The Guarantee system for funding telegraph lines.
At the beginning of telegraphic line construction, each of the Colonial Governments paid the full costs incurred. As more local communities asked for telegraphic facilities, it was apparent that some of these were important yet others were not likely to repay the costs of constructing the line and operating the facility.
Hence the New South Government developed a system whereby local communities had to guarantee part of the construction costs and the operating costs for a period - generally five years.
To provide some of the background and insight into the feeling amongst certain groups, some discussions are now included:
New South Wales
The Maitland Mercury of 1 June 1867 summarised the new system for guaranteeing that telegraph lines are not a burden on the Colonial budget.
The Empire 16 October 1862 reviewed a discussion in the Assembly about the guarantees and to whom they might be offered.
ELECTRIC TELEGRAPHS
| An additional wire from Sydney to Newcastle: | £3,500 |
| Line from Parramatta to Liverpool, a further sum . | £350 |
| Deniliquin to Hay | £5,600 |
| Wellington to Dubbo | £2,600 |
| Braidwood to Queanbeyan | £2,600 |
Mr. Morris desired to have some information respecting the terms on which the electric telegraph lines were to be extended to any particular district.
Mr. Arnold explained that, when a line was applied for, the parties gave a bond that the line would pay a certain percentage on the amount expended.
Mr. Morris: the operation of this system would work very oppressively in distant localities like Hay, to which it was desirable for police as well as other purposes, the line of telegraphic communications should be extended.
Mr. Dalgleish: he did not think the Government justified in extending lines to sheep stations on such terms. Why should they borrow money for the purpose of affording persons on squatting stations the luxury of the electric telegraph? What were those guarantees worth and how long were they to be in force?
Mr. Arnold explained that the bond was to be for seven years. Mr. Dalgleish did not think a guarantee for ten years would justify their borrowing money for the extension of the lines to those districts.
Dr. Lang agreed with what fell from the honorable member (Mr. Dalgleish) - that the extension of telegraph lines to the interior was a luxury the Government should not furnish at the public expense. He would suggest to the Government the propriety of adopting a uniform scale of charge for all places whether distant or not, in the same way as the two-penny postage for letters to any place within the colony.
Mr. Sadlier was of opinion that the interior districts required telegraphic communication more than the settled. Hay was the very place to which, above other places, the electric telegraph should be extended.
Mr. Lucas was of opinion that if the people in any locality gave security that the lines would pay the working expenses, he would like to see them all over the country.
Mr. Arnold: in reference to what had fallen from the honorable and reverend member for West Sydney, that the Government should have a uniform rate of charge for telegraphic communication irrespective of distance, the Government had the question under consideration and were not unfavourable to the system. But they felt that the time was not yet come when it should be adopted. He believed that some change should be adopted either in that way or by reducing the rates. The whole community felt interested in telegraphic communication.
Mr. Rotton hoped the House would pause ere it sanctioned that new system which the Government were now about to engraft on their telegraphic communication. Hitherto the lines were put up at the public expense but now, when a line was applied for, the Government would refuse to go to the expense of erecting a line of telegraph to any district where the people did not give a guarantee. He did not think the Government would ever be able to enforce the guarantee even where it was given. It was all "bosh". He had long been in favour of the equalisation of the rates as recommended by the honorable and reverend member Dr. Lang. He thought for the same reason that they had uniform postage rate, they should have a uniform rate for telegraphic communication. If it cost more money to work a line to Bathurst than it did to Parramatta, it was the same with the conveyance of mails.
Mr. Arnold: the honorable member (Mr. Rotton) argued against himself. He said the Government should satisfy themselves that the line was wanted, and then put it up without any guarantee as to the return. He (Mr. Arnold) desired to know how they were to ascertain whether a line of telegraph was required in a district or not. He knew the people in most districts would be urgent in their demands for a line to their respective localities. In no way could the Government so well test the value of these representations as by requiring a guarantee. The number of letters sent from a locality was not a sufficient guide. For instance, a line from Richmond would pay better than a line from Windsor which had a larger population. In no way could they alter the determination of the Government but by refusing the vote.
Mr. Lord would support the vote.
Mr. Moriarty: the Government ought to be fairly met, and not refused the vote.
Mr. Close desired to get some information from the Secretary tor Works respecting the facilities afforded to the people of Maitland for telegraphic communication.
Mr. Arnold: they had a railway line to Maitland and two telegraphic stations within two miles and a half of each other.
Mr. Hart: he could bear his testimony to the want of a telegraph station at East Maitland. If that town was not worth having a station in it, the sooner the Electoral Act was amended, by taking away from it the representation it had, the better. For if, with its numerous Government establishments, including the court house and goal, it was not worthy of having a telegraph station erected there, it was not of sufficient importance to have a representative. He differed from the views expressed by the honorable member, Mr Rotton. He (Mr. Hart) hoped the Government would carry out the system they proposed and take care that the bonds were properly executed. He was in favour of having a uniform rate for telegraphic communication from all parts of the colony.
