SECTION VI.
GROUPING HERE AND ON THE CONTINENT.

“Grouping,” is the name of the familiar arrangement by which collieries or works within a given area are charged equal rates, and are thus enabled to compete on equal terms. In fixing the rates for traffic carried long distances, grouping stations far apart is carried out to some extent. For instance, the rates for tin plates from South Wales and Monmouthshire to Liverpool are the same from the works between Carmarthen on the west, and Monmouth on the east, the distances varying from 160 to 206 miles. So, too, the rates between Scotland and places in England, south of and inclusive of Yorkshire, are divided into groups—22 in the former, and 39 in the latter. Though the practice is not of the first importance to railway companies, it is not without value to them. If “grouping” were prohibited, and the nearest collieries or works could supply all the coal or goods which were required, railway companies might, in some cases, earn as much net profit on the traffic carried as if grouping were adopted. No doubt, however, if the nearest collieries or works charged the public enhanced prices, or if they could not supply the commodities to the extent required by the public, the railway companies would suffer. They would lose not only the traffic which they might have carried, but they would also suffer from the lessened prosperity of districts in which they had an indirect as well as a direct interest.

The chief sufferers, however, from the giving up of “grouping” would be the public; they distinctly gain by the practice, though producers near great towns or sea-ports may lose the benefit of “geographical position.” Collieries and works which are “grouped” are enabled to contribute to the available supply. They enter markets from which they would be otherwise shut out; the extent of the trade is thereby increased; the price paid by the consumer may be lessened. In fact, many traders admit, tacitly at least, the value of the practice.

Its legality has lately been called in question. It has been supposed to be prohibited by the decision of the Railway Commissioners in the case of the Denaby Main Colliery Company v. Manchester, Sheffield, and Lincolnshire Railway Company, which came before them in January, 1880. The complaint was that the rates and tolls charged to the owners of the Denaby Main Colliery, for the conveyance of coal, both by railway and canal were an undue prejudice and disadvantage to themselves and undue preference to the others within the meaning of Section 2 of the Railway and Canal Traffic Act, 1854. The railway rates from the Denaby Main Colliery to Keadby, which is 25 miles, and to Grimsby, which is 56 miles, were 2s. 1½d. and 3s. 1d. per ton respectively. Similar rates were charged from the other collieries in the same group, although the distances between Keadby and Grimsby and the Denaby Main Colliery were 15 miles less than the most distant of the other collieries in the group. For all coal passing to certain places to the eastward, the Denaby Main Colliery was grouped with 48 other collieries in the same district. But, except in certain cases, the collieries were not grouped for coal going to the west; on traffic sent to places in that direction Denaby had to pay according to its geographical position. With regard to some portion of their traffic to the west, the Denaby Main Colliery had special rates. The decision of the Railway Commissioners, which has not been reversed, was that this particular grouping system did subject the proprietors of the Denaby Main Colliery to undue and unreasonable prejudice and disadvantage. But their decision was probably upon the facts, not upon the law; and their finding really was that the group was too large, and that the Denaby Main Colliery ought to be taken out of it. The same question was to some extent discussed in the House of Lords in the Denaby Main Colliery Company Limited v. Manchester, Sheffield and Lincolnshire Railway Company (L.R. 11, A.C. p. 97); and the observations of the learned law lords do not confirm the opinion that grouping is per se illegal.[21] If the contrary were the case—if all such arrangements were necessarily illegal—the result would be somewhat serious to trade.

A few particulars as to grouping on the Continent may be mentioned. It will be found that it has been adopted there for the same reasons as led to it here.

In Germany and Holland grouping is recognised. There, as has been previously mentioned, mileage rates is the principle on which the tariffs are based, and the State practically controls the rates. But some exceptional tariffs for coal and coke are not calculated upon the distance from the place of origin to the station of destination. Sending stations in certain cases, and sea-ports in others, are formed into groups. In Germany, for instance, the sending stations included in the exceptional tariff with Bremen, Hamburg, and other ports in the North of Germany, are divided into seven groups. The first three embrace all the stations in the Right Rhenish district where coal mines exist. Group 1 contains about fifteen stations from 6 to 24 kilometres distant from each other, in a total distance of 245 kilometres to Bremen and 359 kilometres to Hamburg. Group 2 contains about thirty-five stations from 1 to 19 kilometres distant, and Group 3 seven stations at distances varying from 1 to 13 kilometres. The total distances to Bremen and Hamburg are 271 and 385 kilometres respectively. For all stations in the same group there is one tariff, which is for one fixed consignment per week:—

If there are two fixed consignments sent regularly every week for one year, a reduction is made of one mark for every 10 tons, and for

The coal stations of the Rhine Province and Westphalia are also grouped for Dutch, Belgian and French traffic. In the two last cases, however, the differences of distance are very slight. For Dutch traffic the differences of distance between the stations in Group 1 vary from 1 to 16 kilometres in a total distance of 218 kilometres, in Group 2 from 3 to 20 in a total distance of 233 kilometres, and in Group 3 from 1 to 33 in 265 kilometres.

