Chapter 11

Footnotes[1]Mr. Forwood. Debate on second reading of Railway and Canal Traffic Bill, 6th May, 1886. Hansard, vol. cccv. 446.[2]See Report of Royal Commission, 1867; Report of Joint Select Committee of House of Lords and Commons, 1872; Report of Select Committee, 1881-2.[3]Gustav Cohn, the well known German writer on English railways, while advocating many changes, complains of the limited, one-sided knowledge of the subject shown by the chief English critics of railways.—Die Englische Eisenbahnpolitik(1883), p.88 and elsewhere.[4]Note.—See illustration of cubical contents in proportion to weight, page 83.[5]For attempts to calculate cost of service, see A. Fink on “Cost of Railway Transportation,” New York (1882); Hadley on “Railway Transportation,” p. 261;Sax’s Die Eisenbahnen1.60 and 2.361;Lardner’s Railway Economy; and the Italian Parliamentary Inquiry (Atti della Commissione d’Inchiesta sull’ Esercizio delle Ferrovie Italiane) part II., vol. II., 962.[6]See the unqualified condemnation of the system in the Italian Parliamentary Report already quoted: “The natural system was a system eminently theoretical. To-day all doubt on the subject is removed; this system was tried for five years, and it proved very unsatisfactory.” Parte II., Vol. III., p. 954. It is pointed out with truth that the so-called “natural system” is injurious to small industries and small towns.See also page 18.[7]The late Member for West Wolverhampton, in comparing the rates for Coke between Staveley and Northamptonshire and Staveley and Wolverhampton, practically advocated mileage rates, although, probably, not intending to do so. (See debate on the second reading of the Railway and Canal Traffic Bill, May 6th, 1886.)[8]If an engine and tender weighing together 56 tons is capable of drawing a maximum load of say forty loaded wagons weighing 560 tons at 25 miles per hour on the level, it will only take the following loads over the gradients named below, and, in addition to the reduction in the load, the speed would also be considerably reduced.Level.40 wagons weighing 560 tons.Incline1 in 10020 ” ” 280 ””1 ” 5010 ” ” 140 ””1 ” 306 ” ” 84 ”See also Spon’s Dictionary of Engineering; Encyclopedia Britannica “Railways,” and the elaborate workDes Pentes Economiques en Chemins, par M. Charles de Freycinet.[9]Before Mr. Cardwell’s Committee (23rd February, 1853) the late Mr. Robert Stephenson, the eminent engineer, gave the following illustration, which is not yet antiquated:—“I referred to that in order to shew the Committee the great impropriety of attempting anything like an equal mileage rate on railways. I can elucidate that in a very remarkable manner, and shew the injustice that the carrying out of the principle would inflict upon some railway companies, especially where goods are concerned. I will take the case of the Great North of England Railway, from Newcastle coal-field towards York, and towards the rivers Tees and Tyne. In one direction there were 5,450,000 tons of coals carried over one mile, which was equal to 320,588 over one mile for each engine; there having been employed by the York, Newcastle and Berwick Company for the performance of that duty 17 engines. Towards York, where the distance was greater, and the gradients were better, and the loads heavier, and the work more uniform, 13 engines took 14,435,000 tons over one mile, which was equal to 1,110,000 tons for each engine over a mile; in the other case, the duty that one engine performed was carrying 320,588 tons over a mile; therefore in this case one engine has done 3·466 more work than the other engine, so that on the first line it cost the Company nearly four times as much as it cost them for doing the same duty on the other line. On the one line there are a number of collieries; the engines have to stop and pick up the traffic, and the railway wagons do not average perhaps more than seven or eight miles per day, whereas in the other case they work for hours continuously, and with heavier loads and no stoppages.”[10]See preface to Smiles’ Life of Stephenson, and, as to the provisioning of Paris by means of railways, interesting details inLa Transformation Des Moyens de Transport, par Alfred de Foville, Chef de Bureau au Ministère des Finances, p. 256.[11]About thirty years ago, when the iron works at Westbury in Wiltshire were constructed, it was anticipated that fuel would be obtained from the Badstock district, about 14 miles distant. But after sinking collieries it was found that the coke was not suitable; so that it has now to be obtained from South Wales, a distance of about 130 miles. The pig iron is sent to South Wales in the return coke wagons, and also to South Staffordshire, a distance of 140 miles. The coke and pig iron are carried at special low rates below those in force for traffic to intermediate places. Without such special rates, or if mileage rates were charged, the works would have to be closed.[12]An American writer points out that the following would be the result of applying the principle of equal mileage rates, or of basing rates on cost of service:—1. “There would be little or no classification of freights. Grain, lumber, coal, iron, shoes, dry goods, groceries, drugs and chemicals, would all have to pay near about the same rate per 100 pounds per mile, and that rate would have to be something like an average of the present rates charged upon the different classes of freight. The higher classes of freight would be a good deal lowered, and the lower classes would be materially raised. The result would be that cheap and heavy products could be no longer transported over the distances that are now carried.2. “The rates on through freight would have to be proportioned very nearly to the distance hauled. The rate from Chicago to Boston for instance, would be materially higher, and the rate from Chicago to Baltimore materially lower than the rates from Chicago to New York.3. “Roads having the lowest grades, and most favourable alignment would have lower rates than their competitors, and would monopolise the business, to the entire exclusion of those lines which traverse more difficult and expensive territory, and upon which the cost of transportation was greater. And the tide once turned, the evil would multiply itself; for the rates would decrease rapidly on the favoured roads, with the increase of business, and would increase on the unfortunately located roads, with the decrease in volume of their freight, until the latter would be left with nothing but their local business to support them, which would then have to be advanced to the highest figures possible.”—Railroad Transportation, by E. P. Alexander,Vice-President of the Louisville and Nashville Railway Company.[13]Very recently the fishermen in the North of Scotland have been asking that the same gross rates shall be charged from Wick to large towns in the South as are charged from the fishing ports, such as Grimsby, on the East Coast of England. What would they, or most consumers of fish, say to equal mileage rates?[14]“We have nothing to do here with the study of the tariff systems adopted on the Alsace-Lorraine lines, and extended with some modifications to the generality of German lines. Seductive by its simplicity, the principle of fixing the rate according to the weight only, and without regard to the value of the object carried, has not found numerous partisans in France. Such a radical reform would overthrow our commercial habits, and would occasion results, in a financial point of view, which would be impossible for us to estimate.” Report of the French Commission of the Third System on Railway Tariffs, by M. Richard Waddington. (Appendix 31 to Report from the Select Committee on Railways (Rates and Fares), 1881-2, Vol. 11. p. 449).[15]The rate for the carriage of flour from Minneapolis for consumption at Milwaukee or Chicago is one-third higher than the rate for flour for shipment.[16]In the evidence given before the Select Committee in 1881, the rates for foreign hops from Boulogne to London were compared with the rates charged for home grown hops from the Ashford and Canterbury districts to London. The former were complained of as being an undue preference in favour of foreign produce. No doubt there was a considerable difference. The rate from Boulogne to London was 17s. 6d., and that from Ashford to London, 38s. It was, however, shewn that the rate of 17s. 6d. per ton for foreign hops from Boulogne to London was a station to station rate, while the rate of 38s. per ton from Ashford to London included delivery and all station services, and that owing to the difference in the mode of packing the hops, 73 per cent. more foreign hops than English hops could be loaded in a truck. The railway companies concerned urged that the home producer was not prejudiced by the transit rate complained of. While it enabled the railway companies to obtain the conveyance of a portion of the foreign hops, an increase of the rate from Boulogne would not be of any benefit to the English grower. The foreign hops would still find their way to London direct by sea. The rate of 17s. 6d. per ton from Boulogne to London was cancelled in deference to the complaints. What is the result? The foreign hops are imported as before; but they are now carried by the General Steam Navigation Company. The railway companies have to some extent suffered; the English producer has gained nothing.[17]Lines of steamers carrying Belgian, Dutch, German, and French goods and produce, run between Antwerp, Rotterdam, Amsterdam, Boulogne, Havre and London. In competition with them the Great Eastern, South Eastern, and London Chatham and Dover Companies carryviâHarwich, Folkestone and Dover respectively, at such rates as they can obtain in competition with those charged by steamer direct. It has been a subject of complaint that these goods are conveyed at lower rates than similar merchandise from places in Essex or Kent, past which they are carried by rail. No doubt the regular and quick services provided by the railway companies are of great advantage to the senders and consumers. But so far as London is concerned, a great part, if not the whole of the goods, not requiring quick transit could be sent by sea direct, if the Harwich, Dover, and other services were discontinued.There are import rates to towns in the interior to which there is no direct sea competition. If such rates are not based on the rates to places to which there is such competition,plusthe local rates, they may be open to question to an extent not applicable to the rates to and from ports.[18]Many of the rates from Hull are affected by inland water competition, or by those charged from Liverpool. On the other hand, the rates from Hull govern those from Grimsby (as a competing port), Harwich, West Hartlepool, Newcastle, Sunderland and Shields. In fact, a large portion of the anomalies in railway rates arise from the competition between ports. Although improvements in detail as to such rates, no doubt, are possible, the interests of some ports would be seriously affected by any change in the principle on which railway rates are fixed.[19]See as to this Dr. Otto Michaelis’sDifferenzialtarife der Eisenbahnen, in which the natural and necessary rise of differential rates in Germany is explained.[20]Note.—See Extract from Sir T. Farrer’s Evidence at page 66.[21]“I think that even if it were distinctly found that the differences in the charges actually made were so disproportioned to the differences in the cost as to be undue and unreasonable, it would not impose an obligation to charge equally.”—Lord Blackburn, p. 122.