Mr. Morris: what he objected to was the hardship which the Government inflicted on particular districts of considerable importance. The Government refused to extend the telegraph to Hay which, in consequence of its distance, would require a considerable outlay unless the inhabitants, who were not numerous, guaranteed that the line would repay the expense. They should bear in mind that a variety of circumstances rendered it desirable on public grounds that the line should extend to that township.
Dr. Lang desired to draw the attention of the honorable Minister for Works to a practice that, he believed, was adopted in Victoria, by which the office of postmaster was connected with that of operator for telegraphic communication. He hoped the Government would not lose sight of that course.
Mr. Holt said that Newtown was a place of much more importance than East Maitland and was much more entitled to a telegraph station. Wherever people would guarantee the Government against expense they were entitled to have a telegraph. He thought with the honorable and reverend member (Dr. Lang) that the offices of postmaster and telegraph station master should be combined. Mr. Lucas said every place that returned a member thought they had a right to all the instructions of the country; but East Maitland had only 1,834 inhabitants, whereas Paddington had 6,794, and the Glebe had 3,721, and Newtown had 4,236. Why should not these have stations rather than East Maitland? Camden with a population of 5,000 had no station. (Mr. Robertson: Shoalhaven with 10,000). He was glad to see the honorable Minister for Works had not proposed to put up a station at East Maitland.
Mr. Hart: the honorable member for Newtown (Mr. Holt) attempted wit; and the honorable member for Canterbury (Mr. Lucas), with his usual stolicity, quoted the estimates. He (Mr. Hart) apologised for having forgotten that there was such a place as Newtown. There would be no additional expense in having a station at East Maitland.
Mr. Morris: he had intended to have advocated a station for Camden and Picton It was highly necessary to have a station at Camden. That town was eight or ten miles distant from any telegraph office.
Mr. Stewart: in England, from any station they could communicate to any other station on the line. In England, at every railway station they could communicate. .
Mr. Arnold: It is so here. The line of telegraph that passed through all the railway stations was entirely for the use of the railway. The railway station master could not extend to the general business of the telegraph. He could not leave the station.
Mr. Dangar regretted the absence of the honorable member for East Maitland, Mr. Dickson. He (Mr. Dangar) thought there ought to be a telegraph station at East Maitland. There were the assizes held. He did not care whether telegraphs paid or not, telegraphs and railways should be for the benefit of the masses. A telegraph station was much more wanted at the Paterson township than the bridge. The inhabitants of the Namoi wanted a telegraph from Tamworth to Gunnedah. It would be of great service there. The carcase butchers were the best customers of the telegraph office.
Mr. Sadlier: this attribution towards public works was no new principle. Petersham and Hexham had acted on this principle for five of six years.
Mr. Rotton: it was their duty to consider the proposition of the Minister for Works. Members were right to look out for their own constituents. But they were sent there to legislate for the whole colony. The effect of adopting this guarantee would be to prevent any extension of the electric telegraph, except where such guarantee was given. It would be a dangerous precedent. It was the duty of the Government to find out whether the place that applied for telegraphic communication was important enough to be entitled to it. The guarantee was all bosh! Liverpool was a very insignificant town, yet they gave Liverpool a station. Dubbo was a much more important place and yet they would not give it a station without a guarantee. There might be some wires a good deal occupied; but they might oblige the officials to work a little longer than they did. The hours of attendance were from eight to six; they might give three or four hours more than that.
Mr. Harper: he agreed with the honorable member (Mr. Rotton) that the guarantee was "bosh". Would the Government bind them by a bond to fulfill the guarantee? Would any Government incur the odium of enforcing a guarantee? It would not be fair to equalise the expense of telegrams. The proper principle was for the Government to calculate whether it would cover the expenses incurred.
Mr. Dalgleish: they had been told that the Government required a guarantee that the telegraph lines would pay five per cent for as long as they expected the lines would last, which was estimated at seven years. He was therefore clearly of opinion that if they borrowed money for such a purpose, the item should be omitted. Such lines bore no analogy to railway lines which were permanent works.
The vote was carried on a division by a majority of 32 to 4. Messrs. Dalgleish, Rotton, W. Forster and Harper forming the minority.
There were many examples of these guarantees being required - for example the cost of lines to Cooma from Queanbeyan and from Kiandra required "the necessary guarantee for the cost of construction and the working expenses of the line". The Riverine Grazier of 30 June 1875 provided an extensive discussion on the rationale and approach to implementing the guarantee system for the line from Hay to Booligal. Even the telegraph line to the Randwick Race Course had to be guaranteed by the A. J. C.
