Chapter XIII: Act 18: Geo. II., c. 33, provided, among {50}other things, that the streaks (10)

{269}"The Committee entertain the opinion that the announcement of an intention on the part of Parliament to sift with care the particulars of railway schemes, to associate them with the public interest (in the cases of all future schemes and of all subsisting companies which may voluntarily accede to such an arrangement) ... will produce very beneficial effects in deterring parties from the attempt to entrap the public by dishonest projects, in securing railway projects against the shocks to which in periods of great commercial excitement it must otherwise be liable from such causes," etc.

Praiseworthy as was the design thus put forward by Mr Gladstone's Committee, it failed to bring about the results anticipated.

In accordance with the recommendations made, a special department of the Board of Trade, under the direction of Lord Dalhousie, was created, in August, 1844, to inquire into and report to Parliament on all new railway schemes and Bills, with a view to guiding the Private Bill Committees of both Houses. The special department was more especially to report as to the positive and comparative advantages to the public of any Bills proposed for the construction of competing lines.

A great deal was hoped for from this new arrangement, and the decisions of the department as to which of the schemes then being promoted they would recommend for first consideration by Parliament were keenly awaited.

The expansion of the railway system had, by this time, proceeded so far that by the end of 1843 Parliament had authorised the construction of 2390 miles of railway, of which 2036 miles were then open for traffic. The capital of these lines was £82,800,000, and of this amount about £66,000,000 had been raised. A good deal of wild speculation in 1836-7 had been followed by a reaction, and the railway market was still depressed in 1843; but in 1844 interest in railway enterprise was greatly stimulated by the announcement that the Liverpool and Manchester, the Grand Junction, the London and Birmingham and the York and Midland were paying dividends of from ten to twelve per cent each, and that the Stockton and Darlington was paying fifteen per cent. The shares in existing companies rose in value, a number of new companies were formed, and companies already operating {270}projected branches in defence of their own interests against threatened competition. It was at this juncture that Mr Gladstone's Committee presented its Report and that, following thereon, the special department of the Board of Trade was called upon to undertake its responsible duties.

On November 28, 1844, the department intimated that the points it would particularly inquire into in regard to railway Bills then before it were (1) ability and _bona fide_ intentions of the promoters to prosecute their application to Parliament in the following Session; (2) national advantages to be gained; (3) local advantages; (4) engineering conditions; and (5) cost of construction, prospective traffic and working expenses. On the last day of the year the department announced which Bills they proposed to recommend, and subsequently they issued reports giving their reasons. Strong protests were raised by the disappointed projectors, and on the opening of the Session of 1845 Sir Robert Peel announced that the Government intended to leave railway Bills, as before, to the judgment of the Private Bill Committees.

This meant the virtual setting aside of the newly-formed department, though its actual existence was not terminated until the following August. It meant--since each Private Bill Committee would deal only with the merits of a particular scheme--the definite abandonment of any opportunity for securing, through an authority dealing with railway projects as a whole, the realisation of the ideal of Mr Gladstone's Committee that "each new line should be viewed as a member of a great system of communication, binding together the various districts of the country with a closeness and intimacy of relation" previously unknown. It meant, also, the adoption of a policy of free trade in railways, without protection for established interests, and to any and every honest promoter or dishonest speculator who had a scheme to propose it gave, in effect, _carte blanche_ to bring it forward.

Much disappointment was felt at this collapse of Mr Gladstone's apparently well-devised scheme, and the policy adopted in regard to it was keenly criticised. Francis quotes, for instance, the following passages from "Railway Legislation," the authorship of which, however, I have been unable to trace:--

"Swayed by motives which it is difficult to fathom, the {271}two Houses, with singular unanimity, agreed ... to give unrestricted scope to competition.... Little regard was paid to the claims and interests of existing railway companies, still less to the interests of the unfortunate persons who were induced to embark in the new projects for no better reason than that they had been sanctioned by Parliament.... The opportunity of confining the exceptional gauge within its original territory was also for ever thrown away. By an inconceivable want of statesmanlike views and foresight, no effort was made to connect the isolated railways which then existed by new links into one great and combined system in the form in which they would be most subservient to the wants of the community and to the great ends of domestic government and national defence. Further, the sudden change from the one extreme of determined rejection or dilatory acquiescence to the opposite extreme of unlimited concession gave a powerful stimulus to the spirit of speculation, and turned nearly the whole nation into gamblers."

Francis himself says of the position thus brought about:--

"All hope of applying great general principles passed away. Every chance of directing the course of railways to form a national system of communication was lost.... The legislative body--to appropriate the idea of Mr Morrison--committed the mistake of converting the Kingdom into a great stock exchange, and of stimulating the various members of the railway system to a deep and deadly struggle, destructive of order and fruitful of vice."

This may seem to be unduly strong language; but what actually and immediately followed on the course of events here in question was--the Railway Mania of 1845-6.

By the summer of 1845 the country had gone railway mad. In the Session of 1843 the number of railway Acts passed had been twenty-four, showing no more than a normal development of the railway system in meeting the legitimate needs of the country. In the Session of 1844 the number increased to thirty-seven. In the Session of 1845 there were no fewer than 248 railway Bills. In the next Session Bills were deposited with the Board of Trade for the construction of 815 new lines of railway, with a length of 20,687 miles, and capital powers to the extent of £350,000,000. Of these 815 Bills many were abortive for technical reasons, or {272}because the necessary deposit was not paid; but over 700 of them reached the Private Bill Office.