[22]Seedécretof April 26, 1862, quoted by M. A. de Foville inLa Transformation des moyens de Transportp. 68.[23]The following are some of the opinions of French statesmen and economists on the subject:—“Dans ma conviction le tarif différentiel est à la fois juste, conforme aux vèritables intérêts économiques et nécessaires à la concurrence.”M. Rouher.“Les industries de transport par eau, par terre ou par chemin de fer ne vivent et ne prospèrent que par les tarifs différentiels. C’est en différenciant sagement leurs tarifs qu’elle attirent les marchandises et les voyageurs.”M. Legrand,sous-secrétaire d’état au Ministère des travaux publics:“L’expérience a démontré aux compagnies la nécessité de superposer au tarif réglementaire de nombreux tarifs à prix reduits.***Il a été reconnu que ceux là mêmes qui se plaignaient, le plus vivement des tarifs différentiels en recueillaient indirectement le bénéfice. Ce sont, en effet, ces tarifs qui fournissent au trafic des grandes compagnies les masses de marchandises les plus considérables, et ce sont ces masses qui rendent possible la réduction, au profit de tous, des tarifs généraux.”M. de Foville.La Transformation des moyens de Transportpp. 66, 67.In a report to the French Chamber of Deputies by a Railway Commission in 1880, the Commissioners approved of special tariffs, and added: “We are even inclined to suggest the development of traffic of this nature, the importance of which is not at all in proportion to the natural advantages which France derives from her geographical position and her numerous ports.”Appendix 31 to Report from the Select Committee on Railways (Rates and Fares), 1882, Vol. II.[24]Until recently, the classification of imported and exported goods, in force on the Northern of France Railway, was composed of six classes. A new tariff is now in force, the rates for such traffic varying from frs. 8 to frs. 30 per 1000 kilogrammes.For the purpose of comparison, the rates charged for imported and exported goods are shewn under the respective classes in which the same articles are generally included when charged at the ordinary class rates.[25]These rates are exclusive of cartage and of the extra charges referred to in Appendix I. Page vii.[26]Parte II., Vol. II., Sec. 32.[27]Note—TheMontreal Gazette, 1st April, 1886, writes thus on the subject of the Railway Commission Bill:—“These rates are fixed and determined by the Great American Trunk Lines, in competition with which the Tariff of the Canadian roads is necessarily regulated; to interfere with these rates would be to take away from the Canadian Companies a large amount of the gross earnings derived from a source which increases the volume of business in Canada.... The discrimination which is complained of in particular localities arises wholly out of an established competition between lines reaching a favoured point. Destroy the natural consequences and natural advantages of competition—lower rates—and you remove all inducement to the provision of rival routes; put an end to competition, and at once an increase in rates all round will be established. The Railway Act prohibits interference by the Government in the regulation of rates until a Company is proved to earn 15 per cent. upon its invested capital. What Railway Company in the Dominion to-day is earning that profit?... If competition is to be made a positive disadvantage, if every inducement to particular localities to promote rival enterprises is to be swept away, the rates of existing lines will be run up in all directions to the injury not only of every locality now favoured by competition, but of those localities which consider themselves aggrieved by reason of the absence of the low rates which competition enforces.”It may be mentioned that one of the fiercest enemies of differential rates, in a work recently published, declares that the only remedy is to “restore the character of public highways to the railways by securing to all persons the right to run trains over their tracks under proper regulation!” “The Railways and the Republic” (1886), p. 372, by James T. Hudson.[28]Vol. 5, p. 376.[29]Note.—The evidence of Sir Thomas Farrer, given in 1881, is very deserving of consideration. In answer to the question, “Now turning to the question of inequality of charges, of which the Committee have had many complaints—in fact, the bulk of the complaints have been with regard to the inequality of charges from one place to another—in your opinion, is this inequality productive of injury to the trade of the country?” He replies, “As far as I can judge, it is not.” He is asked:—“I suppose you would say that while on the one hand one portion of the country may be a loser, another portion of the country is a gainer, and that the one may be set against the other?”—He answers:—“I am not quite certain that I should say that one portion of the country is a loser, but I am quite certain that another portion is a gainer.”Again, in reply to question: “Then looking at the question also from the point of view of the public, the inland towns which are charged higher than towns on the sea-coast are merely paying the natural penalty of being inland towns, and not having an equally good geographical position?”—He states, “Quite so; on the whole I should think the inland towns were proportionately better off than before the railways existed, because, before the railways existed, sea-side towns had the water traffic to themselves, but now the railways afford a kind of competition with that traffic, and bring a great many places into communication with one another which could not have been brought into communication before.”In reply to the question, “On the whole, do you think the country gains by these rival routes to the outports?” He says, “I do distinctly.” And again, in answer to the question, “According to your view, then, as far as the public is concerned, it is of no consequence that a railway company should so destroy the natural advantages of one place?” He replies:—“I think it is one purpose of the railway companies to annihilate distance as far as they can; I would certainly encourage the railway companies in bringing Shetland fish to the London market, even although the effect of it were to lower the price of the Grimsby fish.” Further, in reply to the question, “As far as that is concerned, you would allow the Railway Companies to make any differential charges they may please for or against other localities?” He replies:—“I would certainly not compel them to charge upon fish from Thurso and fish from Grimsby in proportion to the distances of those two places. I have been accustomed, as a free trader, to consider the interest of the consumer very largely; but it seems to me that this claim for regular mileage has proceeded upon the interest of one special class of producers; but it is very much to the interest of the consumer as well as to one class of producers, that the people at a distance should be able to send to the consuming market.”[30]In the Report made by M. Richard Waddington in the name of the Commission of the Third System of Railway Tariffs, special or differential rates are thus referred to. “These Tariffs are established in compliance with a trade demand which varies, as one can easily understand, according to the locality and district concerned. Like intelligent merchants the administrators of the railway companies have based their rate of charges on the law ofSupply and Demand....” The celebrated expression of M. Solacroup, director of theOrleans Company, sums up the considerations which led to the compilation of special tariffs. “In the matter of Transport Tariffs there is only one rational rule, viz., to ask of merchandise all it can pay; any other principle is no principle.”[31]It may be objected that under such a system companies might extort exorbitant sums from traders who must send their goods. But (1) the figures and returns referred to later on show that in fact the companies have not made such charges, but have benefited every industry as well as themselves; (2) the statutory maxima cannot be exceeded; (3) at many points there is effective sea and canal competition; (4) the result of increasing the rates to a height which prevents the producer from earning a fair profit must, in the long run, be to diminish the traffic of the railway; (5) there is always a liability when, high rates exist that Parliament will sanction a new line, even if the chances of its financial success be not great.[32]See Ricardo (Principles of Political Economy and Taxation, 3rd Section, page 144): “Of all commodities none are perhaps so proper for taxation as those which, either by the aid of nature or art, are produced with peculiar facility. Taxes on luxuries have some advantage over taxes on necessaries, they are generally paid from income, and therefore do not diminish the productive capital of the country.”See also Leroy Beaulieu,Science des Finances, vol. i.[33]“A tax upon carriages in proportion to their weight, though a very equal tax when applied to the sole purpose of repairing the roads is a very unequal one when applied to any other purpose, or to supply the common exigencies of the State. When it is applied to the sole purpose above mentioned, each carriage is supposed to pay exactly for the wear and tear which that carriage occasions of the roads. But when it is applied to any other purpose, each carriage is supposed to pay for more than that wear and tear and contributes to the supply of some other exigency of the State. But as the turnpike toll raises the price of goods in proportion to their weight, and not to their value, it is chiefly paid by the consumers of coarse and bulky, not by those of precious and light, commodities. Whatever exigency of the State, therefore, this tax might be intended to supply, that exigency would be chiefly supplied at the expense of the poor, not of the rich; at the expense of those who are least able to supply it, not of those who are most able.”—(Wealth of Nations.Book 5 part 3.)[34]In the same year a Statute (8 & 9 Vict. c. 28) was passed giving canal companies powers to vary tolls in the same manner as railway companies might. By 8 & 9 Vict. c. 42, which was passed the same session, canal companies were authorised to become carriers on their canals and “to make such reasonable charges for conveying, warehousing, collection and delivery as they might respectively from time to time determine upon, in addition to the several tolls or dues which any such company or undertakers were then authorised to take for the use of the said canals, navigations or railways.” Two years later canal companies were authorised to borrow money for the purpose of becoming carriers on their own waterways. (10 & 11 Vict. c. 94.)[35]Earl of Selborne inDenaby Main Colliery Companyv.Manchester Sheffield and Lincolnshire Railway Company.—L.R. 11 A.C. p. 113.Consumers may profitably bear in mind the report of the Select Committee on Railways (Rates and Fares), of 1881-2. Whilst stating “Your Committee cannot recommend any new legislative interference for the purpose of enforcing upon Railway Companies equality of charge.” They add: “Some of the inequalities of charges complained of are to the advantage rather than to the disadvantage of the public, where there is anundue preferencethe law now gives a remedy.” They also give the following illustration:—“That Greenock sugar refiners should be in the same markets as the sugar refiners of London, while it may be a grievance to London refiners, must be an advantage to Greenock refiners, and cannot be a disadvantage to buyers of sugar.”It is added that the effect of interference with the freedom to fix rates according to special circumstances would in this instance be “to give a practical monopoly to the London sugar refiners who would be the real gainers by the transaction. It does not appear to your Committee that such a result would be either just or reasonable.”