We now touch a question which comprehends most of those already discussed. When it is stated, as it often is, that the rates charged by the railway companies in this country are generally too high, what exactly is meant? Is it contended that shareholders should be content with smaller dividends than they receive? Let us note the facts. The average dividend in the year 1884 was only 4¼ per cent.; in 1844 it was considered by the Legislature that, at least, 10 per cent. should be earned by the shareholders. In the United Kingdom the average rate of dividend paid during the last 14 years on the capital expended on the construction of railways—which, as already shown, was, at the end of 1884, £801,464,367, and in England and Wales £665,055,379—was only 4·38 per cent. For the year 1884, out of a total of £298,980,000 of ordinary capital, £48,000,000 paid no dividend at all. As an illustration of the moderate return on the shareholders’ capital, it may be mentioned that the Great Western Railway Company, which owns, or jointly owns, 2,496 miles of railway, has during the last 30 years only paid an average dividend of £3 15s. per cent. per annum.

The meaning of the statement cannot be that, as compared with the dividends of other industrial companies, those of railways are too high. The facts are all the other way.

If a comparison is made of the percentage on capital earned by Banks, Insurance, Gas and Water Companies, some of which possess monopolies in a strict legal sense, and not merely in the loose popular acceptation of the word, as applied to railways, it will be seen that these returns are far in excess of those derived from railway capital; that not only is the average dividend, but the maximum dividend higher, and that there are fewer instances of shareholders obtaining no returns. Upwards of sixty Banks pay dividends ranging from 10 to 15 per cent., and twenty from 15 to 20 per cent.; thirty-four Insurance Companies pay from 10 to 15 per cent., and twenty-three over 15 per cent.; and ninety-three Gas and Water Companies pay dividends ranging from 5 to 15 per cent. The average dividends of Banks are 11·83 per cent., of Insurance Companies 12·45 per cent., of Gas Companies 10 per cent., and of Water Companies 5·73 per cent. In face of the above figures, and of the prospects which were held out to those who invested the capital with which the railways have been constructed, it will probably not be directly contended that the present dividend of less than 4¼ per cent, is a sufficient return on railway property. Nor is such an income fixed. There is no inconsiderable uncertainty affecting the income and the net return from the working of railways.

It is alleged that the railway system is not properly managed, and that in some way—how it is rarely explained—the railways might be more profitably worked; that even if considerably reduced rates were charged, as good, or a better, dividend might be earned; or that as a consequence of reducing rates such additional traffic would be carried that the loss would be more than covered by the increased trade. Now, no doubt undue competition between companies exists. The largest possible amount of net revenue is not always obtained. But such an admission affords little encouragement. Here something more than vague general statements are needed; it is incumbent on those who call for a great change to produce facts justifying an expectation that, consistently with a reasonable dividend, a considerable reduction can be made in the rates for merchandise. No attempt has ever been made to show that this can be done, and experience is against it. The most plausible argument is, that by reducing rates the present trade would be considerably increased, that new sources of traffic would be created, and that the companies would be more than recouped the loss which they would sustain by any falling off in the receipts on their traffic. This prospect was held out by the late President of the Board of Trade in introducing the Railway and Canal Traffic Bill. He justified his expectations by stating that the companies who had adopted a cheap passenger system, had reaped great advantages therefrom. Few of them will consider this illustration to be fortunate. Even, however, if the result of the changes in passenger fares had been generally as beneficial as Mr. Mundella seems to have supposed, no comparison can be drawn between carrying a greater number of passengers in trains only partly filled, and conveying additional mineral and goods traffic by trains which must necessarily entail additional mileage and all the attendant expenses. Take, for instance, coal carried at ·50d. per ton per mile and that the rate is reduced to ·45d.; that is a reduction of 10 per cent. in the rate. Assume a train of 240 tons and 1s. 6d. per train mile each way—that is for the loaded and return empty wagons—as the average cost of haulage and maintenance of way, it would require an increase of 16·6 per cent. in the traffic, to leave a railway in the same position as it was before.

The result of such a course as is recommended would be, to say the least, problematical, as the suggested reasons for it are not unknown to the managers of railway companies, and have been carefully considered by them.

SECTION XV.
PROPOSALS FOR FIXING RATES BY RAILWAY COMMISSION—
CONCILIATION COURTS.

One of the many proposals for fixing, or controlling rates was contained in a clause in the Railway and Canal Traffic Bill of last session. It was intended to confer on the Board of Trade the power at any time, “on the application either of a railway company, or of any Local or Harbour Board, any Council of a City or Borough, any representative County body which might hereafter be created, and Justices in Quarter Sessions assembled, any Public Local Authority which is now or might hereafter be established, any Association of Traders or Freighters, or any Chamber of Commerce or Agriculture, who should obtain a certificate from the Board of Trade that they were entitled to make such application, to revoke, amend or vary the maximum rates.” This would have been a totally new departure in legislation. Such statutes as the Railway and Canal Traffic Act of 1854, and the Regulation of Railways Act, 1873, exhibit an inclination on the part of Parliament to jealously limit the powers granted to the companies. The tendency of the Courts of Law has been to construe the Acts strictly against companies and give the public the benefit of all doubtful points.[90] But it had never before been supposed that the powers to charge the rates and tolls contained in the original Acts, under which the companies undertook the construction of the railways, could be indefinitely altered, as proposed in the above clause. No such recommendation was made by the Railway Rates Committee of 1882. After what took place in the discussion of the Bill, both in Parliament and out of it, and the announcement of the then Attorney General, “that no one contemplated a perpetually recurring revision,”—which the clause provided for—it is not probable that any such suggestion will again authoritatively be made.[91]