See also the simple arithmetic to demonstrate that such bonds were not necessary for so many Stations - including Walgett, NSW.
On occasions, communities asked for a telegraph facilities because the line passed through their town. There was little cost in meeting that request - apart from construction and salaries. For communities distant from the telegraph lines, costs were much higher. To meet these costs, the Government required guarantees from a respected community member or a group of citizens. An example of such a line was proposed in the Legislative Assembly on 14 August 1868 when a Member asked:
"if a line was being considered to Fort Bourke. There had been no communication with that part of the country for six weeks owing to the floods. If there had been telegraphic communication much property and possibly life might have been saved.
In answer ... Mr. Holroyd said that the guarantee required by the Government in the erection of branch telegraphic lines was five per cent on the expense of carrying the line to the township from the line or branch line nearest to the place. They also required a guarantee to cover the working expenses of the line - generally about £200 or £300 year. If the messages amounted to that sum of course the persons giving the guarantee were not required to pay anything but, if they should fall short, the guarantors would have to makeup the difference. He had always cut down the guarantee as low as possible. It lasted for five years".
The residents of Bega were good thinkers soon after their Telegraph Office was opened.
The Legislative Assembly reviewed the financial aspects of the telegraphs on 18 October. Some points made in the discussion wre:
"The total expenditure on telegraphs works to 30th June 1866 was £48,569.
The expenditure upon lines open for traffic was to 31st December, 1859, £23,817; and to 30th June, 1860, £41,329. According to the above Estimate, it would produce a return for 1859 of 13½ % per annum; and for the first half-year of 1860, 11 %, after paying working expenses.
We need not have any hesitation wherever there is a necessity for the extension of these lines. Their cost would not be a burden upon the country since the money could be raised by loan and the interest in time would liquidate the cost, [Mr. DARVALL: "Is that upon each line?"] The lines are so blended together that it is impossible to say whether, for instance, the Southern line does not receive revenue from Bathurst; and you could not take away any one line and estimate what its returns are, but must take the telegraph estimates as a whole, for they all contribute to the common fund."
Such reasoning is, in part, contradictory to the arguments put to local communities in terms of the need for guarantees from them.
The Pastoral Times of 20 October 1966 reviewed the use of the Guarantee System as of 1866 - although it does not address its discussion directly to the Deniliquin - Wentworth - Adelaide line within which contect the statement is made.
There are few examples of where a line collected such little income that a bond had to be called upon by the Government. Three examples are:
Another example - related to Burrowa (North--Central region of NSW) - highlighting the nature of the bond and its implications was printed in the Goulburn Herald of 1 August 1868:
"TELEGRAPHIC GUARANTEE.
J. N. Ryan and others v. R. Clay. This was an action reported by the Burrangong Argus, heard at the small debts court Young last week to recover £2 10s, the amount alleged to have been guaranteed by the defendant towards the erection of the telegraph line from Yass and the working expenses of the telegraph station at Burrowa.
Mr. W. D. Campbell conducted the Case for himself and other complainants and Mr. Freestone, solicitor of Young, was retained by Mr. Clay and other defendants. The particulars of the case, as far as we could gather, are briefly these. After several meetings held in the town, a bond was entered into in January 1866, by Edward. Ryan, J. N. Ryan, W. D. Campbell, F. R. Hume, George Eason, Michael O'Neill and T. D. Gibbons, Esquires, guaranteeing the Queen for five years the difference between the actual receipts at the local telegraph office and the cost of constructing a telegraph line from Yass and maintaining a telegraph station here for the same period.
Previous to this guarantee bond being signed and delivered to the telegraph authorities, another or sub-bond was signed by a number of other gentlemen in the district, who severally and collectively bound themselves to pay certain sums set opposite their names.
Some months ago, a claim was made by the Superintendent of Telegraphs for £135, the difference between the actual receipts and the cost of construction and maintenance up to the present time. The original guarantors collected and paid in £50 of the amount and advertised their intention of taking proceedings against the sub-guarantors residing in the town who should not have paid the respective proportions due to them on or before the 11th July; and hence the present action.
Mr. J. N. Ryan gave evidence as to the nature of both bonds; that the original bond was in the hands of the telegraph authorities; that the copy produced was identical with the orignal; that a peremptory demand had been made, and a portion of the money paid in. Mr. Wotton, commissioner for affidavits, deposed that Mr. T.H. Corcoran, now an inmate of Tarban Creek Asylum, declared on affidavit before him that the bond produced, bearing the signatures and seals of defendant and other sub-guarantors, was true in every particular.