The grouping of the ports in the North of Germany, shows a much greater difference in favour of certain ports. For instance, the same rates are charged from the coal stations to Bremen as to Hamburg, although the former is 114 kilometres (71 miles) further; the distance from Dortmund to Bremen being 237 kilometres (147 miles), and to Hamburg 351 kilometres (218 miles.) The same rates are also charged to the following ports as to Bremen, which is distant from the various coal stations from 221 to 271 kilometres:—

Thus the “grouping” which is permitted, and indeed actually carried out, by the German authorities, exceeds in degree anything of the kind known on the railways in this country.

In France also, “grouping” of ports is sanctioned with a view to promote competition. The special import and export rates from Dunkirk, Calais, and Boulogne to Paris, which are equal in amount, notwithstanding the differences in distance, may be taken as an example:—

SECTION VII.
DIFFERENTIAL RATES ON THE CONTINENT.

In France, Belgium, and Germany, there are fewer ports competing with railways or with each other than in Great Britain. In each of those countries the principle of mileage rates has been nominally, and, to a large extent, in practice adopted. But in all of them causes similar to those which have here created so-called differential rates have been in operation. In each of them the fact of competition by water is recognised as a reason for charging reduced or special rates; such rates for export or import traffic exist, although the special rates for the latter traffic are fewer than for the former; and there are also special transit rates[22]. All these rates have been established after much consideration. Writing of the discussion of the subject in the Corps Legislatif in 1863, M. Aucoc observes in his well-known work, “Since that solemn discussion, the principle of differential tariffs has been placed beyond question.” He adds: “It may be well to mention also that, in the numerous judicial works on the working of railways, not only the legality, but the necessity and equity of conditional and differential rates have been almost unanimously recognised.”[23]

Take first the special rates in France. Wheat may be imported either viâ Marseilles, or viâ Rouen and the Seine to Paris, the distance from Marseilles being 863 kilometres, and from Rouen 134 kilometres. To compete with the sea and the Rouen route, the Paris, Lyons, and Mediterranean Railway Company charges for imported goods, special rates between Marseilles and Paris. These rates have been complained of as encouraging foreign trade. The answer, however, is that if not conveyed viâ Marseilles such goods might be conveyed viâ Rouen and the Seine to Paris. The general tariff rates on the French lines are based upon a uniform charge per kilometre, irrespective of any special requirements of the locality. In order, however, to remedy the disadvantages arising from such a system, and to meet the various circumstances and requirements of particular trades, numerous special tariffs are adopted with the sanction of the Minister of Public Works. These special rates are not, as is sometimes supposed, fixed upon any regular or uniform basis. Some are adopted for the purpose of developing a new, or increasing an existing trade which may be subjected to competition from other districts; others are established to meet competition by sea, canal, or otherwise. Under some circumstances reduced rates are arrived at by adopting computed instead of actual distances; the former being sometimes based on the distance by a shorter route either by rail, road or sea. But in some cases an arbitrary distance is adopted.

The French railway companies have special import and export rates for numerous articles in their classifications which are lower than the ordinary class rates to the port town, and occasionally lower than the class rates from intermediate stations; in which case the special import and export rates may apply. The following table is a comparison of a few import and export rates with the ordinary class rates. The latter, it should be observed, are, in some instances, based on computed, and not on actual, distances.

In some instances the special rates apply both ways, i.e., for import or export goods. But many of the export rates for certain articles are lower than the import rates; for instance, the rate for Cereals from Paris to Dieppe for export is frs. 7·50, while the import rate from Dieppe to Paris is frs. 9.