Another proposal of a somewhat similar character is, that the Railway Commissioners, or some other special tribunal, should fix the rates. Were a Court for the control of rates established with the consent of all concerned, there would remain the question on what principle are the rates to be framed? Are they to be according to equal mileage, or, if not, in what other manner? What better mode can be suggested than the past practice, which, as has been shewn, has been beneficial to the community? Nor is it easy to understand how any Court could fix all the incalculable number of rates, and hear and determine all the practical questions certain to arise. Even if a trifling proportion of the rates were fixed in this manner, and the task in those cases were performed, with reference to all the many circumstances now governing rates, complications and difficulties must arise, and the Court would be placed in a position of great, if not insurmountable, difficulty. So many anomalies must be authorised that it would be impracticable for the Court to decide consistently with precedents. In all probability the control would either become nominal, or the whole system would have to be recast. Nor must the serious loss of time by the staff of railways in attending to such inquiries, and the consequent diminution of the efficiency of their work in the actual regulation and conduct of railway traffic be lost sight of. The costliness of inquiries before such a Court is a secondary, but not an unimportant, matter. In the hope of obtaining reduced rates, or of compelling a company to raise the rates of a competitor in trade, or to raise the rates to and from competing ports, some traders and merchants, separately or combined, might risk the expense of applications to such a Court.[92] But the general interest could not be promoted by the creation of any such arbitrary and anomalous Court.

Reference is often made to the experience of the United States in regard to the supervision of railways as if it should be a guide to us. There each State may legislate with reference to the construction and regulation of its own railways. At first everything was done to facilitate their construction. They were proceeded with in advance of, or concurrently with, immigration and settlement. Many States have made large grants of land to railway companies. In some States a few individuals, from five upwards, may form themselves into a railway company, and under general laws construct railways between any two places, regardless of the wishes of others and the considerations which here form the subject of Parliamentary inquiry. No scale of maximum rates, as a rule, governs the charges for conveyance; and great variations in them are in fact made. Only, however, in recent times, when railways have become numerous and their extension is not so urgently needed, have State Legislatures interfered with their management.[93]

The expediency of establishing maximum rates has been discussed in some States. But another course has also been tried; Commissioners have been appointed for the purpose of fixing reasonable charges. Where maximum rates have been fixed, in no case, so far as can be ascertained, have the Legislature altered, or the Commissioners interfered with the powers conferred if the rates charged are within such maximum. Some of the Commissioners fixed rates on so unremunerative a basis as to defeat their object and to prevent the introduction of capital, and the construction of railways. The result was that in one State after a trial of about two years, the law establishing such a tribunal was hastily repealed.[94]

The rates charged in the United States are mainly governed by competition with water carriage, or between the companies themselves. Occasionally they are so reduced over large districts as to be totally unremunerative. As soon, however, as the struggle between competitors is ended, and an arrangement is arrived at, the rates are suddenly raised. The circumstances of England and the United States are so unlike that, even were those tribunals suited to the latter, no case would be made out for establishing here a Court armed with such powers. Here railway companies can make charges only within their statutory maxima; there, as a rule, no statutory maxima, or prohibitions of undue preference, similar to those enacted here, are known. Here no municipalities have largely subscribed to the capital of railways, no grants of public lands have been made to them, as have been freely done there.[95]

To legislation in Continental countries as to the fixing of rates, we only briefly refer; in Appendix III. are full details as to the law on this subject of Prussia and the German Empire. It may, however, be here observed that the Prussian General Railway Law of 1838 provided for a reduction of rates when the net profits exceeded 10 per cent.; that the concessions to private companies stipulate for the control of the Government over rates; but that, in recent concessions, greater freedom is accorded to the companies, which may, within certain maximum limits, modify rates at pleasure. Such legislation is well worthy of attention; only it may be suggested that it is not reasonable to pick out for commendation this or that provision without regard to its concomitants—to propose to adopt provisions to the disadvantage of railways, and to ignore those which recompense them.

In Germany exist District Consultative Councils or Conciliation Courts, which deal with all questions relating to conveyance of goods on railways, and with the application of existing tariffs and the introduction of new local tariffs. It has been stated that those Councils or Courts are of great practical utility. Whether this be so or not the circumstances under which Conciliation Boards are appointed in Germany are very dissimilar to those of the railways in this country. Their constitution is peculiar; similar elements do not exist here. These Boards are composed of representatives of the Government as workers of the railways and representatives of the traders as users of them. Both, however—the nominees of the Government and the traders—may be said to represent the owners (in reality—the public) of 85 per cent. of the lines, who are liable for any loss in working them. In this country neither the Government nor the traders are the owners.[96] Moreover, in Germany the representative of the Government which controls the working of the railways, has, in fact, the power of fixing any rate by his final decision, whatever may be the views of the traders or the Conciliation Boards. In the last resort the owner of the lines controls the rates.

Were such Councils established here their duties would not be so light as those which fall to them in Germany. There the questions to be considered must be few, the time occupied in deciding them short, owing to there being practically no competition, and to the great bulk of the rates being based on a mileage scale. Much more complex questions would arise here, much longer time must be taken up in deciding them in England, where rates are adapted to all the requirements of trade and competition in its many forms.

In Holland, Belgium, and France, railways have been constructed with, in some cases, considerable financial assistance from the Governments, and under concessions for certain periods. Not unnaturally or unreasonably the Governments have reserved the right to control the rates and charges to be made while a concession is in existence, or when it ends. It will be found, however, that when there is power to reduce the rates before the expiration of the concession, the State guarantees the dividend in the event of loss arising from the compulsory reduction. Such is the case in Holland. The Dutch Law (Article 29) provides that reductions in the tariff can at all times be ordered by the State. But if, in consequence of such reductions, the net gain of the company be diminished, compensation is to be paid out of the State Treasury, and any dispute as to the amount of compensation is decided by a Court of Justice. In no case, however, must the amount of compensation raise the net profits of the year or years for which it is demanded above 8 per cent. of the Company’s capital. Thus the right to control rates is part and parcel of a system wholly unlike our own. It exists in a country where the State has helped to construct, and to a very large extent actually constructed, railways. It is alien to this country, where capital for the whole of the railways has been provided by private individuals, on the faith of the powers to levy the tolls and rates fixed in their private Acts.