[36]“What is complained of by the traders is not so much the high scale of the rates as their inconsistency and want of classification, as well as the want of facilities given by the railway companies for the development of the trade in a particular locality. That before the Royal Commission on Depression of Trade, not a single witness, except in the shipping interest, was examined in reference to railway rates who did not complain of some act of injustice on the part of the railway companies, not so much in regard to the rates, although they were onerous and prohibitory in some cases, as to the inconsistency of such rates.”—Mr. L. Cohen, House of Commons Debate, 6th May, 1886. Hansard, vol.cccv.,pages 428-9.[37]Note.—The New Zealand correspondent of the “Economist” (Oct. 23, 1886), writes from Wellington as follows: “The fact of the railways being in the hands of Government is by no means an unmixed good. A uniform system of rates is demanded everywhere. If a concession is made to one district, the rest of the colony naturally demand to be placed on the same footing, so that the Railway Department rarely meet the wishes of the public.A private Company, if it found that the freight could be got by lowering the tariff on some particular item, would do so at once, and if it paid, continue it.The cost probably would be merely a few tons of coals, and a small amount for wear and tear.Many trades, notably the timber trade, are very much hampered by the Government tariff which does not admit of differential rates.”This is a sample of the inconveniences attending uniformity.[38]Grande Vitessegoods are not always carried by passenger train. They can be carried by any train the railway company may determine, provided the time allowed by law, which is half the time for ordinary goods, is not exceeded.[39]The first class in France corresponds with the highest or fifth class in England.[40]Mr. Justice Manisty delivered a separate Judgment. See note at foot of page 99.[41]Wills, J., in Hall v. London Brighton and South Coast Railway Company, p. 536. See also Field J. in Brown v. Great Western Railway Company, L. R. 9 Q. B. D., p. 751.[42]Mr. William Pierssene, Manager to Messrs. Pickford & Co., stated in his evidence before the Railway Commissioners in the case of Kempson v. The G. W. R. (4 N & M 426), that in addition to the amount of the railway companies’ tolls, a sum varying from twelve toeighteen shillingsa ton was paid by the customer for the services which now form the subject of terminal and cartage charges.[43]Hall v. L. B. & S. C. Railway. Manisty, J., L. R., 15 Q. B. D. p. 544.[44]Report to Associated Chambers of Commerce.[45]“The claim of railways to charge terminals would have to be considered if mileage rates are adopted in principle. That charge could in no wise be left to the discretion of the railways themselves, as was proposed in the Bills of last Session.”—SirB. Samuelson.[46]Note.—The terminals authorised and charged in these countries will be found fully set out in a tabular form in the Appendix III.[47]There are some cases in Ireland in which Baronial Guarantees in respect of portions of the capital of railways have been given.[48]This capital relates to the principal lines only.[49]The Report of the French railway Commission of Inquiry appointed in 1880 states: “Our railway companies have been largely subventioned for the construction of their lines, almost all receive annual subsidies, without which they could not meet the charges of their working expenses; all enjoy a monopoly which shelters them from internal competition; we have the right to demand from them, to force upon them, reforms that public and parliamentary opinion deem indispensable.” And again—“* * * * In certain countries, England for example, where the system of liberty and commercial competition is largely in vogue, it is right that the railway companies, who have received nothing and from whom nothing is demanded by the State, and who may be considered only as belonging to the category of private merchants and manufacturers, should have greater freedom in dealing with their traffic and tariffs than is enjoyed in this country (France).”But it is added: “It is not the same with Continental European nations. The Governments of Belgium, Holland, Bavaria, the Grand Duchy of Baden, Austria, Italy, Hungary, Russia, Sweden, and Norway are wholly or in part proprietors of the railway system.”—Appendix 31 to Report from the Select Committee on Railways (Rates and Fares) 1882, Vol. II., pages 453-4.[50]“La dépense tout à fait stérile des 500 millions pour racheter des lignes ferrées improductives, les exagerations du projet Freycinet lors de sa naissance et les extravagances de développements posterieurs qu’on lui a donnés, des sommes énormes dépensées en des canals de transport, qui, pour beaucoup du moins, font double emploi et jouissent d’aucun trafic, toute cette mauvaise direction a absorbé les resources de l’État en sacrifices inutiles et ne lui a pas laissé le loisir de supprimer l’impôt sur la grande vitesse, les timbres sur les récepissés des chemins de fer, et d’obtenir, par un juste retour, des réductions de tarifs qui n’auraient été accompagnées d’aucune augmentation d’impôt.”—M. Leroy-BeaulieuinL’Économiste Francais, February 27th, 1886.[51]It is generally assumed that the railways in Germany were purchased with the view of more effectually utilising them, and the rolling stock for military purposes. The Government in this country are under no necessity to undertake the liability of acquiring the railways and guaranteeing the dividends for such a reason; the number of lines of railway and routes are so ample, and the number of engines, carriages, and wagons so great, that any movement required for the defence of the country can be carried out within any reasonable time, while under the Regulation of the Forces Act, 1871, Her Majesty, by Order in Council, may empower any person or persons, named in such warrant, to take possession of any railroad and of the plant belonging thereto, and to use the same for Her Majesty’s Service at such times and in such manner as the Secretary of State may direct; and the directors, officers, and servants of any such railroad, shall obey the directions of the Secretary of State.[52]See note, page 118.[53]In the Report of May 3, 1882, made by Sir H. Barron to the then Minister for Foreign Affairs (Earl Granville) (part 4 of the “Reports by Her Majesty’s Secretaries of Embassy and Legation on Manufactures, Commerce, &c.,”) on the subject of the Belgian Budget, the former stated that “The 5 years from 1876 each closed with a deficit rising in 1881 to 6¼ million francs (£250,000), the main explanation being the ever-increasing burden thrown on the Treasury by the extension of the railway, which undertaking has ceased to cover its charges and completely disturbed the financial equilibrium of the State. The first lines constructed and worked by the State, being great trunk lines, gave every year an increasing return which enriched the Treasury. To these were first added conceded lines, which had to be purchased from companies at high prices; then secondary lines, whose traffic was unremunerative. After many previous experiments, the accounts of the railway have been since 1878 drawn up on a new and presumedly more accurate principle. The Treasury is now considered as the bankers of the railway; it is assumed that all funds advanced by the former are chargeable with an interest of 4 per cent., and repayable within ninety years. According to this new method of book-keeping, it appears that the railway contributed largely to the revenue until 1872 inclusively, but that since that year it has, on the contrary, entailed an annual loss. Thus, the deficit of 1881 is for the greater part (4,861,725 fr.) due to the insufficiency of the railway revenue. Fortunately Belgium has a resource at hand.”“The Minister of Finance in the debate on the Budget of Public Works, points to that resource in the following pregnant words: It is proved that the railway fails to cover its charges by about five millions (£200,000). We are informed that this year the deficiency may be seven millions; in 1883, possibly even ten millions. What will it be in 1884? No one knows, but the progression is ascending. Must we follow it without counting the cost? Must we raise the tariffs or throw on the Treasury the burden caused by the insufficiency of the railway receipts?Either the railway must be worked on a principle which shall allow it to cover its charges or the taxpayers must make up the difference.”He further added that in his report of 1876 he recommended “a raising of the tariff.” Sir H. Barron goes on to state “that the inferior productiveness of the Belgian Railway was due to the inadequate tariff, which, for passengers and merchandise, was much lower than those prevailing in the rest of Europe.” He further remarks, however, that “notwithstanding all thisit has been heldthat the experiment is a great success, and bears evidence in favour of State ownership, because, as the railway is worked in the interest of trade, &c., it is considered that the benefit thus indirectly accruing to the public at large, is greater than that which might be realised by aiming at a commercial profit for the direct and immediate benefit of the taxpayers.”The construction of railways in Belgium has, no doubt, developed the commerce and industry of the country to a remarkable extent. It was stated by Sir Bernhard Samuelson (page 9 of Report) that the receipts of railways had increased from £1,815,000 in 1870 to £4,880,000 in 1883, or 168 per cent.; but he omitted to point out that the length of the railways had increased by more than 250 per cent.See the observation of M. Leon Say as to the tendency to reduce railway tariffs to an unremunerative point when the State is the owner.—Le Rachat des Chemins de Fer, Journal des Economistes, 1881, p. 343.[54]Note.—The figures relating to the capital, revenue and working expenses of the German Railways have been taken from the “Statistische Nachrichten von den Eisenbahnen des Vereins Deutscher Eisenbahn-Verwaltungen,” which differ in some respects from those contained in statements obtained after going to press from the Department of the German State Railways; the latter giving the revenue for the working year 1884-5 as £50,735,165, the expenses as £29,057,889, or 57·27 per cent. of the receipts. The balance would yield a return of 4·51 per cent.[55]For further particulars see Appendix III.[56]For particulars see Appendix III.[57]In Germany and France the law as regards liability is practically the same as in this country.[58]Including 90 miles on German and Belgian Frontier.[59]The mixed train mileage introduces a disturbing element, but the calculations have been made as accurately as possible.[60]See page 5 of Sir B. Samuelson’s report. It is not known to what the observation as to charges to capital can refer. The larger (if not all) companies in this country charge to revenue portions of the cost of improvements to stations, sidings, &c., which might strictly be charged to capital. In the published returns of the working of German railways, there is nothing to show to what extent, if any, the cost of new works is charged to capital.