In addition to special rates for export and import goods there are also special tariffs for transit goods subject to special conditions which appear anomalous, and have given rise to complaints. The following is an illustration:—Both Roubaix and Rouen are spinning centres, and Epinal is a weaving centre. The rate for a 5-ton load of Yarn from

The rate for Yarn from Dieppe to Bâle, a distance of 716 Kilometres, is 47 frs. 30 cts. The explanation of these apparent anomalies is that the rates from Roubaix and Rouen to Epinal are based on the local ordinary tariffs; that the rate from Antwerp to Epinal is a special import rate; whereas the rate from Dieppe to Bâle is a still lower special tariff for transit goods. The following is an example of transit or through rates from a town in Italy to a port in France. The proportions of the receipts accruing to each Company and the rates charged for goods carried locally between the respective points are shown. It will be seen that the local rates from the frontier to Paris are in excess of the charges from Milan to Paris.

A.—The proportions accruing to the French Companies for lots under 5 tons remain the same for traffic from all the Italian stations named in the Tariff.

B.—The French Railway proportions for lots of 5 tons and above vary according to the distance of the Italian town from the frontier, as will be seen from the examples below:—

In respect of traffic for intermediate places, the French railway companies may make higher charges than the rates for transit traffic carried over the same portion of railway beyond those places. But they may be required to charge the same sums for traffic to or from any intermediate place as they charge for import or for export traffic carried beyond.

In Belgium, also, differential rates are charged between certain places for export and for local consumption. The following are a few illustrations:—

Neither private companies nor the State railways are permitted to make concessions of any kind, or to depart from the official tariff in favour of any particular firm or carrier. All general or special tariffs must be approved by the Minister, and published in the official paper, the “Moniteur.”

On the Prussian railways the maximum rates shewn in the tariff are actually charged. But exceptions are made where trade requirements, competition, and other similar circumstances appear to necessitate a departure from the official rates. It is not considered that railway companies are, in general, bound to adjust anomalies in the carriage charged for traffic arising in different districts, for one and the same destination, by reducing the rates from the more distant sending station. But for the sake of uniformity the rates are so adjusted if, for any reason, exceptional rates from any particular district have been adopted, and if they are lower than from intermediate stations nearer by rail to the same destination.

In Germany under the “Seehafen Ausnahme Tarif,” there are a very considerable number of special rates. For instance, the rate for grain from Bremen to Cologne, a distance of 324 kilometres, is 12 marks, while from Hemelingen, which is short of Bremen by six kilometres, to Cologne (318 kilometres) it is 15 marks 50 pfenning. For the purpose of stimulating the traffic from the Rheinisch Westfälischen District with the German North Sea Ports, viz., Emden, Leer, Papenburg, Bremen, Bremerhaven, the competition of the rates to the Dutch ports, to which the Rhine affords a cheap water conveyance, had to be taken into consideration. Accordingly from Essen to Bremen, 254 kilometres, the Amsterdam rates, which are lower than the tariff rates from Dortmund to Bremen, 237 kilometres, were adopted, although the traffic from Essen to Bremen has to pass viâ Dortmund, which is 17 kilometres nearer to destination. In another instance the German State railways give a rebate of 5 marks per truckload for coal exported from Hamburg.—“For consignments of coal for Hamburg and Harburg a rebate of 5 marks per 10,000 kilos. is made when proof is given that the coal is destined for export to Trannaine, places outside of Germany or for the German Baltic Ports.” In other words, a rate of 5 marks less is charged to Hamburg for coal for export than to the same place for coal to be consumed in the town.

Exceptional Tariff No. 2 consists of special rates for goods traffic between stations of the Royal Elizabeth Railway, &c., and Gustavsburg. They, however, are only in force during the period when vessels can ply on the Rhine, for instance:—For “Stückgut” or piece goods from Vienna to Gustavsburg the transit rate is 7m. 24pf. per 100 kilos. 1st class, and 6m. 60pf. 2nd class, and the local rates are 8m. 11pf. 1st class, and 7m. 73pf. 2nd class.

The effect of these special rates is to secure the traffic to the Bavarian State and Hessian railways, and prevent its passing over the Prussian and Dutch railways. The Rheinisch Westfälischen private railways grant contract (Abonnements Special Train) tariffs for the conveyance of coal from the Ruhr district to Nederlandish stations in fixed consignments of at least 200 tons, and not exceeding 300 tons. The adoption of these rates has principally been prompted by the competition of the water service on the Rhine. They include haulage to the sidings or depôts; and they are granted only to traders who contract to send at least once a week for one year a consignment of from 200 to 300 tons to Nederlandish stations.