In the Railway and Canal Traffic Bill (1886) was also embodied a proposal to the effect that any person who was of opinion that a company was charging an unfair or unreasonable rate might make a complaint to the Board of Trade, who were to be entitled to call on the company for an explanation and to appoint one of their officers, or a competent person, to communicate with the company and the complainant, and to endeavour to settle the difference amicably between the parties. The Board of Trade were from time to time to submit to Parliament reports of the complaints so made, the results of their proceedings, and such observations as they should think fit. The effect of this provision would have been startling. Even where a rate was within a company’s powers—although undue preference was not alleged—at the instance of a trader desirous of obtaining a reduced rate which had been refused by a company and believing that either his own circumstances or those of other traders entitled him to communicate with the Board of Trade, the railway company would be called upon to prove to the Board of Trade that the claim of the trader ought not to be granted. It would be, in effect, litigation made easy and cheap, whether the complaint was good or bad. The President, Vice-President, Secretary, or Assistant-Secretary of the Board of Trade could not spare the time necessary to master the numerous difficult questions and details as to the rates.[97] Notwithstanding the great ability with which that department is conducted, these officials could not deal with such questions in the same way or within the same time as the traders and the representatives of the companies are able. The companies would probably be burthened with correspondence and discussions on matters already fully gone into in negotiation. The discussion would be necessarily carried on through subordinates or nominees of the Board of Trade, who, it is not presumptuous to say, would be neither interested in, nor specially trained to deal with, such questions. Suppose that the representatives of the Board of Trade and the railway companies disagreed as to the necessity or reasonableness of a reduction in rates, the former would have no authority to compel the companies to comply with their views. Would not the result probably be a cry that Parliamentary powers should be conferred on the Board of Trade to enforce their conclusions? Such a policy would in the end place the railway companies of the country, whose capital has entirely been raised by private enterprise, in a worse position than the railway companies in Holland where the State has done so much for them, or in France, where it has guaranteed the dividends.

When we are invited to place in the hands of a tribunal the control of the rates, it is expedient to note the difficulties which the Railway Commissioners seem to have felt in dealing with the various questions raised before them, and the manner in which they have dealt with them.

In determining under the Traffic Act questions of alleged undue preference, they have been obliged to express their opinion on the reasonableness of particular rates. As to the legal correctness of their decisions, nothing need here be said; for the present purpose it may be assumed that they are open to no legal exception, and we fully recognise the ability and care which they manifest. Only their economical effects are here considered. There would be no difficulty in showing that they have acted upon principles, so far as they have acted upon any, which have not merely not been sanctioned, but have been condemned, by every Royal Commission or Select Committee which has inquired into the subject, and by almost every economist of eminence. On the part of the Commissioners there have been—not unnaturally—some waverings in opinion. But on the whole, they appear to have attempted to frame rates according to cost of service; and they appear not to admit that the existence of competition is a reason for varying them. Now, in the first place they apply—it may be added, necessarily apply—the cost of service principle in an imperfect fashion. They deal only with undue preference in regard to the same or very similar articles. They do not say, what consistent adherence to the theory would compel them to say, that a ton of coals and a ton of tin ingots must be carried at much the same rate; they are bound by the existing classification, which forbids this. Occasionally their decisions are indeed curiously inconsistent in many respects, as was probably inevitable, where they were called upon to face the commercial results which would have followed a too rigid adherence to some of the principles by which they felt themselves bound.[98] In the case of the Nitshill and Lesmahagow Coal Company v. Caledonian Railway Company,[99] the defendant company claimed to charge more for carrying cannel coal, which, it was alleged, cost 38s. a ton, than they charged for carrying splint, which cost 15s. 6d. On the principle on which the classifications in most special Acts were framed, this would be reasonable; the more valuable article could bear more, and ought to pay more. But the Railway Commissioners decided differently. “As the quality of coal does not affect the cost of carriage to the railway company,” they said, “we are of opinion that the two kinds of coal ought to receive the same treatment.” If this principle had been carried out since the beginning of railways, if rates had been settled without regard to the value of merchandise, the prosperity of many districts and industries would never have been developed. In the second place, the cost of carriage is, inevitably, sometimes guessed at rather than calculated. We have already stated the nice calculations which must be entered into in order to determine the exact cost of carriage; calculations in which it is practically impossible to attain accuracy. Many elements in cost, the Commissioners cannot accurately measure; the data do not exist. In the third place, the effect of their later decisions is to exclude, practically, if not theoretically, competition from the considerations to be taken into account. This is, not only for the reasons already stated, contrary to sound commercial principles; it is contrary to the language of the early decisions of the Court of Common Pleas, which distinctly recognised competition as rightly taken into account in fixing rates. In Garton v. Bristol & Exeter Railway Co. (1 N. & M. 1859, p. 218), for example, the Court of Common Pleas decided, among other reasons against the validity of a certain charge, because, in the words of Byles, J., “it is not shown that it is rendered necessary for the purpose of meeting and overcoming competition”.[100] The early judgments of the Railway Commissioners themselves recognised the right to take into account the existence of competition. In Foreman v. Great Eastern Railway Co., decided in 1875 (2 N. & M. 202), the point in dispute was the validity of a scale of charges for the carriage of coal from Peterborough to Norwich and Great Yarmouth and intermediate stations. The Great Eastern Company were alleged to give an undue preference to coal consigned to such stations, as compared with the carriage of sea-borne coal from Great Yarmouth to Norwich and the stations between it and Peterborough. The Commissioners observed: “Nor does the Traffic Act prevent a railway company from having special rates of charges to a terminus to which traffic can be carried by other routes, or other modes of carriage with which theirs is in competition,” a dictum inconsistent with the view “that cost of service is the necessary measure of rates.” In a case decided the same year, Thompson v. London and North Western Railway Co., 2 N. & M. (1875) 115, the Commissioners speak dubiously. They observe with respect to the argument that “the Traffic Act prohibits only undue advantages, and that an advantage given by a railway company to obtain traffic for which it competes with another railway company is not undue” (p. 120). “Such a proposition cannot, in our opinion, be laid down unreservedly. It may be true in certain circumstances; it would not be so in others, and what degree of favour can be lawfully shown to some person to the prejudice of others under the pressure of competition can only be decided in any case that arises by reference to its special circumstances.”[101] In still later judgments there is a faint recognition of the fact that the existence of competition ought to be taken into account; e.g., in Richardson v. Midland Railway Company, decided in 1881 (4 N. and M. 1) the Commissioners say: “The difference (between the Burton and Newark rates) or part of it, may possibly be required by the route from the same district, not being the same all the way to the two places, and by the separate portions of line passed over being more costly to work or construct in the one case than in the other; or, again, may be required by a competition for the conveyance of the particular traffic between the two termini, existing in one case but not in the other. They proceed to speak of “due allowance for such causes of difference,” which implies that allowance must be made for both of such causes. But in the Broughton Coal Company’s case (4 N. and M. p. 191, 1883) the Commissioners use somewhat different language. They observe that “if goods of the same kind are carried to the same destination over the same railway for distances that are not the same, and the gross charge from the intermediate distance is as great as from the more distant one, there is a preference of one traffic over the other within the meaning of the Traffic Act of 1854; and that it is not sufficient to rebut this presumption to show that the charge for the longer distance has been reduced to meet a competition from another route.” Lately the Commissioners have, to say the least, lost sight of the element of competition in determining rates; and in all the applications to them, there is no clear instance in which they have found the circumstances in which it ought, in their opinion, to operate.