How every class of society joined in the scramble for shares; how extravagant prices were given for the scrip of lines which, when completed, could not for years have covered their working expenses; how half-pay officers, ticket-porters and men, even, in receipt of parish relief put down their names on the "subscription" lists for thousands of pounds' worth of shares, on their being paid a fee--sometimes as low as five shillings--for so doing; how "frenzy seized the whole nation"; how "there was scarcely a family in England which was not directly or indirectly interested in the fortunes of the rail"; and how the inevitable collapse reached every hearth and saddened every heart in the Metropolis, bringing many families both there and elsewhere to ruin, will be found recorded in detail by John Francis, in his "History of the English Railway," and need not be enlarged upon here.

In referring to the events of this period, the Report of the Joint Committee on the Amalgamation of Railway Companies, 1872, admits that "One effect of the favour shown by Parliament to competing schemes was to encourage a large number of speculative enterprises." Leaving aside the enterprises, of whatever type, that did not survive the passage through Parliament, I compile, from figures given in Clifford's "History of Private Bill Legislation," the following table showing new lines of railway actually sanctioned by Parliament during the Sessions 1845-7:--

YEAR. NUMBER. MILES. CAPITAL.
1845 118 2700 £56,000,000
1846 270 4538 £132,000,000
1847 190 1354 £39,460,000
--- ---- ------------
Totals 578 8592 £227,460,000

These figures indicate sufficiently the magnitude of the schemes in respect to which, during so short a period as three years, Parliament assumed the responsibility of giving its express sanction and approval.

The period of speculation was followed by the inevitable reaction, and in 1850 it was found necessary to pass an Act {273}"to facilitate the abandonment of railways and the dissolution of railway companies." Of the 8592 miles of railway sanctioned in the three Sessions, 1845-7, no fewer than 1560 miles were (as shown by the Report of the Royal Commission on Railways, 1867), abandoned by the promoters under the authority of the Act; while a further 2000 miles of railway, requiring 40 millions of capital, are said by the Report of the 1853 Committee to have been abandoned without the consent of Parliament.

To the extent indicated by these abandonments the railway situation was certainly relieved. But the mania and the resultant panic had serious consequences in regard not alone to investors in the schemes that failed but also to the companies that survived.

Apart from projects designed to open up entirely new districts--many of them of a perfectly genuine and desirable character--there were others directly devised to compete with existing lines and capture some of the remunerative traffic these were then handling; and it was, as I have shown, quite in accordance with the accepted principle of State railway-policy that such competition should be encouraged, in preference to any "districting" of the country among particular companies or to the creation or co-ordination of an organised system of railways on the lines proposed by Mr Gladstone's Committee.

The existing companies, finding that the territory already "allotted" to them (as they considered) was being invaded, or was in danger of being invaded, felt themselves forced, for the purposes of self-defence, to enter on a number of protective schemes which might not, at the time, otherwise have been warranted. Clifford says on this point in his "History of Private Bill Legislation": "As the Government took no steps to prevent the promotion of competitive railways, tending to diminish the profits of existing companies, the latter sought to protect themselves as they best could, and justified their many unprofitable extensions and amalgamations as measures forced upon them by the leave-alone policy of the Government."

Confirmation of this statement will be found in a speech delivered on February 23, 1848, by Mr C. Russell, M.P., chairman of the Great Western Railway Company, at the {274}sixth half-yearly meeting, at Paddington, of the South Wales Railway Company (of which he was also chairman), and reported in "The Times" of the following day. Referring to a pamphlet which had been issued attacking the policy of the Great Western Railway Company, Mr Russell said:--

"If their engagements were extensive, and he did not deny that they were so, they had been entered in only as a matter of necessity. They all arose out of the mania of 1845-46, and even in the pamphlet in question it had been admitted that the Great Western was not one of those companies which at that time had promoted any of the many schemes which were afloat. He, as far as he was concerned, had not only not promoted these projects, but had taken every means in his power to check them. In January, 1846, in his place in Parliament he had predicted the results if some steps were not at once adopted to put a curb upon reckless speculation; but most unfortunately for all parties that was not the view which was taken by the House of Commons. Mr Hudson and other gentlemen maintained that the course he recommended would be an unfair interference with private enterprise, and the consequence was that schemes involving altogether the sum of £125,000,000 passed through the Legislature in that year. The Great Western had remonstrated with the President and the Vice-President of the Board of Trade, and, left to their own resources, they had been compelled, in self-defence, to look after their own interests by getting hold of all the rival or contemplated rival schemes."

In some instances the existing companies guaranteed interest to the shareholders of branches and extensions which were feared as rivals. F. S. Williams, in "Our Iron Roads," says of such lines as these that while many of them were accepted as feeders they "proved for a time to be only suckers."