Thus it will be seen that in Germany the carriage of traffic in large quantities is charged at special or reduced rates. A similar principle has been recognised in this country also. It was held by the Court of Common Pleas, in the case of Nicholson v. Gt. Western, that “Clause 31 of the Railway and Canal Traffic Act, 17 and 18 Vic., is not contravened by a railway company agreeing to carry at a lower rate, in consideration of a guarantee of large quantities and full loads at regular periods provided that the real object of the railway company be to obtain thereby a greater remunerative profit by the diminished cost of carriage, although the effect may be to exclude from the lower rate those persons who cannot give such a guarantee.” The effect of such a system, however, has been complained of by smaller traders as favouring the larger ones; and in this country, it is not in practice generally acted upon.

The basis of through tariffs between Germany and other foreign countries is the normal mileage rate to the German frontier; but with the view of encouraging the export trades, reduced rates are charged in favour of international traffic.

The Dutch are also desirous of developing their transit traffic; and with that object so called “exceptional rates,” based upon lower mileage rates than the ordinary tariffs, are charged from places of production in Germany to the Dutch ports. Thus, there are “exceptional rates” for, amongst other things, heavy iron and steel goods from manufacturing towns in Westphalia to Amsterdam and Rotterdam, and they are as much as 37 per cent. lower than the ordinary rates. These German-Dutch rates are invariably lower than the ordinary rates to inland towns lying between the forwarding station and the port. The following are some of the exceptional rates in force, compared with the ordinary rates to inland towns for shorter distances:—

For traffic between Austrian and Hungarian towns and the Dutch ports in certain articles there are also so-called “Seaport transit rates.” For instance, for dried plums, apples and pears from Vienna to Rotterdam, the export rate for lots of 10 tons is m. 41·50 per ton of 1,000 kilogrammes, the local rate being m. 51·60 per ton; for wool from Buda Pesth to Amsterdam the rate per ton of 1,000 kilogrammes in lots of 5 tons, is export m. 67·0, local m. 81·30. These rates are only available for goods destined for export or import; and, as will be seen, they are considerably lower than the rates for the same description of goods for consumers in the port of shipment. There are also exceptional rates for goods traversing Germany to and from the German sea-ports and Austria and Hungary. The following is a comparison between the rates from Bremen to a station on the Danube, and the rates from the latter station to a station situated between that station and the sea-port:—

In Holland no scale of rates is universally chargeable. Each railway company is authorised by the Concession under which the railway was constructed, to charge certain specified rates. But, as in England, the existing rates actually charged are generally lower than the maximum; and the fixing of them maybe controlled by the State. By Article 31 of the Dutch Law the railway companies are required to carry all goods (not excluded from transport) and passengers at the rates set forth in the published tariffs, and under the conditions determined by the regulations, without unduly favouring special persons, Societies, Companies, or other bodies. By the existing law the railway companies are forbidden to make special arrangements for carriage at lower rates than those published in the tariffs, except in the following cases:—

   (a). For the carriage of large quantities;
   (b). For the carriage of one or more truckloads of goods at stated intervals;
   (c). For the carriage of goods intended for charitable purposes or for exhibition.

Notice of such exceptions has to be given to the Home Minister. Those reductions must be available for all goods of the same class, to be conveyed on the same line, and under the same conditions; they must be immediately advertised; and they remain in force during the existence of the contract.

By the strict letter of the law it is provided that the same rates must, over the whole of the system of the railway, be charged by the company for the like article for the same distance. But, in consequence of the competition by inland navigation for traffic to and from places in Holland, and also by the Rhine, and through Belgium for German traffic, this requirement proved impossible to carry out in practice. The Government have found it necessary to allow the companies to enter into special contracts for the conveyance of goods on such conditions as they might consider it desirable to agree upon. Notice of any special contract must, as before stated, be given to the Minister of Commerce after it is entered into, and the official assent is subject to the company agreeing to enter into a like agreement with any other person. While such is the letter of the law, virtually enjoining equal mileage rates, the practice is altogether different. For any description of traffic, special agreements as to quantity to be forwarded and time of delivery are made. The great object is to obtain traffic. The published notices of such contracts contain, it may be added, no information which can be utilized.

The following is an illustration of the special contracts entered into and of the manner in which their existence is notified:—

    [Copy of Special Contract.]

SPECIAL AGREEMENT for the carriage of slow train goods

from _______________________________________

to  _______________________________________

between ____________________________________

on the one hand, and the General Goods Manager of the

 Railway Company, at ______________________________

contracting in the name of the Direction of the above-named

Company (or Companies), on the other hand.

          ART. I.