Among the multifarious complaints against railway companies is one to the effect that companies, instead of competing with and underbidding each other, combine to charge equal rates. This is an illustration of the curious inconsistencies of some of those who criticise the working of railways. Such a practice would be, as will be seen in the next chapter, opposed to the ideas of others who urge that rates should be based on scientific and uniform principles. Such competition, too, would inevitably lead to valid grounds for complaints, in the opinion of others, of undue preference in contravention of the Railway and Canal Traffic Act of 1854. The fact is, the practice has been tried and abandoned. In the days of road carriers, competition in quoting low rates generally ended in the submission or ruin of one of the parties. Here, and in the United States, experience shews that all such competition on the part of railways must end in combination. However severe the contest may be, and however great the losses in carrying it on, each of the railways continues to exist; they do not disappear like private traders engaged in a disastrous war of competition; and in the end they come to terms. In thus acting, they only do what is done in other industries. In the principal trades of the country are associations which arrange the prices of their products. Colliery proprietors, for example, agree as to the price of coal. Although the hardware merchants seldom vary their price lists, they agree from time to time as to the rate of discount to be allowed. The steel rail manufacturers of Germany, Belgium, England, and Scotland, had recently an arrangement regulating, if not the proportion to be produced by each country and district, the price at which rails were to be sold.

SECTION XVI.
RAILWAY AMALGAMATION.

We now come to a class of criticisms and proposals wholly different from those which have hitherto been considered. In the report by Sir Bernhard Samuelson (page 22) is a recommendation that railway companies should either amalgamate, or make agreements between themselves, for the division of the receipts from competitive traffic, so as to reduce the working expenses.[102] Probably for the first time has this suggestion come from such a quarter. Manifestly it is beginning to be understood that undue competition between railways is injurious to the companies without being beneficial to the public, and that, in the interests of both, it should be moderated.

Hitherto, the public and Parliament have looked with jealousy on arrangements between railway companies intended to lessen the waste caused by undue competition. The statements so often put forward by companies that the expenditure of capital in the construction and working of unnecessary competing lines is not beneficial to the public, have been disregarded. Any scheme which professed to meet “public requirements,” and promised multiplication of trains and the carriage of railway traffic at a high rate of speed, has met with favour in and out of Parliament.

Whether the particular line could only be worked at undue cost, or could yield a proper or, indeed, any return upon the capital to be expended, has rarely been considered. The Legislature has fostered new schemes, and has favoured competition, not economy; it has not recognised how much interested the public were in the prudent expenditure of capital on railways. Had the reports prepared under the guidance of Lord Dalhousie, in order that railways might be constructed according to a definite plan, been acted upon, or had he been able to carry out here his ideas as to railway extension, as he did in India, the rapid growth of railways might have been retarded.[103] But, undoubtedly, the want of any plan has entailed the outlay of a much larger amount of capital than would otherwise have been required. Upon this excess, interest, if it can be earned, is paid; a fact not to be overlooked by those who now desire that the companies should reduce their rates. Such errors are repeated. Even in recent years Parliamentary Committees have authorised on the most trifling grounds new competing lines. True, they expressed no opinion as to the success of such schemes. But it must have been known that, if the capital were subscribed, it must come from people who were under the impression that only schemes of substantial value would be authorised by Parliament.

