less than 5 per cent, would be sufficient. And, moreover, these English enterprises have always to compete with foreign enterprises. All foreigners require and are constantly offering the English public inducements to subscribe to railways abroad and other undertakings; and, with regard to foreign Governments, or foreign companies, or an English company possessed of a concession for making a foreign railway, in no case have I known in my experience that capital has been attempted to be raised by them without, at least, 5 per cent, interest during the construction being allowed, and generally foreign Governments and foreign enterprises offer much more than 5 per cent. Indeed, I think it would be important that the Committee should know what means have been resorted to by foreign Governments and foreign railway companies for obtaining capital from this country. I can give an instance of the Eussian Government. In 1866 the Eussian Government found it quite impossible to get capital in this country for the construction of their railways, even although they permitted the concessionaries to offer indirectly interest upon capital during the construction ; and they resorted to those means of inducing the public to subscribe. They agreed to pay interest directly out of the Treasury, entitling the subscriber to the capital of the undertaking