Footnotes

[1]Mr. Forwood. Debate on second reading of Railway and Canal Traffic Bill, 6th May, 1886. Hansard, vol. cccv. 446.

[2]See Report of Royal Commission, 1867; Report of Joint Select Committee of House of Lords and Commons, 1872; Report of Select Committee, 1881-2.

[3]Gustav Cohn, the well known German writer on English railways, while advocating many changes, complains of the limited, one-sided knowledge of the subject shown by the chief English critics of railways.—Die Englische Eisenbahnpolitik(1883), p.88 and elsewhere.

[4]Note.—See illustration of cubical contents in proportion to weight, page 83.

[5]For attempts to calculate cost of service, see A. Fink on “Cost of Railway Transportation,” New York (1882); Hadley on “Railway Transportation,” p. 261;Sax’s Die Eisenbahnen1.60 and 2.361;Lardner’s Railway Economy; and the Italian Parliamentary Inquiry (Atti della Commissione d’Inchiesta sull’ Esercizio delle Ferrovie Italiane) part II., vol. II., 962.

[6]See the unqualified condemnation of the system in the Italian Parliamentary Report already quoted: “The natural system was a system eminently theoretical. To-day all doubt on the subject is removed; this system was tried for five years, and it proved very unsatisfactory.” Parte II., Vol. III., p. 954. It is pointed out with truth that the so-called “natural system” is injurious to small industries and small towns.See also page 18.

See also page 18.

[7]The late Member for West Wolverhampton, in comparing the rates for Coke between Staveley and Northamptonshire and Staveley and Wolverhampton, practically advocated mileage rates, although, probably, not intending to do so. (See debate on the second reading of the Railway and Canal Traffic Bill, May 6th, 1886.)

[8]If an engine and tender weighing together 56 tons is capable of drawing a maximum load of say forty loaded wagons weighing 560 tons at 25 miles per hour on the level, it will only take the following loads over the gradients named below, and, in addition to the reduction in the load, the speed would also be considerably reduced.Level.40 wagons weighing 560 tons.Incline1 in 10020 ” ” 280 ””1 ” 5010 ” ” 140 ””1 ” 306 ” ” 84 ”See also Spon’s Dictionary of Engineering; Encyclopedia Britannica “Railways,” and the elaborate workDes Pentes Economiques en Chemins, par M. Charles de Freycinet.

See also Spon’s Dictionary of Engineering; Encyclopedia Britannica “Railways,” and the elaborate workDes Pentes Economiques en Chemins, par M. Charles de Freycinet.

[9]Before Mr. Cardwell’s Committee (23rd February, 1853) the late Mr. Robert Stephenson, the eminent engineer, gave the following illustration, which is not yet antiquated:—“I referred to that in order to shew the Committee the great impropriety of attempting anything like an equal mileage rate on railways. I can elucidate that in a very remarkable manner, and shew the injustice that the carrying out of the principle would inflict upon some railway companies, especially where goods are concerned. I will take the case of the Great North of England Railway, from Newcastle coal-field towards York, and towards the rivers Tees and Tyne. In one direction there were 5,450,000 tons of coals carried over one mile, which was equal to 320,588 over one mile for each engine; there having been employed by the York, Newcastle and Berwick Company for the performance of that duty 17 engines. Towards York, where the distance was greater, and the gradients were better, and the loads heavier, and the work more uniform, 13 engines took 14,435,000 tons over one mile, which was equal to 1,110,000 tons for each engine over a mile; in the other case, the duty that one engine performed was carrying 320,588 tons over a mile; therefore in this case one engine has done 3·466 more work than the other engine, so that on the first line it cost the Company nearly four times as much as it cost them for doing the same duty on the other line. On the one line there are a number of collieries; the engines have to stop and pick up the traffic, and the railway wagons do not average perhaps more than seven or eight miles per day, whereas in the other case they work for hours continuously, and with heavier loads and no stoppages.”

[9]Before Mr. Cardwell’s Committee (23rd February, 1853) the late Mr. Robert Stephenson, the eminent engineer, gave the following illustration, which is not yet antiquated:—

“I referred to that in order to shew the Committee the great impropriety of attempting anything like an equal mileage rate on railways. I can elucidate that in a very remarkable manner, and shew the injustice that the carrying out of the principle would inflict upon some railway companies, especially where goods are concerned. I will take the case of the Great North of England Railway, from Newcastle coal-field towards York, and towards the rivers Tees and Tyne. In one direction there were 5,450,000 tons of coals carried over one mile, which was equal to 320,588 over one mile for each engine; there having been employed by the York, Newcastle and Berwick Company for the performance of that duty 17 engines. Towards York, where the distance was greater, and the gradients were better, and the loads heavier, and the work more uniform, 13 engines took 14,435,000 tons over one mile, which was equal to 1,110,000 tons for each engine over a mile; in the other case, the duty that one engine performed was carrying 320,588 tons over a mile; therefore in this case one engine has done 3·466 more work than the other engine, so that on the first line it cost the Company nearly four times as much as it cost them for doing the same duty on the other line. On the one line there are a number of collieries; the engines have to stop and pick up the traffic, and the railway wagons do not average perhaps more than seven or eight miles per day, whereas in the other case they work for hours continuously, and with heavier loads and no stoppages.”