The effects of the mania on the finances of existing railway companies was further shown by the fact that, in order to pay their contractors, some of the companies were obliged during the crisis to raise money at from ten to thirty, and, in some instances it is said, even at fifty per cent discount. Then, also, the shares in ten leading companies suffered between 1845 and 1847 a depreciation in value estimated at {275}£18,000,000. The following are typical examples of the falls experienced:--

COMPANY. SHARES. JULY,1845. APRIL 4,1848. DECLINE.
£ £ £ £
London and Birmingham 100 243 126 117
Great Western 80(paid) 205 88 117
Midland 100 187 95 92
London and Brighton 50 76 28½ 47½

While the general situation in the railway world had been thus developing, there was a revival, in 1846, of the idea that the work of Private Bill Committees in respect to railway schemes should be supplemented by some other form of inquiry into their merits.

Writing on this subject in the issue of his "Railway Magazine" for July, 1837, John Herapath had said:--

"It has long been anxiously expected that Parliament would take some steps to relieve itself from the onerous duties of investigating and deciding on railway matters. Probably no tribunals can be less fitted for inquiries of this kind than Parliamentary Committees, of which the House of Commons has lately given a demonstrative proof in the case of the Brighton line. After Committees of the two Houses had sat nearly the whole of last session, and a Committee of the Commons for thirty-five days of the present; after the Committee's reports had been made on each of the lines and near 300,000l. of the subscribers' money had been wasted, the House of Commons stamped its own opinion of all those labours by giving them the 'go-by,' and referring the whole four lines to the judgment of a military engineer."

As for the element of uncertainty in the decisions of Parliamentary Committees, F. S. Williams is responsible for the statement that six railway Bills rejected by Commons Committees in 1844 were passed on precisely the same evidence in 1845; that of eighteen Bills rejected in 1845 seven were passed unaltered in 1846; and that of six Bills thrown out by Committees of the House of Lords in 1845 four were adopted by other Committees in 1846.

The failure, however, of the special department of the Board of Trade, created on the recommendation of Mr {276}Gladstone's Committee to meet the requirements of the situation, was complete. In giving evidence before the Select Committee of 1881, the secretary of the Board of Trade, Mr T. Farrer (afterwards Lord Farrer), referring to the work of Lord Dalhousie's department, said the reports made "were very able, but they were thrown over immediately they got to the House." When, he declared, the Board of Trade had taken all the means in their power to make a full report, "it was treated as waste paper. The Board might just as well have made no report at all." On the other hand, he admitted that the reports had not been of much actual value, the Board of Trade having no power to call the parties before them and take evidence.

Apart from a feeling of jealousy entertained by members in general and Private Bill Committees in particular towards any curtailment of their powers, privileges and functions by departmental officials, experience had shown that the Private Bill Committees, after examining witnesses, getting expert testimony and hearing counsel, were better able to ascertain the facts of particular schemes than the special department, while the latter had lost credit, also, on account of its recommendations in regard to amalgamations.

The first scheme of this kind on which it was asked to report was one for an amalgamation between the Liverpool and Manchester Railway, the Grand Junction Railway (from Liverpool to Birmingham) and the North Union (from Warrington to Preston). The Bill was opposed by public bodies and traders in the leading towns of Lancashire, and Lord Dalhousie's report favoured the opposition; but the Select Committee on the Bill nevertheless assented to an amalgamation which was, in effect, to lead to the creation of the London and North-Western system of to-day. The department also reported unsuccessfully in 1845 against the amalgamation of the Chester and Birkenhead with the Chester and Holyhead Railway--two other lines which were first united to each other and then to the London and North-Western. It further reported against various proposed amalgamations and arrangements in the Midland Counties; so that, as the Report of the Select Committee of 1872 points out, the department would have objected strongly to such combinations as the present London and North-Western Railway, the {277}Great Western, the North-Eastern, the Midland, the Great Northern and the Great Eastern.

These considerations should be borne in mind by those who might otherwise be disposed to criticise the attitude adopted by the Government of 1845 towards the special department here in question.

The one experiment had been a failure--with, as we have seen, deplorable consequences for the country and serious prejudice to _bona fide_ railways; but Committees of both Houses, appointed in 1846, were now to recommend another. They advised the creation of a Board of Commissioners of Railways who were to discharge the dual functions of (1) seeing that the railway companies did not contravene the provisions of their special Acts or of any general Statutes; and (2) report to Parliament, if so directed, upon any pending railway Bills.

An Act to this effect was passed in 1846; but in the following Session there was introduced a Bill which proposed greatly to increase the powers of the Board of Commissioners. Clifford says, concerning this Bill, that it made the Commissioners, in effect, arbiters of all railway legislation. Promoters were not even to survey an intended line until the Commissioners gave permission. When the survey was made one of their officers was to report upon the project. With them plans and sections were to be deposited; they were to examine into compliance with Standing Orders and report to Parliament upon engineering merits and proposed rates. Considerable authority was also vested in them over existing railways. They were to report annually to Parliament upon tolls, fares and charges, and upon the regularity or irregularity of trains; and they might call for returns as to traffic and many other details of management, inspect the books and documents of railway companies, and settle disputes between companies having termini or portions of line in common.