 The first-named contracting party binds himself to have all the goods to be
despatched or received by him during the current year, estimated at ______________________
truck loads ( ____________________ kilogrammes), from _____________________________
to ____________________________________________
carried over the lines of the ________________________________
Railways, in accordance with the conditions in Article IV. of the Law of Railway
Companies (General Rules and Regulations), of 9th January 1876 (Gazette No. 7), and
with the Special Bye-Laws in force for local traffic, as set forth in the tariff, for the
conveyance of fast and slow goods over the lines of the ________________________________
________________________________ Railway Company, approved by order of the Minister of the
Interior, dated 1st March, 1877, and which tariff came into force on the 1st April, 1877.
On the other hand the last named contracting parties bind themselves to carry the
goods of the first-named contracting parties during the year 1885 at the reduced rates
shown in the circular of the ________________________________
Railway Company, dated  ________________________________  1885.
 No use may be made of these rates for the re-despatch of goods at intermediate
stations, so as to obtain a cheaper rate than the direct rate.
 Agreed to and signed in dupl. at

________________________________ th ________________________________ 188_
                           Contracting party No. 1.
________________________________ th ________________________________ 188_
                           Contracting party No. 2.

    [Copy of Circular.]

________________________________________________________ RAILWAY.

The Direction of the ________________________________ Railway begs to inform
those interested that the General Goods Manager ________________________________
of ________________________________ has been authorised to make special agreements for
the carriage during the current year of large quantities of Goods, or for regular consignments
of one truckload or more between Stations of the ________________________________
Railway, and between those Stations and Stations of the ___________________________
on the following basis:—

(a) For large quantities:       Per 100 kilos. and 10 km.

   In consignment of 10 tons   in      1 cent.
     ”   ”    5 to 10 tons      1½ cent.
     ”   ”    3 to 5 tons       2  ”
     ”   ” 100 kilos. to 3 tons      2⅓> ”
     with 8 cents per 100 kilos. terminal charges.

(b) For regular consignments in truckloads:

The charges as above for consignments of 10 and 5 tons.

Any fractional distances will be counted as for 10 kilometres, and the weight per
100 kilogrammes, without distinction for different classes of goods. Parts of 10 kilometres
and 100 kilogrammes will thus be taken as 10 kilometres or 100 kilogrammes.

With these exceptions the General and Special Rules and Regulations of the
________________________________ Local Rate Book of 1st April, 1877, with the alterations
and additions made therein later, apply to these contract goods.

Consignments of 5,000 kilogrammes will be treated in the same manner as goods
of Class A, and consignments of 10,000 kilogrammes in the same manner as goods
belonging to the Classes B, C, D, and the Special Tariff.

Further information can be obtained at all the Stations; or on application to
the Agent of the ________________________________ Railway.

    [Copies of Notices of Special Contracts.]

    From the “Dutch Guide,” of 28th January, 1886.

      Holland Railway Company.

A contract has been entered into for the carriage of a large quantity of goods over
the Company’s lines.

Further information can be obtained at the Goods Office, at the Central
Administration Buildings, Droogbak, Amsterdam.     The ADMINISTRATOR.
Amsterdam, 25th Jan., 1886.

From the “Dutch Guide,” of 25th February, 1886.
  Company for working the Dutch State Railways.

Various contracts have been entered into for the carriage of large quantities of goods
on the Southern net of the State Railways.

Further information can be obtained at the Goods Manager’s Office, Moreelselaan,
No. 1, Utrecht.                 The GENERAL MANAGER.
Utrecht, 17th-24th Feb., 1886.

    [Central Railway.]

A Contract for the carriage of cattle has been entered into.
Further information can be obtained at the Goods Manager’s Office,
Catharijne Kade 759, Utrecht.

The result is that a considerable portion of the traffic is carried under special agreements, under conditions such as the following, viz.:—

The sender agrees to forward between A and B special quantities, for instance:—

or to forward the whole of his traffic between C and D estimated at a specific quantity for a certain period, for instance:—

In Italy, differential rates have been the subject of public inquiry, and the representatives of some local interests have asked for their abolition. But they exist; and the verdict upon them of the Parliamentary Committee of Inquiry in 1881 was: “It is indisputable that the system of differential rates has helped to strengthen and improve the national industries.”[26]

The fact of railways in other countries charging special rates for import, export and transit traffic, is, of course, not a proof of their being right in principle. But the foregoing information may correct loose assertions or suggestions that differential rates are unknown or rare elsewhere. It shows that the railway authorities and the Governments who control the rates in those countries, even while professing to charge mileage rates, have considered it necessary, with the view of promoting and protecting the interests of their trade, to charge differential rates.