[10]See preface to Smiles’ Life of Stephenson, and, as to the provisioning of Paris by means of railways, interesting details inLa Transformation Des Moyens de Transport, par Alfred de Foville, Chef de Bureau au Ministère des Finances, p. 256.

[11]About thirty years ago, when the iron works at Westbury in Wiltshire were constructed, it was anticipated that fuel would be obtained from the Badstock district, about 14 miles distant. But after sinking collieries it was found that the coke was not suitable; so that it has now to be obtained from South Wales, a distance of about 130 miles. The pig iron is sent to South Wales in the return coke wagons, and also to South Staffordshire, a distance of 140 miles. The coke and pig iron are carried at special low rates below those in force for traffic to intermediate places. Without such special rates, or if mileage rates were charged, the works would have to be closed.

[12]An American writer points out that the following would be the result of applying the principle of equal mileage rates, or of basing rates on cost of service:—1. “There would be little or no classification of freights. Grain, lumber, coal, iron, shoes, dry goods, groceries, drugs and chemicals, would all have to pay near about the same rate per 100 pounds per mile, and that rate would have to be something like an average of the present rates charged upon the different classes of freight. The higher classes of freight would be a good deal lowered, and the lower classes would be materially raised. The result would be that cheap and heavy products could be no longer transported over the distances that are now carried.2. “The rates on through freight would have to be proportioned very nearly to the distance hauled. The rate from Chicago to Boston for instance, would be materially higher, and the rate from Chicago to Baltimore materially lower than the rates from Chicago to New York.3. “Roads having the lowest grades, and most favourable alignment would have lower rates than their competitors, and would monopolise the business, to the entire exclusion of those lines which traverse more difficult and expensive territory, and upon which the cost of transportation was greater. And the tide once turned, the evil would multiply itself; for the rates would decrease rapidly on the favoured roads, with the increase of business, and would increase on the unfortunately located roads, with the decrease in volume of their freight, until the latter would be left with nothing but their local business to support them, which would then have to be advanced to the highest figures possible.”—Railroad Transportation, by E. P. Alexander,Vice-President of the Louisville and Nashville Railway Company.

[12]An American writer points out that the following would be the result of applying the principle of equal mileage rates, or of basing rates on cost of service:—

1. “There would be little or no classification of freights. Grain, lumber, coal, iron, shoes, dry goods, groceries, drugs and chemicals, would all have to pay near about the same rate per 100 pounds per mile, and that rate would have to be something like an average of the present rates charged upon the different classes of freight. The higher classes of freight would be a good deal lowered, and the lower classes would be materially raised. The result would be that cheap and heavy products could be no longer transported over the distances that are now carried.

2. “The rates on through freight would have to be proportioned very nearly to the distance hauled. The rate from Chicago to Boston for instance, would be materially higher, and the rate from Chicago to Baltimore materially lower than the rates from Chicago to New York.

3. “Roads having the lowest grades, and most favourable alignment would have lower rates than their competitors, and would monopolise the business, to the entire exclusion of those lines which traverse more difficult and expensive territory, and upon which the cost of transportation was greater. And the tide once turned, the evil would multiply itself; for the rates would decrease rapidly on the favoured roads, with the increase of business, and would increase on the unfortunately located roads, with the decrease in volume of their freight, until the latter would be left with nothing but their local business to support them, which would then have to be advanced to the highest figures possible.”—Railroad Transportation, by E. P. Alexander,Vice-President of the Louisville and Nashville Railway Company.

[13]Very recently the fishermen in the North of Scotland have been asking that the same gross rates shall be charged from Wick to large towns in the South as are charged from the fishing ports, such as Grimsby, on the East Coast of England. What would they, or most consumers of fish, say to equal mileage rates?

[14]“We have nothing to do here with the study of the tariff systems adopted on the Alsace-Lorraine lines, and extended with some modifications to the generality of German lines. Seductive by its simplicity, the principle of fixing the rate according to the weight only, and without regard to the value of the object carried, has not found numerous partisans in France. Such a radical reform would overthrow our commercial habits, and would occasion results, in a financial point of view, which would be impossible for us to estimate.” Report of the French Commission of the Third System on Railway Tariffs, by M. Richard Waddington. (Appendix 31 to Report from the Select Committee on Railways (Rates and Fares), 1881-2, Vol. 11. p. 449).

[15]The rate for the carriage of flour from Minneapolis for consumption at Milwaukee or Chicago is one-third higher than the rate for flour for shipment.

[16]In the evidence given before the Select Committee in 1881, the rates for foreign hops from Boulogne to London were compared with the rates charged for home grown hops from the Ashford and Canterbury districts to London. The former were complained of as being an undue preference in favour of foreign produce. No doubt there was a considerable difference. The rate from Boulogne to London was 17s. 6d., and that from Ashford to London, 38s. It was, however, shewn that the rate of 17s. 6d. per ton for foreign hops from Boulogne to London was a station to station rate, while the rate of 38s. per ton from Ashford to London included delivery and all station services, and that owing to the difference in the mode of packing the hops, 73 per cent. more foreign hops than English hops could be loaded in a truck. The railway companies concerned urged that the home producer was not prejudiced by the transit rate complained of. While it enabled the railway companies to obtain the conveyance of a portion of the foreign hops, an increase of the rate from Boulogne would not be of any benefit to the English grower. The foreign hops would still find their way to London direct by sea. The rate of 17s. 6d. per ton from Boulogne to London was cancelled in deference to the complaints. What is the result? The foreign hops are imported as before; but they are now carried by the General Steam Navigation Company. The railway companies have to some extent suffered; the English producer has gained nothing.

[17]Lines of steamers carrying Belgian, Dutch, German, and French goods and produce, run between Antwerp, Rotterdam, Amsterdam, Boulogne, Havre and London. In competition with them the Great Eastern, South Eastern, and London Chatham and Dover Companies carryviâHarwich, Folkestone and Dover respectively, at such rates as they can obtain in competition with those charged by steamer direct. It has been a subject of complaint that these goods are conveyed at lower rates than similar merchandise from places in Essex or Kent, past which they are carried by rail. No doubt the regular and quick services provided by the railway companies are of great advantage to the senders and consumers. But so far as London is concerned, a great part, if not the whole of the goods, not requiring quick transit could be sent by sea direct, if the Harwich, Dover, and other services were discontinued.There are import rates to towns in the interior to which there is no direct sea competition. If such rates are not based on the rates to places to which there is such competition,plusthe local rates, they may be open to question to an extent not applicable to the rates to and from ports.

There are import rates to towns in the interior to which there is no direct sea competition. If such rates are not based on the rates to places to which there is such competition,plusthe local rates, they may be open to question to an extent not applicable to the rates to and from ports.

[18]Many of the rates from Hull are affected by inland water competition, or by those charged from Liverpool. On the other hand, the rates from Hull govern those from Grimsby (as a competing port), Harwich, West Hartlepool, Newcastle, Sunderland and Shields. In fact, a large portion of the anomalies in railway rates arise from the competition between ports. Although improvements in detail as to such rates, no doubt, are possible, the interests of some ports would be seriously affected by any change in the principle on which railway rates are fixed.

[19]See as to this Dr. Otto Michaelis’sDifferenzialtarife der Eisenbahnen, in which the natural and necessary rise of differential rates in Germany is explained.

[20]Note.—See Extract from Sir T. Farrer’s Evidence at page 66.

[21]“I think that even if it were distinctly found that the differences in the charges actually made were so disproportioned to the differences in the cost as to be undue and unreasonable, it would not impose an obligation to charge equally.”—Lord Blackburn, p. 122.

[22]Seedécretof April 26, 1862, quoted by M. A. de Foville inLa Transformation des moyens de Transportp. 68.