"Parliament," Clifford further tells us, "was again jealous of this proposed interference with legislation." The railway companies also protested, and the measure was received with such general disfavour that it was withdrawn before it reached a second reading. As for the Board of Commissioners, instead of getting more authority it got less. Part of its functions were re-united to those of the Board of Trade in 1848, and the {278}remainder followed in 1851, whereupon the new authority ceased to exist.[44]

Once more, therefore, railway Bills were left to be dealt with on their individual merits by Private Bill Committees operating on lines to which, not simply John Herapath, but Mr Gladstone's own Committee, had taken exception; and once more was a set-back given to the aspiration for the establishment of some central authority which could organise, co-ordinate or otherwise consolidate the still rapidly increasing railways on the basis of a national system of rail communication. The difficulty might, perhaps, have been met by the creation of a Minister of Communications, who would have held a position somewhat similar to that of the Minister of Public Works in Prussia or in France, and have discharged a useful function as director-in-chief, or, at least, as adviser-in-chief, in regard alike to railways, roads, rivers and canals. Such a Minister, being a member of the Government, might have acted or recommended without wounding the susceptibilities of Private Bill Committees or of individual members; he might have organised or been the means of organising an efficient system of railways at an earlier date and at far less cost; and he might have saved both the country from its enormous losses on the wild-cat projects of unscrupulous schemers during the mania period and _bona fide_ companies from much of the excessive capitalization into which they were driven.

Whether or not the problems of the situation could have been solved in this manner, the fact remains that it was the railway companies themselves who--in spite of the established policy of the State, directed to the maintenance of railway competition, and in spite of the disapproval of amalgamations by one Parliament Committee after another--brought about the conveniences of through travel or through transit. It was they themselves who, by amalgamation or otherwise, instigated the creation of the "great" companies which both ensured these conveniences and effected a complete transformation in the general railway position, to the great advantage of everyone concerned.

{279}Before, however, reaching this stage in their development, the railways had had some other struggles with the Government on questions of State policy arising out of those aforesaid feelings of suspicion and distrust, and due to the same fear as before that the companies would be sure to abuse their position unless they were restrained from so doing.

Following on the recommendations of the Committee of 1840, and with a view to safeguarding the public interests in regard alike to safety and to reasonable treatment, some important statutory powers had already been conferred on the Board of Trade. Under the Regulation of Railways Act, 1840, notice was to be given to the Board of Trade of the opening of all new lines of railway; such lines were to be inspected by Board of Trade inspectors; various returns in respect of traffic, tolls, rates and accidents were to be made to that body, to which, also, all existing bye-laws affecting the public were to be submitted for confirmation. In 1842 a further Act gave the Board power to delay the opening of any new line until they were satisfied that all the necessary works had been effectively constructed. Mr Glyn, chairman of the London and Birmingham Railway, said of this measure: "It is a Bill which I do not hesitate to say is, on the whole, calculated to do the interests of railways very considerable service."

But the attitude of the companies was no longer favourable when Mr Gladstone's Committee of 1844 proposed to confer on the Board of Trade some drastic powers for the periodical revision of railway rates, and likewise sought to lay down the terms on which the State might acquire all future lines of railway. The proposals in question were incorporated in a Bill which was brought in by Mr Gladstone; but the measure met with strenuous opposition from the railway interests, and the modifications introduced before it became law were of such a nature that the Act has never been put into operation.

In regard to the revision of rates, the Act laid down that if, after the lapse of twenty-one years (not fifteen, as proposed in Mr Gladstone's first Bill), any railway sanctioned after the passing of the Act had paid ten per cent for three years, the Treasury (not the Board of Trade) might reduce the rates, guaranteeing, however, a ten per cent dividend to {280}the company, while the revised rates and the guarantee were to continue for another twenty-one years. Needless to say, railway companies in general do not pay ten per cent dividends, though in 1844 ten per cent was regarded as quite a reasonable dividend for a railway, in view of what the canal companies had been paying; while no such guarantee as that suggested is ever likely to be made by the Treasury. Provisions authorising the Board of Trade to make deductions from the guaranteed income as penalties for what they might regard as mismanagement, and prohibiting a company from increasing its capital pending a revision of rates, without the sanction of the Board of Trade, were so vigorously opposed that they were abandoned.

The clauses of the Act relating to State purchase were to apply only to new lines of railway, the 2320 miles of railway sanctioned prior to the Session of 1844--and including many of the chief links in the great trunk lines of to-day--being expressly excluded. As regarded railways sanctioned in the Session of 1844, or subsequently thereto, it was enacted that after the lapse of fifteen years the Treasury might acquire them for twenty-five years' purchase of the average annual profits for the preceding three years; but if those profits were less than ten per cent, the amount was to be settled by arbitration. It was further enacted that no railway less than five miles in length should be bought; that no branch should be acquired without purchase of the entire railway; that the policy of revision or purchase was not to be prejudiced by the Act; that "public resources" were not to be employed to sustain undue competition with independent companies; and, finally, that no revision of rates or State purchase of lines should take place at all without an Act of Parliament authorising the guarantee or the purchase, and determining how either was to be done.

To argue, as many advocates of the nationalisation of railways habitually do, that the basis for State purchase has already been established by the Act of 1844 is to set up a theory which is obviously inconsistent with the real facts of the situation.

Commenting on this Act of 1844 the Joint Committee on the Amalgamation of Railway Companies (1872) say in their report:--

{281}"It would be impossible to deal with railways made since 1844 without dealing with railways made before that time, since both form part of the same systems.