In the United States, where there is much competition for the conveyance of long distance interstate traffic, and where remarkably low rates—“war rates,” as they are called—are charged, charges for intermediate traffic are not lowered proportionately. In that country differential rates have been much attacked; they have no doubt occasionally been imposed without measure or reason. But they still subsist, and are found useful. As an illustration it may be stated that, at the present time, the rates for the conveyance of flour from Minneapolis to Milwaukee, 335 miles, and to Chicago, 420 miles, are the same; while the rate to Duluth, 164 miles, is only 25 per cent. less.[27]

SECTION VIII.
THE INTEREST OF CONSUMERS IN RATES.

Of the causes which have prevented progress in the public discussion of rates, chief has been the fact that the subject has been regarded too exclusively from the point of view of a limited number of traders or producers. The general interests of the country have been overlooked, or it has been assumed that they are identical with those of particular traders. Once the question is looked at from several sides—as it appears to those who buy as well as to those who sell, and to producers in different places—many of the complaints made against the companies as to the existing system of fixing rates are seen to be unfounded.

Those who buy commodities are interested in getting them to the various markets cheaply and in abundance. They wish the charge for transport to be small—they wish it to be small even if the distance from which the goods are conveyed be great, because their sources of supply are thereby increased. To the consumer the ideally perfect state of things would be a tariff for the conveyance of merchandise based on the same principle as the Penny Post; commodities would be conveyed at a low price, and producers over an immense area would be able to send them to market. To the consumer it would be in every way desirable that all disadvantages of distance or “geographical advantages” should disappear. Accordingly, as has been before stated, plans have been brought forward for making uniform rates for the same class of goods within a large area, or within certain regions or zones. The attainment of this is impracticable—the distance between various parts of the same country cannot be ignored, as in the case of carrying letters or transmitting telegrams. Consumers may fairly desire that the cost of transporting articles from a great distance may be lowered so as to permit of the influx of goods from remote parts. But unfortunately they cannot altogether efface distance. The next best thing is that the cost of transport shall not increase pro rata with the distance. This reasonable desire railway companies have sought to satisfy, and with what results is well known.

London, for instance, formerly drew its chief supplies of food from its immediate neighbourhoods. The extensive market gardens which existed, especially in the eastern and western suburbs, sent their produce to town by heavy road wagons, and to this day they continue to do so. But as population increased, and the demand for food became greater, the facilities, both in regard to conveyance and charges, afforded by the railway companies, enabled farmers, graziers, and market gardeners in distant parts of the kingdom to compete with those in the immediate neighbourhood of London, to the obvious advantage of the consumer. In this way fat cattle from Norfolk, meat from Scotland and Devonshire, fish from Scotland, Ireland, and the East and West Coast of England, broccoli and new potatoes from the Scilly Islands, Penzance and the Channel Islands, store potatoes from Lincolnshire and Scotland, and other articles of food are conveyed by the railway companies at rates which, although not proportionate to those charged for shorter distances, are beneficial to traders and their customers. Meat is carried from Yorkshire, about 189 miles, at 55s. per ton; from Aberdeen, 516 miles, at 67s. 6d.; and from Stromness, in Orkney, 776 miles, at 90s. per ton. Potatoes from Yorkshire are carried at 15s.; from Sunderland, 269 miles, 18s. 4d.; and from Aberdeen, 30s. per ton. The effect is to open fresh markets to producers throughout the country, and to supply the wants of an ever increasing population at such reasonable prices as would not otherwise be possible.

“To move is practically to produce,” at least it often is so. The consumer desires that commodities and materials should be conveyed from places where they are produced cheaply or are abundant, to places where they are more in demand; that coal, for instance, should go to districts where there is ore without fuel available for smelting; that timber, or excellent building stone, should be conveyed to great cities; and that the small value of many raw materials, rendering it impossible for them to bear more than the lowest rate of carriage, should not prevent their being conveyed. This demand, also, the railway companies have satisfied by charging rates not always exactly varying with the distance. Writing of the marvellous effects of railways, the late Mr. Newmarch, in his edition of “Tooke’s History of Prices,” says: “Among their greatest achievements are the opening up of new fields of supply, and the deepening of old channels of consumption. They have brought into profitable use mines, forests, quarries, arable and grazing districts, fisheries, harbours, and rivers, previously inaccessible. The produce arising from these various and numerous sources is so much additional wealth placed at the command of the community.”[28] Had equal mileage rates been universally enforced many of those new sources of supply would still be useless; the articles would not bear the cost of transport.