[23]The following are some of the opinions of French statesmen and economists on the subject:—“Dans ma conviction le tarif différentiel est à la fois juste, conforme aux vèritables intérêts économiques et nécessaires à la concurrence.”M. Rouher.“Les industries de transport par eau, par terre ou par chemin de fer ne vivent et ne prospèrent que par les tarifs différentiels. C’est en différenciant sagement leurs tarifs qu’elle attirent les marchandises et les voyageurs.”M. Legrand,sous-secrétaire d’état au Ministère des travaux publics:“L’expérience a démontré aux compagnies la nécessité de superposer au tarif réglementaire de nombreux tarifs à prix reduits.***Il a été reconnu que ceux là mêmes qui se plaignaient, le plus vivement des tarifs différentiels en recueillaient indirectement le bénéfice. Ce sont, en effet, ces tarifs qui fournissent au trafic des grandes compagnies les masses de marchandises les plus considérables, et ce sont ces masses qui rendent possible la réduction, au profit de tous, des tarifs généraux.”M. de Foville.La Transformation des moyens de Transportpp. 66, 67.In a report to the French Chamber of Deputies by a Railway Commission in 1880, the Commissioners approved of special tariffs, and added: “We are even inclined to suggest the development of traffic of this nature, the importance of which is not at all in proportion to the natural advantages which France derives from her geographical position and her numerous ports.”Appendix 31 to Report from the Select Committee on Railways (Rates and Fares), 1882, Vol. II.

“Les industries de transport par eau, par terre ou par chemin de fer ne vivent et ne prospèrent que par les tarifs différentiels. C’est en différenciant sagement leurs tarifs qu’elle attirent les marchandises et les voyageurs.”M. Legrand,sous-secrétaire d’état au Ministère des travaux publics:

“L’expérience a démontré aux compagnies la nécessité de superposer au tarif réglementaire de nombreux tarifs à prix reduits.***Il a été reconnu que ceux là mêmes qui se plaignaient, le plus vivement des tarifs différentiels en recueillaient indirectement le bénéfice. Ce sont, en effet, ces tarifs qui fournissent au trafic des grandes compagnies les masses de marchandises les plus considérables, et ce sont ces masses qui rendent possible la réduction, au profit de tous, des tarifs généraux.”M. de Foville.La Transformation des moyens de Transportpp. 66, 67.

In a report to the French Chamber of Deputies by a Railway Commission in 1880, the Commissioners approved of special tariffs, and added: “We are even inclined to suggest the development of traffic of this nature, the importance of which is not at all in proportion to the natural advantages which France derives from her geographical position and her numerous ports.”Appendix 31 to Report from the Select Committee on Railways (Rates and Fares), 1882, Vol. II.

[24]Until recently, the classification of imported and exported goods, in force on the Northern of France Railway, was composed of six classes. A new tariff is now in force, the rates for such traffic varying from frs. 8 to frs. 30 per 1000 kilogrammes.For the purpose of comparison, the rates charged for imported and exported goods are shewn under the respective classes in which the same articles are generally included when charged at the ordinary class rates.

For the purpose of comparison, the rates charged for imported and exported goods are shewn under the respective classes in which the same articles are generally included when charged at the ordinary class rates.

[25]These rates are exclusive of cartage and of the extra charges referred to in Appendix I. Page vii.

[26]Parte II., Vol. II., Sec. 32.

[27]Note—TheMontreal Gazette, 1st April, 1886, writes thus on the subject of the Railway Commission Bill:—“These rates are fixed and determined by the Great American Trunk Lines, in competition with which the Tariff of the Canadian roads is necessarily regulated; to interfere with these rates would be to take away from the Canadian Companies a large amount of the gross earnings derived from a source which increases the volume of business in Canada.... The discrimination which is complained of in particular localities arises wholly out of an established competition between lines reaching a favoured point. Destroy the natural consequences and natural advantages of competition—lower rates—and you remove all inducement to the provision of rival routes; put an end to competition, and at once an increase in rates all round will be established. The Railway Act prohibits interference by the Government in the regulation of rates until a Company is proved to earn 15 per cent. upon its invested capital. What Railway Company in the Dominion to-day is earning that profit?... If competition is to be made a positive disadvantage, if every inducement to particular localities to promote rival enterprises is to be swept away, the rates of existing lines will be run up in all directions to the injury not only of every locality now favoured by competition, but of those localities which consider themselves aggrieved by reason of the absence of the low rates which competition enforces.”It may be mentioned that one of the fiercest enemies of differential rates, in a work recently published, declares that the only remedy is to “restore the character of public highways to the railways by securing to all persons the right to run trains over their tracks under proper regulation!” “The Railways and the Republic” (1886), p. 372, by James T. Hudson.

It may be mentioned that one of the fiercest enemies of differential rates, in a work recently published, declares that the only remedy is to “restore the character of public highways to the railways by securing to all persons the right to run trains over their tracks under proper regulation!” “The Railways and the Republic” (1886), p. 372, by James T. Hudson.

[28]Vol. 5, p. 376.

[29]Note.—The evidence of Sir Thomas Farrer, given in 1881, is very deserving of consideration. In answer to the question, “Now turning to the question of inequality of charges, of which the Committee have had many complaints—in fact, the bulk of the complaints have been with regard to the inequality of charges from one place to another—in your opinion, is this inequality productive of injury to the trade of the country?” He replies, “As far as I can judge, it is not.” He is asked:—“I suppose you would say that while on the one hand one portion of the country may be a loser, another portion of the country is a gainer, and that the one may be set against the other?”—He answers:—“I am not quite certain that I should say that one portion of the country is a loser, but I am quite certain that another portion is a gainer.”Again, in reply to question: “Then looking at the question also from the point of view of the public, the inland towns which are charged higher than towns on the sea-coast are merely paying the natural penalty of being inland towns, and not having an equally good geographical position?”—He states, “Quite so; on the whole I should think the inland towns were proportionately better off than before the railways existed, because, before the railways existed, sea-side towns had the water traffic to themselves, but now the railways afford a kind of competition with that traffic, and bring a great many places into communication with one another which could not have been brought into communication before.”In reply to the question, “On the whole, do you think the country gains by these rival routes to the outports?” He says, “I do distinctly.” And again, in answer to the question, “According to your view, then, as far as the public is concerned, it is of no consequence that a railway company should so destroy the natural advantages of one place?” He replies:—“I think it is one purpose of the railway companies to annihilate distance as far as they can; I would certainly encourage the railway companies in bringing Shetland fish to the London market, even although the effect of it were to lower the price of the Grimsby fish.” Further, in reply to the question, “As far as that is concerned, you would allow the Railway Companies to make any differential charges they may please for or against other localities?” He replies:—“I would certainly not compel them to charge upon fish from Thurso and fish from Grimsby in proportion to the distances of those two places. I have been accustomed, as a free trader, to consider the interest of the consumer very largely; but it seems to me that this claim for regular mileage has proceeded upon the interest of one special class of producers; but it is very much to the interest of the consumer as well as to one class of producers, that the people at a distance should be able to send to the consuming market.”

Again, in reply to question: “Then looking at the question also from the point of view of the public, the inland towns which are charged higher than towns on the sea-coast are merely paying the natural penalty of being inland towns, and not having an equally good geographical position?”—He states, “Quite so; on the whole I should think the inland towns were proportionately better off than before the railways existed, because, before the railways existed, sea-side towns had the water traffic to themselves, but now the railways afford a kind of competition with that traffic, and bring a great many places into communication with one another which could not have been brought into communication before.”

In reply to the question, “On the whole, do you think the country gains by these rival routes to the outports?” He says, “I do distinctly.” And again, in answer to the question, “According to your view, then, as far as the public is concerned, it is of no consequence that a railway company should so destroy the natural advantages of one place?” He replies:—“I think it is one purpose of the railway companies to annihilate distance as far as they can; I would certainly encourage the railway companies in bringing Shetland fish to the London market, even although the effect of it were to lower the price of the Grimsby fish.” Further, in reply to the question, “As far as that is concerned, you would allow the Railway Companies to make any differential charges they may please for or against other localities?” He replies:—“I would certainly not compel them to charge upon fish from Thurso and fish from Grimsby in proportion to the distances of those two places. I have been accustomed, as a free trader, to consider the interest of the consumer very largely; but it seems to me that this claim for regular mileage has proceeded upon the interest of one special class of producers; but it is very much to the interest of the consumer as well as to one class of producers, that the people at a distance should be able to send to the consuming market.”