"As regards the revision of rates, no Government would undertake to try experiments in reducing rates on an independent company whose income they must guarantee; and efficient or economical administration could scarcely be expected from a railway company whose rates were cut down and whose dividend at ten per cent was guaranteed by Government.

"Whatever value there may be in the notice given to the companies by this Act of their liability to compulsory purchase by the State, over and above the general right of expropriation possessed by the latter in such cases, its terms do not appear suited to the present condition of railway property or likely to be adopted by Parliament in case of any intention at any future time on the part of Parliament to purchase the railways."

The proposals contained in the Bill, and modified into the Act of 1844, were, of course, simply a further development of the then established policy of the State in taking precautions against the evils that might result from railway monopoly.

A greater degree of apparent success was, at first, to attend those further precautionary measures which took the form of encouraging the construction of competing lines, leading both to new and to existing companies invading the so-called "territory" of other companies, as distinct from the provision of lines in districts which had no railways at all.

There was at this time much discussion as to the rights of established companies.

When the proposal for the appointment of the Committee of 1840 was under discussion in the House of Commons, Sir Robert Peel had contended that a material distinction was to be drawn between new companies approaching Parliament for the first time and companies which, relying on the faith of Parliament, had invested their capital in the construction of railways. "Parliament, it was true, might repent of the indiscretion and levity with which it had granted those powers ... but he would advise Parliament to be very cautious how it interfered with the profits or management of companies which had been called into existence by the {282}authority, and had invested their money on the faith, of Parliament." Mr Gladstone's Committee of 1844 also declared that they had been "governed throughout their consideration of the subject by the strongest conviction that no step should be taken by Parliament which would either induce so much as a reasonable suspicion of its good faith with regard to the integrity of privileges already granted, and not shown to have been abused, or which would prospectively discourage the disposition now so actively in operation to extend the railway system by the formation of new lines."

On the other hand, there was that ever-present and ever-active dread of what _might_ happen if the railway companies _did_ become grasping and merciless monopolists. There was, also, the fact that while there would be direct competition between two railways having the same terminal points, each line might further serve a more or less considerable and important intermediate stretch of country which otherwise would be left without railway accommodation at all.

For one or other of these reasons competing lines continued to be sanctioned, notwithstanding Special Committees' recommendations and railway companies' protests. One such protest, giving a specific example of the tendencies of the day, was made in a memorial to the Board of Trade, dated June 26, 1857, and headed, "Proposed Remedies for Railway Grievances." The memorial, signed by Sir John Hall, Bart., and six others, and addressed to Lord Stanley of Alderley, president, and Mr Robert Lowe, vice-president, of the Board of Trade, had been drawn up at the request of those two gentlemen as a more detailed statement of facts to which their attention had already been called. Five specific grievances were dealt with, and the first of these was "The Tendency of Parliament to concede competing or otherwise unnecessary lines." Under this head the memorialists state:--

"It is not our desire that the railway system should be legislatively restricted within its present limits, or that existing shareholders should by any process whatever be nominally or practically gifted with a monopoly of the means of railway transit. We should submit to the introduction of new lines of railway wherever called for by absolute public necessity.... In such cases, however, we consider that the Legislature would only be doing justice to its previous enactments in {283}giving former applicants time to complete their engagements so that they might be able, at the proper time, to exhibit their ability and their willingness to consider the wants of the public as well as their proper remuneration."

The memorialists mention the fact that in 1853 several new lines were sanctioned, the period fixed for their completion being 1858, and they proceed:--

"Already, however, before these lines are opened, others are promoted in competition with them--promoted, not by a complaining locality, but in some cases by existing companies, in others by persons whose only apparent object is to sell the schemes to advantage when Parliament has sanctioned their construction. In such instances as these we humbly submit that the Legislature should not permit the introduction of new lines until it has seen whether or not the company in possession can fulfil its engagements, and whether, also, such company should not be permitted an opportunity of electing to extend its undertaking, or to leave further effort to the discretion of the Legislature."

Whilst the State was thus maintaining its own policy of competition, the railway companies were equally persistent in keeping to their policy of amalgamation; so that, as the Joint Committee of 1872 remarked, "A new line was sure sooner or later to join the combination of existing railways, and to make common cause with them."

Practical railway experience was showing that the ordinary ideas of competition, as regarded commercial undertakings in general, did not and could not be made to apply to railways beyond a certain point. The capital sunk alike in obtaining a railway Act, in acquiring and adapting land, with provision of embankments, cuttings, viaducts, bridges, tunnels, etc., for the railway lines, and in supplying the various necessary appurtenances, railway stations, and so on, was irredeemable, since, in the case of failure of the line, due to competition or otherwise, the capital invested could not be realised again, the land, rails, buildings, etc., on which it had been spent being of little or no value for other than railway purposes. There could thus be no transfer of capital from one undertaking to another, as in ordinary commercial affairs.

In addition to this it might be that interest would have to be paid on two lots of railway capital in a district where the {284}traffic was sufficient to allow of the financial obligations of only a single company being efficiently met, any success achieved by the new company depending (until the available traffic increased) on its power to divert business and profits from the other company.