Of the many schemes of this description, two or three illustrations may be given. Within the last 13 years, authority was obtained to construct a local line for the accommodation of a sparsely inhabited agricultural district. In this form it was favoured by the companies in whose district it was. The prospect of a return on the capital, however, was so small that comparatively little money could be raised. A scheme was, therefore, got up for obtaining Parliamentary powers to extend the line on the plea that it would thus become a through competitive line connecting two important existing systems; a scheme which quite ignored the fact that the two systems had already a means of communication, which it was their interest and desire to develop to the utmost against any hostile scheme. A large portion of the capital was procured on the faith of statements contained in carefully framed prospectuses, for the issue of which the financiers were paid £60,000. A considerable portion of the capital came from persons residing in remote parts of the country. Some money was borrowed for a time at the rate of 16 per cent. per annum. Although about £1,200,000 in cash and paper has been expended, the receipts do not cover the working expenses, including the rent of stations and expenses of junctions; the line must be imperfectly worked; and of course not a farthing of interest or dividend can be paid on any portion of the capital.

A second illustration may be given. About twenty-five years ago a branch railway of 6 miles in length was promoted and sanctioned by Parliament as part of a line to compete with an existing railway. The original cost was estimated at £42,000, and the total amount of capital authorised was £60,000. Not until 20 years after the Act was obtained was the line opened for traffic. During this period no fewer than eleven applications for increased capital or other powers were made to Parliament; and three schemes of arrangement were entered into with creditors and confirmed by the Chancery Court. The total capital expended has been upwards of £157,000, of which 44 per cent. has been raised by loans, 46 per cent. by preference shares, and 10 per cent. only by ordinary stock. What need there was of the line may be inferred from the fact that, although it has now been open for some five years, the gross receipts are not sufficient even to pay the locomotive expenses.

One more case may be mentioned. An application was made to Parliament for powers to construct a line about 7 miles in length, which was estimated to cost not far short of £120,000. After four years a further application was made for extension of time and for power to raise more than half the share capital by the issue of preference stock and to pay interest out of capital. It was then given in evidence that upwards of one-fourth of the estimated cost of the line had already been expended, although no works had been constructed, and only £1,000 paid towards the acquisition of land.

In such cases the diversion of traffic from existing railways usefully serving the public, the loss of interest on the outlay if the line is in the end purchased by them, and the expense of working it, are so much dead weight which the railway system has to bear. Thus the companies are so much less able to reduce rates.

Many similar cases could be stated. Notwithstanding the absorption of this class of schemes, there is still upwards of £61,000,000 of capital which has paid no dividend at all. An inquiry into the promotion and construction of many of the railways authorised during the last 25 years, would probably bring to light facts as startling as those elicited by the Foreign Loans Committee. The established companies oppose such schemes. But their opposition is generally looked upon as arising solely from selfish objects. They are told that it is not their money which is to be expended, and that though they may have a nominal, they have no substantial, right to oppose. It is a common observation that, if a new line afford accommodation for a part of the traffic carried by the opposing company, it will be useful to the public, and that if it will not carry any such traffic the objections of the opposing company are groundless. Such arguments succeed; the Bill is passed; and what happens? From long experience the existing companies know that nearly all the schemes which are at first brought out as independent competing lines will sooner or later be pressing to be worked or leased, or be in the market, and that the promoters of any of them not taken over, will be continually making applications to Parliament or to the Railway Commissioners, posing, not as an aggressive, but as an ill-used company, and harassing its neighbours with a view to be purchased or to levy blackmail.

The present position of railways is largely due to the action of Parliament and to the public, though some blame is no doubt attributable to the companies themselves. A great improvement has taken place in the relations of the companies, and in the conduct of railways in recent years. But there has been too much readiness, indeed anxiety, to invade districts accommodated by neighbouring companies. In the working of their lines exaggerated importance is too often given to competition without regard to its utility. Frequently passenger trains are run without sufficient regard to whether or not they are fairly remunerative. Wagons containing only a small quantity of goods are often sent long distances at little profit, if not at a loss. Goods trains are run at an excessive speed, and therefore do not and cannot carry such remunerative loads as in other countries, notwithstanding some of the undoubtedly low rates charged there. So-called “concessions,” not really essential, are made to trading or other interests, when it would be better that the companies should earn on the traffic a reasonable income to go into the pockets of the shareholders, or be expended, as suggested by Sir Bernhard Samuelson, in improved accommodation.

While there has been too much proneness to favour competing schemes, there has been an unreasonable jealousy of agreements between companies. Traces of the jealousy with which Parliament has regarded agreements between companies, even for merely working branches in extension of parent lines, are shewn by the provision that agreements shall be reviewed every ten years. It also appears in the views of the Railway Commissioners as expressed in section 6 of their twelfth report (1885). They state that it is the practice of some companies to get such agreements confirmed by means of a schedule to their private Bills, which gives the public no opportunity of knowing what those agreements are about, and that the agreements are confirmed, either for long terms, or in perpetuity, without any provision for a periodical revision in the interests of the public. And yet it is not known that the public have derived any advantages from the periodical revision of agreements for working branch lines, and whenever application has been made to Parliament for absorbing a branch line it has been authorised without any difficulty.

In the last session of Parliament, the Midland Company applied for power to enter into, and carry into effect, agreements with certain other railway companies with respect to the provision of joint terminal accommodation at towns and stations on their respective systems; the alteration and enlargement of existing stations for joint purposes; the providing at joint expense of train services between towns and places served by their respective systems, and of locomotive engines and stock for such joint trains; the appointment of joint staff and the fixing of rates, fares and charges in respect of traffic using such joint stations, or carried by such joint trains, and the division of the receipts therefrom. Any agreements made under these powers were to be subject to the approval of the Board of Trade. With the present view held by Parliament and by a section of the traders as to railways, it is, however, questionable whether such agreements would be confirmed, except on terms which it would be impossible for the companies to accept.