[30]In the Report made by M. Richard Waddington in the name of the Commission of the Third System of Railway Tariffs, special or differential rates are thus referred to. “These Tariffs are established in compliance with a trade demand which varies, as one can easily understand, according to the locality and district concerned. Like intelligent merchants the administrators of the railway companies have based their rate of charges on the law ofSupply and Demand....” The celebrated expression of M. Solacroup, director of theOrleans Company, sums up the considerations which led to the compilation of special tariffs. “In the matter of Transport Tariffs there is only one rational rule, viz., to ask of merchandise all it can pay; any other principle is no principle.”

[31]It may be objected that under such a system companies might extort exorbitant sums from traders who must send their goods. But (1) the figures and returns referred to later on show that in fact the companies have not made such charges, but have benefited every industry as well as themselves; (2) the statutory maxima cannot be exceeded; (3) at many points there is effective sea and canal competition; (4) the result of increasing the rates to a height which prevents the producer from earning a fair profit must, in the long run, be to diminish the traffic of the railway; (5) there is always a liability when, high rates exist that Parliament will sanction a new line, even if the chances of its financial success be not great.

[32]See Ricardo (Principles of Political Economy and Taxation, 3rd Section, page 144): “Of all commodities none are perhaps so proper for taxation as those which, either by the aid of nature or art, are produced with peculiar facility. Taxes on luxuries have some advantage over taxes on necessaries, they are generally paid from income, and therefore do not diminish the productive capital of the country.”See also Leroy Beaulieu,Science des Finances, vol. i.

See also Leroy Beaulieu,Science des Finances, vol. i.

[33]“A tax upon carriages in proportion to their weight, though a very equal tax when applied to the sole purpose of repairing the roads is a very unequal one when applied to any other purpose, or to supply the common exigencies of the State. When it is applied to the sole purpose above mentioned, each carriage is supposed to pay exactly for the wear and tear which that carriage occasions of the roads. But when it is applied to any other purpose, each carriage is supposed to pay for more than that wear and tear and contributes to the supply of some other exigency of the State. But as the turnpike toll raises the price of goods in proportion to their weight, and not to their value, it is chiefly paid by the consumers of coarse and bulky, not by those of precious and light, commodities. Whatever exigency of the State, therefore, this tax might be intended to supply, that exigency would be chiefly supplied at the expense of the poor, not of the rich; at the expense of those who are least able to supply it, not of those who are most able.”—(Wealth of Nations.Book 5 part 3.)

[34]In the same year a Statute (8 & 9 Vict. c. 28) was passed giving canal companies powers to vary tolls in the same manner as railway companies might. By 8 & 9 Vict. c. 42, which was passed the same session, canal companies were authorised to become carriers on their canals and “to make such reasonable charges for conveying, warehousing, collection and delivery as they might respectively from time to time determine upon, in addition to the several tolls or dues which any such company or undertakers were then authorised to take for the use of the said canals, navigations or railways.” Two years later canal companies were authorised to borrow money for the purpose of becoming carriers on their own waterways. (10 & 11 Vict. c. 94.)

[35]Earl of Selborne inDenaby Main Colliery Companyv.Manchester Sheffield and Lincolnshire Railway Company.—L.R. 11 A.C. p. 113.Consumers may profitably bear in mind the report of the Select Committee on Railways (Rates and Fares), of 1881-2. Whilst stating “Your Committee cannot recommend any new legislative interference for the purpose of enforcing upon Railway Companies equality of charge.” They add: “Some of the inequalities of charges complained of are to the advantage rather than to the disadvantage of the public, where there is anundue preferencethe law now gives a remedy.” They also give the following illustration:—“That Greenock sugar refiners should be in the same markets as the sugar refiners of London, while it may be a grievance to London refiners, must be an advantage to Greenock refiners, and cannot be a disadvantage to buyers of sugar.”It is added that the effect of interference with the freedom to fix rates according to special circumstances would in this instance be “to give a practical monopoly to the London sugar refiners who would be the real gainers by the transaction. It does not appear to your Committee that such a result would be either just or reasonable.”

[35]Earl of Selborne inDenaby Main Colliery Companyv.Manchester Sheffield and Lincolnshire Railway Company.—L.R. 11 A.C. p. 113.

Consumers may profitably bear in mind the report of the Select Committee on Railways (Rates and Fares), of 1881-2. Whilst stating “Your Committee cannot recommend any new legislative interference for the purpose of enforcing upon Railway Companies equality of charge.” They add: “Some of the inequalities of charges complained of are to the advantage rather than to the disadvantage of the public, where there is anundue preferencethe law now gives a remedy.” They also give the following illustration:—

“That Greenock sugar refiners should be in the same markets as the sugar refiners of London, while it may be a grievance to London refiners, must be an advantage to Greenock refiners, and cannot be a disadvantage to buyers of sugar.”

It is added that the effect of interference with the freedom to fix rates according to special circumstances would in this instance be “to give a practical monopoly to the London sugar refiners who would be the real gainers by the transaction. It does not appear to your Committee that such a result would be either just or reasonable.”

[36]“What is complained of by the traders is not so much the high scale of the rates as their inconsistency and want of classification, as well as the want of facilities given by the railway companies for the development of the trade in a particular locality. That before the Royal Commission on Depression of Trade, not a single witness, except in the shipping interest, was examined in reference to railway rates who did not complain of some act of injustice on the part of the railway companies, not so much in regard to the rates, although they were onerous and prohibitory in some cases, as to the inconsistency of such rates.”—Mr. L. Cohen, House of Commons Debate, 6th May, 1886. Hansard, vol.cccv.,pages 428-9.

[37]Note.—The New Zealand correspondent of the “Economist” (Oct. 23, 1886), writes from Wellington as follows: “The fact of the railways being in the hands of Government is by no means an unmixed good. A uniform system of rates is demanded everywhere. If a concession is made to one district, the rest of the colony naturally demand to be placed on the same footing, so that the Railway Department rarely meet the wishes of the public.A private Company, if it found that the freight could be got by lowering the tariff on some particular item, would do so at once, and if it paid, continue it.The cost probably would be merely a few tons of coals, and a small amount for wear and tear.Many trades, notably the timber trade, are very much hampered by the Government tariff which does not admit of differential rates.”This is a sample of the inconveniences attending uniformity.

This is a sample of the inconveniences attending uniformity.

[38]Grande Vitessegoods are not always carried by passenger train. They can be carried by any train the railway company may determine, provided the time allowed by law, which is half the time for ordinary goods, is not exceeded.

[39]The first class in France corresponds with the highest or fifth class in England.

[40]Mr. Justice Manisty delivered a separate Judgment. See note at foot of page 99.

[41]Wills, J., in Hall v. London Brighton and South Coast Railway Company, p. 536. See also Field J. in Brown v. Great Western Railway Company, L. R. 9 Q. B. D., p. 751.

[42]Mr. William Pierssene, Manager to Messrs. Pickford & Co., stated in his evidence before the Railway Commissioners in the case of Kempson v. The G. W. R. (4 N & M 426), that in addition to the amount of the railway companies’ tolls, a sum varying from twelve toeighteen shillingsa ton was paid by the customer for the services which now form the subject of terminal and cartage charges.

[43]Hall v. L. B. & S. C. Railway. Manisty, J., L. R., 15 Q. B. D. p. 544.

[44]Report to Associated Chambers of Commerce.

[45]“The claim of railways to charge terminals would have to be considered if mileage rates are adopted in principle. That charge could in no wise be left to the discretion of the railways themselves, as was proposed in the Bills of last Session.”—SirB. Samuelson.

[46]Note.—The terminals authorised and charged in these countries will be found fully set out in a tabular form in the Appendix III.

[47]There are some cases in Ireland in which Baronial Guarantees in respect of portions of the capital of railways have been given.

[48]This capital relates to the principal lines only.