Hence it might well occur that "the best laid schemes" of Parliament and Parliamentary Committees, in approving competitive lines, resulted only in the companies concerned coming to, at least, a friendly understanding; and it might even be that the public did not eventually benefit at all, because, as the Joint Committee of 1872 say, "The necessity of carrying interest on the additional capital required for the new line tends sometimes, in the end, to raise rather than to reduce the rates."

Economic considerations, again, apart altogether from those monopolistic tendencies on the fear of which the policy of the State had been founded, were quite sufficient to account for the absorption of one company by another, and especially of small companies by larger ones, not so much to avoid competition as to ensure the provision of through routes operated under one and the same management, involving less outlay on working expenses, and providing greater advantages to the public than if the same length of line belonged to a number of different companies.

The lines between London and Liverpool, for example, were originally divided between three companies, and the same was the case with the lines between Bristol and Leeds. In some instances the companies were not on good terms with one another, and they ran their trains to suit their own convenience. Even when they were on good terms, they might not have any interests in common, apart from (at one time) offering as few comforts and conveniences as possible to the third-class traveller, and compelling him at least to complete his journey by going first class, if he wished to get to his destination the same night.

As early as 1847 attempts had been made by some of the companies to overcome the glaring defects of the original system of railway construction by establishing the Railway Clearing House, with a view to facilitating through traffic and allowing of a better adjustment of accounts when passengers or goods were carried over various lines in return for a {285}single payment. The companies persevered, however, in their further policy of amalgamation and consolidation, and in 1853 the number and magnitude of schemes with these objects in view created such alarm on the part both of politicians and of traders that a further Select Committee--known as Mr. Cardwell's Committee--was appointed.

The members of this Committee pointed out in their report that the whole tendency of the companies was towards union and extension, that competition ended in combination, and that the companies were able in great measure to attain these ends by agreements with one another without the authority of Parliament. The economy and the convenience resulting from amalgamation were admitted by the report; but, though still no proof was offered, or suggestion made, that the companies were actually abusing the greater powers they had thus secured, there was an obvious under-current of alarm in the minds of the Committee as to the many undesirable things which large concerns _might_ do.

The Committee were opposed to any "districting" of the country between different companies, and they recommended that, while working agreements might be allowed, amalgamations between large companies should not. As an example of the combinations they deprecated, I might mention that they pointed with evident feelings of much concern to the fact that if the amalgamation schemes then being proposed by the London and North-Western Railway Company were conceded, they would involve the union under one control of a capital of £60,000,000, a revenue of £4,000,000, and 1200 miles of railway, with the further result of "rendering impossible the existence of independent rival trunk lines." One wonders what the members of this Committee would have said had they been told that by the end of 1910 (as shown by the Board of Trade "Railway Returns") the London and North-Western would control a total authorised capital of (in round figures) £134,000,000, have gross receipts in a single year amounting to £15,962,000, and be operating 1966 route miles of line, equivalent to 5490 miles of single track (including sidings), besides being only one of half a dozen great trunk lines.

A much more practical result of the deliberations of this Committee was seen in certain provisions of the Railway and Canal Traffic Act, 1854, which laid down that every {286}railway company should afford proper facilities for receiving and forwarding traffic; that no undue or unreasonable preferences should be given; and that where the systems were continuous the companies should afford due and reasonable facilities for the interchange of traffic, without undue preference or obstruction. In this way it was sought to bring about greater co-ordination between the numerous small lines, and secure a better provision for through traffic. The Act is well described by the Select Committee of 1872 as "a measure valuable in fact and most important in its scope and intention." It may have been further anticipated that companies which, as the result of the Act, secured running powers or free interchange of traffic over the lines of other companies--and especially as regards lines having access to London--would be less ready to agree to absorption by them; but if this expectation were, indeed, entertained, it was not realised.

The companies, in fact, continued to develop their commercial undertakings in accordance with what they regarded as commercial principles, and the Joint Committee on the Amalgamation of Railway Companies, 1872, taking a much broader view of the situation than previous Committees had done, pointed out how small had been the effect of the policy sought to be enforced against the railways, since the combinations which had enabled the great trunk lines to attain to the position they occupied at that date had been effected "contemporaneously with reports against large combinations," those reports having had "little influence upon the action of Private Bill Committees," and not staying "the progress of the companies in their course of union and amalgamation." The Committee further said, on the subject of "districting":--

"Among the various suggestions which naturally occur when dealing with the question of amalgamation, one of the most obvious and most important is to the effect that for the future some endeavour should be made to compel railways in amalgamating to follow certain fixed lines or principles.... If at an earlier period in railway history such an attempt had been successfully made, there is no doubt that it might have provided us with a railway system, if not more efficient, at any rate far less costly than that which we now possess. But considering _the policy, or want of policy_, which has hitherto {287}been pursued, and the interests which have grown up under it, the difficulties of laying down any fixed policy for the future are very formidable."

The words in this extract which I have put in italics, representing, as they do, the views of a Joint Committee of the House of Lords and of the House of Commons, justify, I would suggest, much of the criticism in which I have here ventured to indulge.

Among the conclusions at which the Committee arrived were the following:--

"Past amalgamations have not brought with them the evils which were anticipated."

"Competition between railways exists only to a limited extent, and cannot be maintained by legislation."