In this country—which is unlike the United States in this respect—agreements to charge equal rates for competitive traffic have been, on the whole, adhered to. Arrangements for the division of such traffic are therefore not so much required here as there. The great desiderata of the companies are the limitation of competition within reasonable bounds, stopping the waste which it now causes, and fully affording to each other and to the public and traffic all practicable facilities and accommodation.

Agreements for the division of traffic, or for “pooling,” as they are termed in the United States and Canada, are not unknown in this country. Some have been sanctioned by Parliament; others have been made between the companies without any express Parliamentary authority, and have been carried out. For instance, Mr. Gladstone made, in 1851, an award apportioning, for a period of five years, the receipts for traffic carried between, London, York, Leeds, Sheffield, and several other places, between the Great Northern, and London and North Western, and Midland Railways. In the year 1857 he made a further award determining, for a period of fourteen years, the proportions in which the proceeds from the passenger and goods traffic between the same and other places, including Hull, Halifax, Bradford, &c., were to be divided between these companies and the Manchester, Sheffield and Lincolnshire Company.

Parliament has sanctioned agreements for the division of traffic receipts between the South Eastern and London Chatham and Dover, and between the London Brighton and South Coast and South Eastern Companies. But it is more than doubtful whether the parties to these agreements have derived all the advantages which, consistently with the interests of the public, they might have obtained.

It is well known that nowhere on the Continent has the construction of competing lines been carried out to the same extent as in this country; it is one of the great permanent advantages possessed by Continental railways.[104] In France the companies have districts within which they exclusively afford railway accommodation. The Government recognise and sanction agreements between the companies for the prevention of undue competition where it inevitably arises, and for an apportionment of the receipts from competitive traffic. The following is an instance:—An agreement made 31st March, 1885, between the “Western of France Railway and the Orleans Railway Companies, provided that the receipts in respect of traffic carried between Paris and Angers, Nantes, Montoir, St. Nazaire, Redon and stations beyond, after deducting taxes (“Impôts”) and terminals should be apportioned thus:—

1. Traffic between Paris and Redon and stations beyond as far as Plaermel and Pontivy—

   55 per cent. proportion to the Western Company.

   45  ”    ”   ”  Orleans Company.

2. Traffic carried between Paris and Angers, Nantes, Montoir, St. Nazaire, and branches leading out of the latter two stations, as well as Pont Chateau, by whatever route the traffic may have been carried—

   49 per cent. proportion to the Western Company.

   51  ”    ”    ”  Orleans Company.

3. Traffic carried between Paris and stations beyond Angers or Martre d’Ecole on the States Railway—

   230/304 to the Western Company.

   74/304  ”  Orleans  ”

In Belgium there is practically no such competition as exists in this country. The Government have had to face the difficult questions respecting it: they have solved them in a manner different from that adopted here. They have entered into an agreement for the division of competitive traffic between the State railways and the Grand Central Belge. Under this arrangement the route over which the traffic is conveyed is credited with the whole of the terminals, and 50 per cent. of the carrying receipts. The remaining 50 per cent. is apportioned between the two competing routes on the following basis, viz:—

Each route is credited with 25 per cent. if the mileage is equal.

The longest route is credited with

The route selected by either the State railways or the Grand Central Belge must not exceed the distance by the shortest route by more than 25 per cent.; above which limit all competition ceases.

In Germany exist arrangements practically amounting to a division of traffic. For instance, the shortest route from Elberfeld to Bâle is viâ Coblenz-Strasburg. The traffic to Bâle is carried every alternate month by the Right Rhenish route over the Badisch State railway, and by the Left Rhenish route over the Alsace-Lorraine railways. As regards traffic with Austria-Hungary arrangements are made which ensure to each line a certain percentage. In the event of the returns showing that one company have not carried their fixed share, they are entitled to a money compensation.

Undoubtedly the suggestion of Sir B. Samuelson that reductions should be made in the expenses of working railways, and that undue competition should be avoided by arrangements between the companies, is important and well worthy of consideration. To commerce generally, and to the traders using railways, it might clearly be advantageous. It may, however, be premature to expect that at present such agreements as he suggests would be sanctioned by Parliament, except upon onerous conditions. If such agreements were favourably regarded by the representatives of commerce and agriculture in Parliament, the companies would more willingly enter into them. In many cases greater economy and improved working would undoubtedly result, and there is no reason why such arrangements should not be made beneficial to the public as well as fair to the railway companies.

SECTION XVI.
RAILWAYS AND CANALS.

Great stress is laid on the importance of canals. Railway companies have been accused of preventing them from competing with railways, of improperly getting possession of them, not maintaining them, and so acting as to force the traffic on to their lines. In Parliament and elsewhere they have been charged with purchasing canals and then deliberately killing them, either by ceasing to keep them in repair or by reducing rates upon their lines to a point which makes competition by the canals impossible. These assertions have been made before Royal Commissions and Select Committees. In no official report or other authoritative document, however, have they been declared proved; and it is submitted that facts do not warrant them. Not to the artifices of railway companies, but to altered conditions of trade is due, in the main, the inability of many canals to hold their own against railways. The necessity for rapid transit, the disinclination to keep large stocks, the growth of the practice of applying to the producer or manufacturer as orders come in, and as occasion requires, and the low rates by railway for articles which canals can convey, have all been unfavourable to the latter. It is not unimportant to note that no Commission or Committee has been able to point out any mode in which the decline of canal traffic—“the creeping paralysis of our inland waterways”—could be arrested. We may, too, incidentally note the considerable diversity of opinion as to the importance of canals generally. Some complain that great injury has been done to the trading community by the absorption of the canals by railway companies.[105] Others will have it that too much importance is attached to canals; they have been even described as “those wretched little waterways which could never compete successfully with the great railway companies.”[106]

In 1883, a Committee was appointed by Parliament to enquire into the condition and the position of the canals and internal navigation of the country, to report thereupon, and to make such recommendations as might appear necessary. It sat during the greater part of the Session. Many charges were made against railway companies which owned canals. They could not be answered in that Session for want of time. So little importance seems to have been attached to them or indeed to the subject of canals, that the Committee was not re-appointed in the following Session. No report was therefore ever made.