At any given time in a particular market there is a certain price which an article such as milk, wheat, or iron will fetch. Assuming that price to be 30s., the cost of production 20s., the rate of conveyance 3d. a mile, A, B, C, D, to be four places, each 10 miles distant from each other on the same railway, and each capable of producing an “output” of 500 tons. The article can be economically conveyed no further than (10 x 12) / 3 = 40 miles, that is from D. In such circumstances consumers will have an available supply of 2,000 tons. Producers at A, 10 miles distant, will pay for transport 2s. 6d.; those at B, 5s., and so on. Those at A, B, and C, 10, 20, 30 miles distant, will possess a considerable advantage over producers at D, the place 40 miles distant. This superiority would be retained by those who have long leases; but in course of time, by the action of competition, rents would rise, and the advantage would tend to pass to the owners of the land at A, B and C. What would be the result, if a railway company, desirous of enlarging its traffic, established lower rates (say 2d. a mile) to E and F, places on the same line, also 10 miles apart, and equally capable of producing an “output” of 500 tons? The particular article might now be conveyed from F, 60 miles distant. The consumer would benefit; his available supply would now be 3,000 tons. In practice this might be an understatement of the gain to him, for the result might be to give access to districts in which the conditions of production were altogether easier and cheaper. Producers at A, B and C, might temporarily—the landowners at these points might permanently—suffer; but the public and other landowners would gain. They would gain indirectly and directly—directly in the increased volume of supply, indirectly by the increase of traffic enabling the company to keep down its general scale of charges; and manufacturers and landowners at points E and F would benefit. Such an illustration may serve to show how the interests of some landowners and certain traders may sometimes be on one side, and those of consumers, other landowners, the bulk of traders, and the railway companies on the other.[29]

SECTION IX.
THE REAL BASIS OF RATES.

The Managers of English railways have not assumed that they could fix rates on a “Scientific” or “Natural” basis. But they have endeavoured, after consulting merchants, manufacturers and traders, to fix such rates as were required to develop the largest amount of trade; and it is submitted that they have been carrying out principles which will, on the whole, bear the closest examination. They probably have made mistakes, and in some cases entered into undue competition with each other, or fostered it too much between producers or ports. But the principles upon which they have acted are sound; and the instances in which they have erred are exceptional. It has been the aim of railway companies to make rates conform to the requirements of trade, or, according to a popular expression, to charge what the traffic will bear.[30] It is easy to misrepresent this principle. The commonest misrepresentation is to assume that it means charging what the traffic will not bear. Rightly understood, this, it is contended, is the only fair working principle; the only scientific rule, if that phrase has any clear meaning. It is only another way of saying that rates should be so fixed as to enable a manufacturer or a trader and the railway company to obtain a reasonable profit, and that rates should ultimately be determined by the law of supply and demand. The value of conveyance, like the value of any other service, is not necessarily what it costs, but what it is worth to him who wishes his goods carried. On supply and demand, the available means of transport and the demand for it depends what it is worth while to give for carrying an article from A to B. Obviously the demand will be affected by the nature of the merchandise. If it be of a costly nature, such as manufactured articles, producers of it or dealers in it can afford to pay a higher rate than if it were of low value; a rate of 3d. a ton per mile, which might be prohibitive of the carriage of sand or lime, would add to the value of silk or velvet only an insignificant percentage.[31]

The capital of English railways amounts to upwards of £800,000,000. One of the problems to be considered is how to raise a revenue sufficient to pay on this sum even a moderate rate of interest? The Companies might perhaps obtain it by charging for conveyance according to equal mileage rates or according to cost of service. Following such a course they might probably levy charges which a great portion of the traffic would not bear; they might charge, for example, as much for a consignment of pig iron as for a consignment of copper of equal weight carried equal distances—which is generally what cost of service implies. If their sole object were to obtain the necessary revenue, they might cease to regard the effect of rates upon the interests of traders, districts, or ports, and, while conforming to the statutory maximum, they might levy rates detrimental to particular kinds of traffic. Their practice has been altogether different: they have sought to give full effect to the intention which Parliament had in view in framing the rude statutory classifications. They have endeavoured to suit the charges to the capacity of the traders, and in the words of Section 90 of the Railways Clauses Consolidation Act of 1845, “To accommodate them (the rates) to the circumstances of the traffic.” Such is the only sound principle working to the interest alike of railways and their customers. If rates were too high, and the traffic could not bear them, traders would suffer; the companies themselves would also suffer; their traffic would diminish, or would not expand as it might do. Such was the principle, speaking generally, on which the classification in railway Acts was framed. Such, too, is the principle of existing rates, only instead of being an hypothesis as to what will suit particular kinds of traffic, the existing classification and rates are based on facts carefully ascertained, verified by long experience, and corrected from time to time.

