It may be said that the nationalisation of railways could be carried
out, not by a cash payment, but by a paper exchange of existing Railway
Stocks into newly created Irish Government Stock, the amount of the
existing net receipts being guaranteed. But, unless the Irish Government
could actually borrow in cash the sum required, at a rate equal to that
nominally put on the new stock, the shareholders would be robbed of a
capital sum equal to the amount of the discount on the stock, _i.e._ the
amount of the market quotation below par, or issue price. There will be
sellers of the new stock from the beginning, and what the public will
give for it, and not the nominal figure put upon it by the Irish
Government, will be its real value. The Irish Government may issue the
Railway Stock at 3-1/2 per cent., but if they could borrow the sum
required only at 4-1/2 per cent., the new stock will at once find its
level at about 77 instead of 100, and the capital value of Irish
railways will be reduced from, say, £45,000,000 to £35,000,000, and the
difference, £10,000,000, would come out of the pockets of Irish
shareholders. The Irish Government would be, however, in this unpleasant
dilemma, that if they issued the stock at a rate per cent, nominally
higher than the present return in railway capital, namely, 3.77 per
cent., the annual charge for interest would be greater than the net
receipts, and so from the beginning there would be an annual loss; and
the fact of this annual loss would be another factor tending to
depreciate the new Railway Stock. The alternatives before an Irish Prime
Minister, pressed to carry out a "Nationalisation" policy, are not
enviable. He will either have to provide by taxation for the annual loss
involved in taking over the railways on a fair basis, or to deprive the
most thrifty and industrious classes of his fellow-countrymen of a large
slice of their savings and investments. In either event, the new
Government will have received a serious blow to its credit at the outset
of its career.