[49]The Report of the French railway Commission of Inquiry appointed in 1880 states: “Our railway companies have been largely subventioned for the construction of their lines, almost all receive annual subsidies, without which they could not meet the charges of their working expenses; all enjoy a monopoly which shelters them from internal competition; we have the right to demand from them, to force upon them, reforms that public and parliamentary opinion deem indispensable.” And again—“* * * * In certain countries, England for example, where the system of liberty and commercial competition is largely in vogue, it is right that the railway companies, who have received nothing and from whom nothing is demanded by the State, and who may be considered only as belonging to the category of private merchants and manufacturers, should have greater freedom in dealing with their traffic and tariffs than is enjoyed in this country (France).”But it is added: “It is not the same with Continental European nations. The Governments of Belgium, Holland, Bavaria, the Grand Duchy of Baden, Austria, Italy, Hungary, Russia, Sweden, and Norway are wholly or in part proprietors of the railway system.”—Appendix 31 to Report from the Select Committee on Railways (Rates and Fares) 1882, Vol. II., pages 453-4.

But it is added: “It is not the same with Continental European nations. The Governments of Belgium, Holland, Bavaria, the Grand Duchy of Baden, Austria, Italy, Hungary, Russia, Sweden, and Norway are wholly or in part proprietors of the railway system.”—Appendix 31 to Report from the Select Committee on Railways (Rates and Fares) 1882, Vol. II., pages 453-4.

[50]“La dépense tout à fait stérile des 500 millions pour racheter des lignes ferrées improductives, les exagerations du projet Freycinet lors de sa naissance et les extravagances de développements posterieurs qu’on lui a donnés, des sommes énormes dépensées en des canals de transport, qui, pour beaucoup du moins, font double emploi et jouissent d’aucun trafic, toute cette mauvaise direction a absorbé les resources de l’État en sacrifices inutiles et ne lui a pas laissé le loisir de supprimer l’impôt sur la grande vitesse, les timbres sur les récepissés des chemins de fer, et d’obtenir, par un juste retour, des réductions de tarifs qui n’auraient été accompagnées d’aucune augmentation d’impôt.”—M. Leroy-BeaulieuinL’Économiste Francais, February 27th, 1886.

[51]It is generally assumed that the railways in Germany were purchased with the view of more effectually utilising them, and the rolling stock for military purposes. The Government in this country are under no necessity to undertake the liability of acquiring the railways and guaranteeing the dividends for such a reason; the number of lines of railway and routes are so ample, and the number of engines, carriages, and wagons so great, that any movement required for the defence of the country can be carried out within any reasonable time, while under the Regulation of the Forces Act, 1871, Her Majesty, by Order in Council, may empower any person or persons, named in such warrant, to take possession of any railroad and of the plant belonging thereto, and to use the same for Her Majesty’s Service at such times and in such manner as the Secretary of State may direct; and the directors, officers, and servants of any such railroad, shall obey the directions of the Secretary of State.

[52]See note, page 118.

[53]In the Report of May 3, 1882, made by Sir H. Barron to the then Minister for Foreign Affairs (Earl Granville) (part 4 of the “Reports by Her Majesty’s Secretaries of Embassy and Legation on Manufactures, Commerce, &c.,”) on the subject of the Belgian Budget, the former stated that “The 5 years from 1876 each closed with a deficit rising in 1881 to 6¼ million francs (£250,000), the main explanation being the ever-increasing burden thrown on the Treasury by the extension of the railway, which undertaking has ceased to cover its charges and completely disturbed the financial equilibrium of the State. The first lines constructed and worked by the State, being great trunk lines, gave every year an increasing return which enriched the Treasury. To these were first added conceded lines, which had to be purchased from companies at high prices; then secondary lines, whose traffic was unremunerative. After many previous experiments, the accounts of the railway have been since 1878 drawn up on a new and presumedly more accurate principle. The Treasury is now considered as the bankers of the railway; it is assumed that all funds advanced by the former are chargeable with an interest of 4 per cent., and repayable within ninety years. According to this new method of book-keeping, it appears that the railway contributed largely to the revenue until 1872 inclusively, but that since that year it has, on the contrary, entailed an annual loss. Thus, the deficit of 1881 is for the greater part (4,861,725 fr.) due to the insufficiency of the railway revenue. Fortunately Belgium has a resource at hand.”“The Minister of Finance in the debate on the Budget of Public Works, points to that resource in the following pregnant words: It is proved that the railway fails to cover its charges by about five millions (£200,000). We are informed that this year the deficiency may be seven millions; in 1883, possibly even ten millions. What will it be in 1884? No one knows, but the progression is ascending. Must we follow it without counting the cost? Must we raise the tariffs or throw on the Treasury the burden caused by the insufficiency of the railway receipts?Either the railway must be worked on a principle which shall allow it to cover its charges or the taxpayers must make up the difference.”He further added that in his report of 1876 he recommended “a raising of the tariff.” Sir H. Barron goes on to state “that the inferior productiveness of the Belgian Railway was due to the inadequate tariff, which, for passengers and merchandise, was much lower than those prevailing in the rest of Europe.” He further remarks, however, that “notwithstanding all thisit has been heldthat the experiment is a great success, and bears evidence in favour of State ownership, because, as the railway is worked in the interest of trade, &c., it is considered that the benefit thus indirectly accruing to the public at large, is greater than that which might be realised by aiming at a commercial profit for the direct and immediate benefit of the taxpayers.”The construction of railways in Belgium has, no doubt, developed the commerce and industry of the country to a remarkable extent. It was stated by Sir Bernhard Samuelson (page 9 of Report) that the receipts of railways had increased from £1,815,000 in 1870 to £4,880,000 in 1883, or 168 per cent.; but he omitted to point out that the length of the railways had increased by more than 250 per cent.See the observation of M. Leon Say as to the tendency to reduce railway tariffs to an unremunerative point when the State is the owner.—Le Rachat des Chemins de Fer, Journal des Economistes, 1881, p. 343.

“The Minister of Finance in the debate on the Budget of Public Works, points to that resource in the following pregnant words: It is proved that the railway fails to cover its charges by about five millions (£200,000). We are informed that this year the deficiency may be seven millions; in 1883, possibly even ten millions. What will it be in 1884? No one knows, but the progression is ascending. Must we follow it without counting the cost? Must we raise the tariffs or throw on the Treasury the burden caused by the insufficiency of the railway receipts?Either the railway must be worked on a principle which shall allow it to cover its charges or the taxpayers must make up the difference.”

He further added that in his report of 1876 he recommended “a raising of the tariff.” Sir H. Barron goes on to state “that the inferior productiveness of the Belgian Railway was due to the inadequate tariff, which, for passengers and merchandise, was much lower than those prevailing in the rest of Europe.” He further remarks, however, that “notwithstanding all thisit has been heldthat the experiment is a great success, and bears evidence in favour of State ownership, because, as the railway is worked in the interest of trade, &c., it is considered that the benefit thus indirectly accruing to the public at large, is greater than that which might be realised by aiming at a commercial profit for the direct and immediate benefit of the taxpayers.”

The construction of railways in Belgium has, no doubt, developed the commerce and industry of the country to a remarkable extent. It was stated by Sir Bernhard Samuelson (page 9 of Report) that the receipts of railways had increased from £1,815,000 in 1870 to £4,880,000 in 1883, or 168 per cent.; but he omitted to point out that the length of the railways had increased by more than 250 per cent.

See the observation of M. Leon Say as to the tendency to reduce railway tariffs to an unremunerative point when the State is the owner.—Le Rachat des Chemins de Fer, Journal des Economistes, 1881, p. 343.

[54]Note.—The figures relating to the capital, revenue and working expenses of the German Railways have been taken from the “Statistische Nachrichten von den Eisenbahnen des Vereins Deutscher Eisenbahn-Verwaltungen,” which differ in some respects from those contained in statements obtained after going to press from the Department of the German State Railways; the latter giving the revenue for the working year 1884-5 as £50,735,165, the expenses as £29,057,889, or 57·27 per cent. of the receipts. The balance would yield a return of 4·51 per cent.

[55]For further particulars see Appendix III.

[56]For particulars see Appendix III.

[57]In Germany and France the law as regards liability is practically the same as in this country.

[58]Including 90 miles on German and Belgian Frontier.

[59]The mixed train mileage introduces a disturbing element, but the calculations have been made as accurately as possible.

[60]See page 5 of Sir B. Samuelson’s report. It is not known to what the observation as to charges to capital can refer. The larger (if not all) companies in this country charge to revenue portions of the cost of improvements to stations, sidings, &c., which might strictly be charged to capital. In the published returns of the working of German railways, there is nothing to show to what extent, if any, the cost of new works is charged to capital.

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