The subject affords a valuable illustration of the railway legislation in this country, and of the prejudice and misapprehension which exist in some quarters as to the conduct of railway companies. Far from there being an inordinate desire to absorb canals, it will appear that those which belong to railway companies have, as a rule, been forced upon them, either to remove the opposition of the canal companies, or as a condition of railway Bills being passed.

Let us give an instance of the treatment which the promoters of railways, when opposed by the representatives of waterways, have received at the hands of Parliament. In respect of the Severn navigation, the Great Western Company are at the present time under a heavy liability. This liability was forced upon their predecessors, the Oxford, Worcester and Wolverhampton Railway Company, when applying for powers to construct their railway, which did not really compete with the navigation to any serious extent, if at all. Clause 94 of the Oxford, Worcester and Wolverhampton Railway Act of 1845 recites that the Severn Commissioners had raised the sum of £180,000 upon the security of the tolls on the Severn navigation, in the expectation that those tolls would reach the sum of £14,000 a year. It provides that the Great Western and the Oxford, Worcester and Wolverhampton Railway Companies should, from the opening of the Oxford, Worcester and Wolverhampton Railway for traffic between Worcester and Wolverhampton, and so long as the principal moneys raised by the Severn Commissioners, or interest thereon, remained due, make up to the Severn Commissioners any deficiency between the actual amount of the tolls for any year, and the sum of £14,000. The Great Western Company do not possess or even control the navigation. Yet this liability was forced on the promoters as a condition of obtaining their Bill; and in respect of it the Great Western Company actually now pay between £6,000 and £7,000 per annum!

How much truth there is in the allegation that the canals owned by railway companies are not properly maintained by these companies, but that on the contrary the railway companies obstruct the trade on them, may be shown by the case of the Kennet and Avon canal, which is also the property of the Great Western Company.[107]

This canal was authorised by an Act of 1794. The canal is between Newbury and Bath, a distance of 57 miles. But the water communication is extended beyond Newbury on the one side to Reading by means of the River Kennet, and from Bath to near Bristol on the other side by means of the River Avon. The total navigable distance between the points named is 86½ miles. This canal is joined by the Wilts and Berks canal (which is connected with the Thames by the Thames and Severn canal) and the Somersetshire Coal canal. Thus the Kennet and Avon canal forms part of an extensive system of waterways, by communicating direct with the Thames on the one hand and the Severn on the other. The total cost of the Kennet and Avon canal was £1,011,589. It was opened in 1810, from which date, up to 1813, no separate accounts of capital and revenue were kept. But the returns from 1813 show that the receipts of the canal gradually increased from £22,075 gross and £11,843 net in 1813 to £58,820 gross and £39,113 net in 1840. The opening of the Great Western Company’s line between Reading and Bath in 1840-41 seriously affected the canal revenue. The canal company applied to Parliament for powers to construct a railway alongside their canal. Failing in that project, they in 1848 availed themselves of the powers of the General Canal Act, and entered upon the carrying business, from which, however, they derived little profit. In fact the first year was the only year when the revenue derived from the carrying business exceeded the expenses. The opening of the line of railway between Chippenham and Trowbridge in 1848-50 still further injured the canal traffic. The canal company offered to transfer their undertaking to the Great Western Company; and the terms for such transfer were agreed and approved by Parliament in 1852. In sanctioning the arrangement, Parliament, however, imposed upon the Great Western Company the condition that, if at any time the canal tolls were complained of as, in comparison with those of the railway, prejudicially affecting traders on the canal, the Board of Trade should make such regulations and fix such tolls as they might think fit. In 1867-1868 the traders using the canal memorialized the Board of Trade to reduce the tolls. An Arbitrator, who was appointed, reported in favour of a reduction, which was accordingly carried out. The tolls thus fixed were charged up to 1877, when the traders again memorialized the Board of Trade. The matter was referred to the Railway Commissioners, before whom it was given in evidence that if further reductions were made on certain articles constituting the chief trade of the canal, the traffic would materially increase. The Railway Commissioners thereupon reduced the tolls upon those articles from 1d. per ton per mile with a maximum of 6s., to 1/2d. per ton per mile with a maximum, for the whole distance of 86½ miles, of 2s. But the statements of the traders that an increase of the traffic would follow upon a reduction of the tolls have been found to be entirely baseless. Notwithstanding this great reduction, the traffic had fallen from 159,190 tons in 1876, to 125,807 in 1885.

The gross receipts in the year 1840 were, as already stated, £58,820; in 1848 they had fallen to £33,205; in 1852, when the canal was taken over by the Great Western Company, to £24,291, and in 1885 to £4,237. The canal has been maintained in an efficient state of repair by the Great Western Company, in accordance with the obligation imposed upon them by their Act of 1852, and the navigation has been always kept open. Notwithstanding the large reductions in the tolls, the traffic has year by year diminished, until in 1885 the expenses considerably exceeded the receipts, without taking into account the interest (between £7,000 and £8,000 a year) which the company have to pay upon the capital expended in acquiring the canal undertaking. These are weighty facts. Although the Great Western Company purchased the Kennet and Avon canal, pay interest on the purchase money, and maintain it, and although they are deprived of the power to fix the tolls upon the canal, and have had to submit to two reductions—the maximum under the latter arrangement being for the whole length of the canal little more than one farthing per ton per mile in respect of any description of goods—the traffic has continued to fall off. The tolls do not yield sufficient to pay the salaries and wages of the working staff, or even the actual cost of the labour and materials necessary for maintenance and repairs.