"Combination between railway companies is increasing and is likely to increase, whether by amalgamation or otherwise."

"It is impossible to lay down any general rules determining the limits or the character of future amalgamations."

In support of their views in regard to the first of these conclusions, the Committee pointed especially to the North-Eastern and the Great Eastern Railway Companies, each of which had so far pursued a policy of amalgamation that the report speaks of the former as "pervading and possessing one of the wealthiest and most important districts of the Kingdom," and of the latter as having "almost exclusive possession of the principal centres to which it extends."

The Committee did not suggest that either of these companies had abused its powers, or taken undue advantage of such "monopoly" as it had secured in the districts concerned. In fact, of the North-Eastern Railway they said:-- "That railway, or system of railways, is composed of thirty-seven lines, several of which formerly competed with each other. Before their amalgamation they had, generally speaking, high rates and fares and low dividends. The system is now the most complete monopoly in the United Kingdom ... and it has the lowest fares and the highest dividends of any English railway." As for the Great Eastern, instead of abusing their "almost exclusive possession" of the Eastern Counties, everyone knows that the Company have won for themselves the credit of pioneering the movement for offering {288}exceptionally low rates and other special facilities for the transport of agricultural produce, and, also, of having done more, perhaps, than any other single railway company to enable working men to live in healthy suburbs around London.

The whole position in regard to the prospective abuse of a so-called monopoly due to railway amalgamations is, in fact, much misunderstood.

A railway company which controls, or practically controls, the traffic in a certain section of the country is especially interested in developing that traffic because it will enjoy all the advantages thereof, without having to share them with a rival. For this reason, instead of restricting facilities, such a company seeks to increase them; instead of imposing extortionate fares and rates it aims, not merely at immediate profits on the transport of particular commodities, but at encouraging such a development of the district in general as will ensure its prosperity, increase its population, expand its trade, _and_ create more traffic of all kinds in a not far distant future.

It was precisely this idea that led the Great Eastern Railway Company to set the example it did in seeking to develop the interests of its agricultural districts. The more these interests expanded, and the more profitable the agricultural industry became to the people living in those districts, the greater would be the demand for household supplies, for furniture, for pianos, for building materials, and for countless other commodities, most of which would bring additional traffic to the line apart from the greater amount of agricultural produce carried, and apart, also, from the further inevitable increase in passenger traffic.

Cornwall, again, might be regarded as the "monopoly" of the Great Western Railway; but what person would suggest that the Great Western have not sufficiently boomed "the Cornish Riviera"?

Nor is there necessarily a "monopoly" simply because a particular district is served by a single railway. If the Great Eastern did not take people to East-coast resorts at reasonable rates, or if the Great Western charged excessive fares for the journey to Cornwall, holiday-makers would, in each case, go elsewhere. If either company, or any other company, sought to get too much for carrying milk to London, milk {289}would be obtained by the metropolitan dealers from other districts, instead; and so on with most other commodities.

Indirect competition, on sound economic lines, may, therefore, still exist even when a railway company is, after many amalgamations, in the possession of an apparent monopoly. The law of supply and demand will still regulate both prices and charges. When, on the other hand, an attempt is made to enforce an artificial and non-economic competition by Act of Parliament, the inevitable result is that the companies concerned find it to their advantage to combine, or to agree, rather than to compete in rates and fares under conditions that would not only be mutually disadvantageous, but confer no lasting benefit on the public they seek to serve.

How the ultimate result of railway policy, as here described, has been to bring about the creation of great systems out of small ones may be seen from the following typical examples, showing in each case the number of lesser companies absorbed, leased or worked as the result of amalgamations, of leases in perpetuity, or otherwise; though the figures do not include railways which have been vested in two or more companies jointly:--

COMPANIES
NAME OF COMPANY. LENGTH OF LINE.[45] AMALGAMATED
Miles. OR LINES LEASED.
Great Central 753 15
Great Eastern 1133 26
Great Northern 856 22
Great Western 2993 115
Lancashire and Yorkshire 589 14
London and North-Western 1966 59
London and South-Western 964 40
London, Brighton and South Coast 454 19
Midland 1531 35
North-Eastern 1728 41
South-Eastern and Chatham 629 29
Caledonian 1074 41
North British 1363 45
Great Northern of Ireland 560 14
Great Southern and Western (Ireland) 1121 19

{290}The process of amalgamation has been carried even further than these figures suggest, some of the companies absorbed into the great systems having themselves previously amalgamated a number of still smaller companies. The North-Eastern, for example, came into existence in 1854, through a combination of three companies--the York, Newcastle and Berwick, the Leeds Northern, and the York and North Midland--which three companies then represented between them what had originally been fifteen separate undertakings. Since 1854 the North-Eastern Company have purchased or amalgamated thirty-eight other companies, one of which, the Stockton and Darlington (absorbed in 1863), was already an amalgamation of eleven companies.[46]

That the conveniences of travel and the advantages to traders have been greatly enhanced by the substitution of these few great companies for a large number of small ones is beyond question, and actual experience has shown that the fears of grave evils resulting from prospective abuses of the railway "monopoly" brought about by amalgamations such as these have been mainly imaginary, notwithstanding the fact that they have formed the basis of so much of the policy of the State in its dealings with the railways.