It is not unimportant to bear in mind that much the same principle as that which we have discussed is applied in regard to indirect taxation, or the taxation of commodities.[32] What an article will bear—in other words what the owner can with convenience pay—is a rule alike applicable to taxation and railway rates. In more civilised countries articles of prime necessity are not taxed, or very little; articles of luxury and of great value are taxed more. A distinction is made between wheat and tobacco, sugar and wine; and whenever it is practicable, without opening the door to fraud, to put indirect taxes on ad valorem basis, it is done. A similar rule is observed, so far as possible, with respect to direct taxation. Income tax, for example, is payable only by those whose incomes exceed £150. An endeavour is made to obtain the revenue of the country from the persons who can best afford to pay, and to levy it upon articles, the taxation of which will, to the least practicable extent, be a burden on the trade of the country. To fix railway rates on any other principle than that described above would be much like raising the national revenue from all persons alike, rich or poor, to impose the Customs and Excise upon all commodities, whether articles of luxury or necessity, and irrespective of their value.

When railways were first authorised, it was everywhere anticipated, strange though it may now appear, that the companies would be merely toll takers, and that the public, or carriers, would use them in the same manner as turnpike roads. Every railway was to be a highway; every one of the King or Queen’s subjects was to be free to use it. Many statutes bear traces of this, now apparently, curious assumption. The private Acts, as a rule, contained no provision for the companies themselves acting as carriers. The classification of the articles to be carried and the tolls to be taken were borrowed from the canal Acts. No very clear principle of classification ran through the special Acts. The classification in the main, however, probably accorded with the considerations pointed out by Adam Smith, who drew attention to the inconvenience of levying tolls on turnpike roads solely according to weight.[33] Speaking broadly, the tolls were in accordance with the ideas as to indirect taxation prevalent at the time when canals began to be largely constructed. In the original classification one may trace a desire to encourage agriculture, and the manufacture of iron, and such articles as were, generally speaking, carried in large quantities. Articles of general use in manufactures and raw materials were to be carried cheaply. The omissions from the lists of articles are remarkable. Such commodities as coal, iron ore, bricks, clay, manure, slates, stone, bar and pig iron, heavy iron castings, anvils, chains, timber, grain, flour, sugar, hides, dye-woods, earthenware, drugs, cotton and wool, were enumerated. On the other hand, machinery, hardware, hollow-ware, cutlery, glass, ale, wines and spirits, grease, oils, soap, drysalteries, paints, colours, paper, leather, floor-cloth, and textile fabrics, were not named; they came under the general description of “manufactured goods, articles, matters or things,” and might be charged the highest maximum rates. The special Acts contained, as a rule, an enumeration of only 40 to 50 articles in three to five classes.

In a few years, experience proved that the theories on which Parliament had proceeded were impracticable. In the first place, the notion that railways could be used by all comers in much the same way as canals or roads was found to be erroneous. Railway companies accordingly applied, in their special Acts, for powers not only to find locomotive power and wagons, but also to convey traffic as common carriers. In 1845, the Railways Clauses Act (s. 86) authorised every company to convey on their railway all such passengers and goods as might be offered to them for that purpose, and to make such reasonable charges in respect thereof as might be from time to time determined upon, not exceeding the tolls by the special Act authorised to be taken. The special Acts contained, as has been stated, imperfect classifications of merchandise, the maximum rates chargeable for conveyance, and powers to charge for loading, unloading, and other services incidental to the business of a carrier. About 1845 a second great change in the mode of charging for conveyance came to pass; and it is a circumstance worth noting that about that date a similar change took place, without concert, in France, Belgium and wherever railways existed. Up to that time railways had, as a rule, acted on the principle of equal mileage rates. This proved disadvantageous; it did not meet the requirements of trade; it was particularly unsatisfactory to distant traders; it prevented the opening up of new districts; and it needlessly limited the amount of traffic.

About the time which we have mentioned, the imperfection of the statutory classifications became manifest. Such rates as were intended to be ad valorem were not in fact on that basis; so far as it was intended to favour raw produce this object was not sufficiently accomplished. The advantages of differential rates, the necessity of adapting charges to the traffic, the power of railways to open up new districts, and develop new industries, began to be understood. Accordingly the Legislature enacted the following provision, the words of which merit attention:[34]