The foregoing illustration, may help to correct the statements which have been made as to the conduct of railway companies in the capacity of owners or workers of canals. Not only the Kennet and Avon canal, but, it is probable, all the other canals which have been taken over by the Great Western Company, must have been closed years ago if they had remained in the possession of the canal companies. The public have, in fact, had the opportunity of availing themselves of the water carriage when it was to their interest to do so, just because the railway company took over the canals and kept them in working order.

Though every railway company owning or managing a canal may be compelled under the Section cited on page 193 to keep it in repair, only one application for that purpose has been made to the Railway Commissioners. This is scarcely consistent with the loose, unverified accusations as to the shortcomings of railway companies. Besides, it is not true that the whole canal system has passed under the influence of railways. Of the 3,029 miles of canals in Great Britain, 1,592½ miles are owned or managed by other than railway companies.[108] An examination of the map prepared by Mr. Abernethy, C.E., for the Select Committee of 1883, shows, that south of a line passing through Worcester, Birmingham, Nottingham and Hull, there is scarcely a canal of any importance, with the exception of the Kennet and Avon canal, between Bath and Reading, permanently, temporarily, or partially in the hands of a railway company.

The fact appears to be that canals flourish only where certain conditions exist. Where a large traffic can be conveyed in full boatloads; where the country is flat, and there are consequently few locks; where large vessels propelled by steam can be used; where works are so situated that the cost of collection or delivery can be saved; in such circumstances, canals are suitable for coal, chalk, cotton, stone, bricks, pig-iron, round timber, grain, &c., and such like goods carried in large quantities, or for short distances. They can, no doubt, when such conditions exist, be beneficially used at a low cost for carriage; but for traffic not large, or composed of a great variety of articles, which have to be collected in small quantities from different places, or to be distributed all over the country, canals cannot successfully compete with railways. Want of water in dry summers, interruptions from ice in winter, and diversity of gauges in locks and tunnels—all matters which add to cost—are great inconveniences, and grave objections to water carriage. Often carriage by canal necessitates the erection of warehouses for storing goods, which is saved by the transit of traffic by rail. The speed and despatch demanded by the modern necessities of trade have tended to throw upon the railway more and more of the traffic which formerly went by canals, as well as the increase in the traffic of the country. In Staffordshire, canal boats meet from all the principal towns such as Manchester, Liverpool, and parts of Yorkshire in the North, and London and Bristol in the South; but no through traffic is exchanged. All the traffic of Staffordshire in iron, hardware, chains, anchors, nails, &c., outwards, and grain, timber, spelter, bone, manures, &c. inwards, requiring speed, is carried by railways. Where the canal charges are equal to, or lower than, the railway rates, the railways and canals divide the traffic. Newly-opened collieries and works are now, as a rule, laid out for loading into railway wagons, not into boats, because railway stations and railway trucks give greater facilities for distribution of coal to all parts of the country. No doubt certain large canals—for example, the Aire and Calder, Bridgwater, and the Leeds and Liverpool—can be profitably worked in their exceptional circumstances, as they possess a plentiful supply of water, and traverse a long stretch of comparatively level country. Where such conditions exist for distances of fifty to sixty miles, canals may compete successfully for heavy traffic with railways.

Nor have the proprietors of canals done the utmost to overcome inherent disadvantages. The existing inland system, with only 7-feet locks, is inadequate. The canals are too shallow; they are wasteful in the consumption of water; and they cannot be worked economically. The cost of working larger boats of 300 tons on suitable canals, hauled by steam, and loaded and unloaded by the best appliances of steam cranes would, of course, be much less expensive than that of working the boats of, say 30 to 60 tons, now used.

The cost of haulage on the narrow canals is much in excess of the cost of conveyance by rail, and the difference remains,[109] notwithstanding all efforts to improve the canals; efforts which, to be really useful, it was estimated would cost about £12,000 a mile. Mr. F. Morton, a canal carrier, stated that his firm lost from £100 to £150 per boat, per year, on certain of their “Fly” or quick boats, which were worked as an auxiliary to their general business with a view to compete with the railways, and help to retain that portion of the “Slow” traffic which they still have.

In countries possessing a large network of canals and other waterways—in France, Holland, and Germany (the Rhine provinces) for example—and where railway accommodation is not so complete as in this country, canals are necessarily important channels of communication. In France the waterways consist of—

Except 534 miles the whole of the mileage is the property of the State, and canals have been artificially fostered by it. According to a report prepared by M. Krantz, in 1872, and submitted to the Select Committee on Canals in 1883, the expenditure upon the waterways in France was on that date £32,738,715 on canals, and £13,557,867 on rivers, a total of £46,296,582, while the cost of maintenance for the year was upwards of £336,000[110].

In Belgium the aggregate length of the canals and navigable rivers is 1,254 miles, seven-eighths of which belong to the State. On a great portion no toll is charged; and on the remainder, sums varying from 3¼d. to 1s. 1d. per ton per 100 miles.

In Holland there are nearly 3,000 miles of canals and waterways, the former of which practically belong to the State.

If the explanation which has been given be not correct—if the great obstacle to the success of canals in this country be not their inferiority, as compared with railways, in the carriage of goods to answer the needs of trade—why have no new canals been made for some fourteen or fifteen years? They cost much less per mile than railways, and their maintenance expenses are not so heavy. That they are falling into decay in this country when left in private hands, is due, in the main, to the fact that this country is well supplied with railway accommodation, and that for most kinds of merchandise they are not such an efficient mode of transport as railways.[111]