There are still various small and even diminutive companies which have escaped the fate of being swallowed up by their big neighbours. One of the smallest engaged in a general traffic--as distinct from dock or mineral lines--is the Easingwold railway, Yorkshire, which connects with the {291}North-Eastern at Alne, but still maintains an independent existence. According to the Board of Trade Returns for 1910 the Easingwold Railway consists of two miles of line, or three miles if we include sidings, and it owns one locomotive, two carriages for the conveyance of passengers and one goods waggon. It carried in 1910 a total of 33,888 passengers, 5547 tons of minerals and 11,214 tons of general merchandise. Its total gross receipts from all sources of traffic for the year amounted to £2358, and the net receipts, after allowing for working expenses, were £936. The authorised capital of the company is £18,000, of which £16,000 has been paid up.

Small as this line is, it serves a useful purpose; but the policy of amalgamation, followed up by leading companies with such pertinacity, and in spite of so much distrust and opposition, has, happily, saved the railway system of the country from remaining split up among an endless number of companies of the Easingwold type--even though they might have had more than three miles of railway and a single locomotive each.

Other developments of State policy towards the railways have applied to ensuring both perfection of construction and safety in operation.

In the former respect the English lines have been built with a solidity and a completeness not to be surpassed by the railways of any other country in the world. Even in sparsely populated districts where, under similar circumstances, the American or the Prussian railway engineer would lay down only such a line as would be adequate to the actual or prospective traffic, would give the passengers no platform, would provide little more than a shed for a railway station, and would expect the public to be content with a level crossing and look out for the trains, a British railway company is obliged to respect State requirements by laying down a line equal to the traffic of a busy urban centre, give the passengers such platforms as will enable them to enter or leave the trains without the slightest inconvenience, erect well-built and more or less commodious station buildings, and, it may be, arrange for bridges, viaducts or underground passages such as in other countries would be found only in centres having a substantial amount of traffic.

Apart, in fact, from any question as to expenditure on {292}Parliamentary proceedings and on the acquiring of land, the cost simply of building the railway itself has, generally speaking, been far greater in this country than, under corresponding geographical and traffic conditions, has been the case elsewhere. Judging from the example of the Prussian State Railway administration it is extremely doubtful if, had the British railway system been constructed, owned and operated by the State, instead of being left to private enterprise, any responsible Chancellor of the Exchequer would have authorised so great a degree of expenditure, in the interests of an absolute perfection of construction under all possible conditions, as that which has been forced upon commercial companies dependent for their capital on the money they could raise from investors.

Less scope for criticism is offered by the provision of the most complete of safety appliances in regard to signalling and other phases of railway operation. The desirability of reducing the risk of railway accidents to an absolute minimum is beyond the range of all possible dispute. Yet, as a matter of detail, the substantial cost of ensuring this all-important element of safety, no less than the exceptionally heavy outlay on the lines themselves, has helped still further to increase that capital expenditure a return on which is only to be secured by the investors from the revenue the companies can get from the railway users.

When we look for the ultimate and combined results of the various conditions touched upon in this and the preceding chapter--excessive cost of land, abnormal expenditure on Parliamentary proceedings and various aspects of State policy and control--we find them in the fact that, whether or not the British railways are really the best in the world, they have certainly been the most costly.

Comparisons with other countries may be misleading unless we remember that published statistics as to the cost of construction of the world's railways apply to route mileage--or, otherwise, "length of line"--and that the English lines have a large proportion of double, treble and other multiple track, while in more sparsely populated countries the railways, except in and around the large towns, consist to a far larger extent of single track. The actual position is not, therefore, quite so bad as the comparative figures appear to show. But, even allowing for these considerations, the following table--which {293}I compile from data published in the "Bulletin of the International Railway Congress Association" for February, 1911--may be regarded as conveying the moral of the story I have here been seeking to tell:--

CONSTRUCTION COST OF THE RAILWAYS OF
DIFFERENT COUNTRIES.

CONSTRUCTION CAPITAL
COUNTRY. SYSTEM. YEAR. MILES. TOTAL. PER MILE.
Great Britain £ £
and Ireland Entire 1905 22,843 1,272,600,000 55,712
Germany " 1908 35,639 813,300,000 22,821
France Main lines 1906 24,701 706,700,000 28,611
Belgium State lines 1907 2,523 93,600,000 37,088
Netherlands Entire 1897 1,653 28,700,000 17,350
Denmark State 1909 1,218 13,250,000 10,884
United States
of America -- 1908 233,632 3,521,200,000 15,071
Canada -- 1907 22,447 269,850,000 12,022

{294}CHAPTER XXII

DECLINE OF CANALS

Considering that, in spite of the unreasonableness, the exactions and the large profits of many of the canal companies in the later days of their prosperous monopoly, the canals themselves had rendered such invaluable service to the trade, commerce and industry of the country, the question may well have arisen why they were not allowed, or enabled to a greater extent than was actually the case, to continue their career of usefulness.

There has, indeed, for some years been in the United Kingdom a canal-revival party which favours the idea that either the State or the local authorities should acquire and improve the canals with a view to enabling them better to compete with the railways--which, as the story of the Liverpool and Manchester line shows, were at one time expressly designed as competitors of and alternatives to the canals.