Mr. Freestone pleaded that Mr. Wotton's evidence being of a secondary nature was not admissable; that there was no evidence of the bond being signed, sealed and delivered by defendants as required by law; also the Statute of Frauds, there being an allegation that some of the names to the bond (Clay's for one) had improperly been placed there. These and other objections were energetically. urged by Mr. Freestone, who quoted at length in support of his views, from Smith's Leading Cases and other authorities.
R. Clay, on being put in the box, disputed at first but ultimately admitted that the signature might be his. Mr. Campbell, for the complainants, met all the objections of Mr. Freestone in a lawerly logical manner, and the police-magistrate coinciding in his views, a verdict was entered for the amount claimed.
Mr. Freestone, for the reasons stated in his pleadings, notified his intention of moving for a prohibition. There being other technical objections raised in the case of Mr. J. D. Crego, the hearing of that and other defended cases was postponed for a month to enable the prosecution to bring forward evidence of the handwriting of Mr. Cracknell. The court then adjourned until Wednesday, the 12th August next".
Note there was no reference to the telegraph line having been in operation for only about 12 months nor that the Burrowa Telegraph Office was in a temporary location in a local store and, about the time of the case, that office was about to be removed to another temporary location. These conditions are far from conducive to efforts to buid up a clientele and to stimulate support for the new venture.
The Jerilderie situation brought the implications of the guarantee into a clearer resolution. The Pastoral Times of 31 October 1868 recounted:
"JERILDERIE.—There is some hope that the Telegraph Office may be re-opened here and that offices may be opened in small townships where they are necessary though they may be unable to pay for a full office.
In the report (dated 18th August) of the Chief Superintendent of Telegraphs (Mr. E. (J. Cracknell) made to the Postmaster-General we find the following: "In minor towns where there are branch lines, alphabetical instruments might be employed and placed in charge of the post-masters, as at Raymond Terrace and Scone." The office of post-master, telegraph-station-master and other minor offices might be concentrated in one person. A telegraph-office might then be secured in such small roadside townships and great public good would thus accrue.
It is well worthy of consideration of the Government. It is not difficult to teach police sergeants the elementary branches of telegraphy - for instance, the senior police officer at Jerilderie might operate for brief messages such as are likely to be sent from a roadside village as Jerilderie. The police officer has next to nothing to do, and his time could be devoted to some such useful employment.
It would be possible to make his situation permanent for a term of years by installing him post-master and telegraph-master, while he had at the same time the directing power of the police. He need not leave his post excepting on great emergencies, and these rarely arise. A small increase of salary to the police officer might pay all these things—making the officer far more useful than he is now when time passes so leisurely on his hands. We have a great many (official) cats that do not catch mice in Riverina, and Government proclaims aloud that retrenchment is indispensable".
On some occasions, a bond was called upon to be paid but guarantors did not pay the amount agreed. One such was the extension of the line from Yass to Burrowa. In this case, the guarantee did not work out well for some of the signatories. The Armidale Express of 8 August 1868 gave the following details:
"The 'Burrangong Argus' reports a case heard at the Small Debts Court, Young, last week, J. N. Ryan and others v. R. Clay, in which it appeared that plaintiffs had, in January 1866, entered into a bond guaranteeing the Government, for five years, the difference between the actual receipts at the local Telegraph Office and the cost of constructing a telegraph line from Yass and maintaining a station at Burrowa for that period.
Previous to this bond being signed, another, or sub-bond, was signed by a number of gentlemen in the district, amongst whom the defendant was one, who bound themselves to contribute the sums set against their names. A claim amounting to £135, for deficiency, had been made by the Superintendent of Telegraphs and some of the guarantors had paid in according to the several proportions to which they had rendered themselves liable in the bond. Others, and the defendant was among them, refused to pay. Hence the present action was brought. Defendant was examined as a witness, but could not deny his signature, and a verdict was entered for the plaintiffs in the amount claimed".
The worst example of the repayment of a bond was reported in the Braidwood Independent of 18 September 1867:
"TELEGRAPHIC BONDSMEN.
We were on Tuesday last shown a document issued from the Crown Law Offices, calling upon Mr. John Welch, of Monaro, to pay the sum of £5,000 and £4 4s. costs of writ, on account of our telegraph line. We believe the bondsmen some time since received notice that they would be required to make good the deficiency in the amount guaranteed - that amount being stated in the notice.
But they failed to take cognizance of it and the result is that Mr. John Welch has been sued for the full amount and costs. This is certainly one of the evil results of becoming public bondsmen. The only way of putting an end to the matter is by complying with the demands of the Government. Otherwise it will fall rather heavily, and perhaps unpleasantly, on those persons now living who entered into that bond - two of their number being dead".
Victoria
Guarantee references:
Victoria Report for 1868, p. 6
also for 1867, p. 5 (details of Penshurst and Coleraine).
See Serpentine, vic